Independent analyst Dr Roelof Botha said for the next two years, the South African government’s only priority should be creating jobs if they hope to fix the country’s economy and alleviate poverty.
Botha’s comments come in light of the Altron FinTech Household Resilience Index having ticked slightly higher to 109 in the second quarter of 2023, meaning the average household’s financial disposition marginally improved.
However, the index showed no change year-on-year. With a base level of 100 for the inception period of the index (Q1 2014), the average household’s financial disposition has improved by only 9% in real terms over more than nine years.
“The gains made in the post-Covid-19 recovery period have now been wiped out by the highest interest rates in 15 years, with the current real prime overdraft rate more than double the average rate that existed during the tenure of the previous SARB Governor, Gill Marcus,” said Botha, who compiles the index on behalf of Altron FinTech.
Botha told Business Day TV that, when speaking about household resilience, his sympathy does not lie with South Africa’s middle and upper-income groups.
This is because many of the people in this group are enjoying the benefit of the higher interest rates through their investment income.
“For the people in the upper-income groups, I can almost guarantee you they have saved some of their dividend revenues over the years. They, to the extent that they have interest-bearing securities, are laughing all the way to the bank,” he said.
However, in the case of poorer South Africans – those without employment or in marginal employment – they do not enjoy these benefits.
“They are the ones that one needs to look after, and the most effective way to combat poverty, and I cannot stress this enough, is to create a job,” Botha said.
“We need to create jobs in South Africa. That should be the government’s only economic priority over the next year or two.”
However, Botha acknowledged that many people in middle and higher-income groups in South Africa are also under severe pressure from the country’s high interest rates.
He said household debt costs as a percentage of disposable income are now at a higher level than they were before Covid, meaning households in South Africa are worse off than they were before the pandemic.
He also acknowledged that South Africa has made significant strides in job creation over the past year and a half, as the country has created close to two million jobs in the last six quarters.
However, he said despite this significant increase in employment, the average salary in South Africa has declined over this period in real terms.
“One of the reasons for that, obviously, is that people took a hit during Covid when they lost their jobs, and those that got their jobs back or even a new job are prepared to work for slightly less,” he explained.
“Once again, it puts a bit of a squeeze on our souls, and they are certainly, per capita, not in a good space.”
“I think the National Treasury should just whisper in the Monetary Policy Committee members’ ears that, ‘Isn’t it time to look at the second part of your mission statement, which says that you should encourage growth and job creation?’ That’s the type of policies we need right now.”