South Africans are getting poorer as the country’s population continues to grow while its economy stagnates, meaning there is less money to go around.
This was revealed by the World Economic Forum (WEF) in its Future of Growth report, which outlines the competitiveness of economies worldwide.
The report showed that South Africa’s economy is not competitive on the global stage, as it is below average on three of the four key indicators that the WEF considers vital to economic prosperity.
Sustainability was the only indicator where South Africa scored above the global average, falling significantly short on innovativeness, resilience, and inclusiveness.
The country does not fare any better on traditional indicators of economic prosperity such as economic growth, GDP per capita growth, government debt, and life expectancy.
All of these indicators have deteriorated, with South Africa’s economy stagnating while its government debt has skyrocketed and population boomed.
Of particular concern is how the country’s economic growth has failed to keep up with its population, making South Africans poorer.
This is shown in the graphs below, where South Africa’s GDP per capita stagnated and began declining over the past five years.
Crucially, this does not include inflation, which has further eroded South Africans’ earnings.
Over the past two years, South African salaries have not kept pace with inflation, resulting in declining purchasing power.
This was revealed in a research note attached to the South African Reserve Bank’s (SARB) Quarterly Bulletin last year.
The research note focused on the current trends in South Africa’s labour market, particularly wage growth and worker productivity.
In South Africa, real wage growth contracted in 2022 and 2023 as nominal wage growth moderated to below inflation due to a challenging domestic economic environment amid intensified load-shedding.
The increase in load-shedding and deteriorating logistical services compounded rapidly rising global inflation from disrupted supply chains and higher commodity prices.
Real wage growth is a proxy for workers’ living standards, and a sustained increase in real wages will raise their standard of living.
However, wages also represent the cost of labour in the production process and thus impact the prices of goods and services.
South Africa’s headline inflation rapidly rose in 2021 to a peak of 7.8% in July 2022 – the fastest increase since 2009.
By contrast, private and public sector wage growth in terms of employee gross earnings and compensation measures moderated throughout 2022.
The moderation in public sector remuneration growth primarily reflected successive delays in implementing the annual public sector wage.