South Africans left behind

South Africa has been left behind in economic growth over the past thirty years, with its GDP per capita growing a meagre 29% compared to the global average of 70%. 

The country performed worse than its Sub-Saharan African peers on this metric, with their GDP per capita growing by 45% in the past three decades. 

Data compiled by the Bureau of Economic Research, which conducted a study of South Africa’s national accounts over the past thirty years, revealed this. 

Its analysis showed a steady decline in economic growth since the mid-2000s when the government ran budget surpluses and the country capitalised on global tailwinds. 

The early 1990s were a torrid time for South Africa’s economy, with growth slowing to a mere 0.2% a year as political tension, uncertainty, and violence plagued the country. 

This was the hand that Nelson Mandela’s administration, as the first democratically-elected government in South African history, was dealt. 

In its first decade in power, the ANC did a remarkable job in stabilising the local economy and greatly improving the living conditions of millions of South Africans. 

The share of households without electricity declined sharply from 49% in 1996 to 19% in 2006, while the number of people employed nearly doubled from 7.48 million to 14.5 million. 

Another improvement for many South Africans was the rapid growth of the state’s welfare system, as the number of people receiving social grants shot up from 2.4 million in 1996 to 14.9 million in 2010. 

This translated into strong economic growth under Thabo Mbeki, who ran a tight fiscal ship and ensured the government ran consistent budget surpluses. 

Growth slowed in the next decade and a half, averaging just over 1% under Jacob Zuma and Cyril Ramaphosa. 

At the same time, the country’s population continued to grow, and, combined with weak growth, GDP per capita stagnated and then declined. 

The worldwide standardisation of national accounts allows output to be compared between countries. GDP per capita is used to compare individuals’ average income levels. 

However, due to exchange rates that trade at under- or overvalued positions, international comparisons of GDP per capita are generally expressed in terms of purchasing power parity (PPP). 

In 2023, South Africa’s GDP per capita was R75,200, or US$13,200 (PPP, constant 2011 prices). This level is close to the world average ($11,600) and that of other emerging markets ($12,500) and is significantly higher than Sub-Saharan Africa’s at $4,000. 

However, South Africa’s growth performance over the past 30 years has lagged behind other regions and the global economy. This is shown in the graph below. 

Over the past thirty years, the lacklustre GDP per capita growth in South Africa has resulted in the country’s population effectively being left behind by faster-growing economies. 

In 1993, South Africa’s GDP per capita was $10,300, increasing by 29% over the following three decades. Globally, GDP per capita increased by 70% over the same period. 

In Sub-Saharan Africa, it rose by 45%. Even in advanced economies, which have no catch-up potential, individual income levels improved by more, at 57%. 

Worryingly, this trend of South Africa being outpaced by its African peers and other economies shows no sign of stopping. 

Earlier this year, the country slipped to fourth place in RMB’s Invest in Africa 2024 rankings, surpassed by the Seychelles, Mauritius, and Egypt. 

South Africa ranked first in only one category – forex stability and liquidity – while it lost the top spot in terms of economic output to Egypt. 

With regard for the future, it also came in last place on the continent regarding GDP growth forecasts, income inequality and unemployment. 

“Long the continent’s economic powerhouse, South Africa faces major headwinds that have seen other countries supersede it in a variety of consequential rankings,” RMB said in the report. 

The investment bank did say a recovery is possible, spurred by the formation of a Government of National Unity (GNU) and renewed investor optimism. 

However, this is unlikely to occur overnight and will require concrete changes from political leaders. 

“Foreign investors will likely wait for evidence that South Africa’s many reform plans and procedures to stabilise multiple dire metrics are gaining traction before investments turn a corner.”