Читать книгу New South African Review 1 - Anthony Butler - Страница 23

Seeraj Mohamed

The South African economy was in a state of crisis before the recent global financial crisis.

The official unemployment rate has remained at well over 20 per cent over the past decade. Employment has declined in manufacturing, indicating deindustrialisation of the economy. Though employment in services has grown, this was not in productive services but instead seems to have been driven by acceleration in debt-driven consumption, outsourcing and growth in private security services; as a result, recent relatively high levels of economic growth could very well have been the ‘wrong’ kind of economic growth for South Africa.

The South African gross domestic product (GDP) grew at around 5 per cent or more per annum from 2004 to 2007, and although this growth was accompanied by increased employment and investment, not all growth in GDP, investment and employment is good for a country. This chapter argues that an important lesson of this short period of relatively high economic growth in South Africa is that one has to consider the quality of economic growth and the type of employment and investment associated with it. In other words, we have to examine the causes of economic growth and the types of investments made and of jobs created. When we move beyond the assumption that all economic growth is good for an economy we can begin to understand that an economy growing at 5 per cent per annum can be performing poorly. The South African economy was in a crisis, even though GDP grew at around 5 per cent per annum from 2004 to 2007.

Figure 1: Annual percentage changes in GDP and GDP per capita (2000 prices)

Source: SARB

The global financial crisis and economic recession meant that the growth rate declined to 3.1 per cent in 2008 and there was a recession in 2009. According to Statistics South Africa’s quarterly labour force survey, there was an employment decrease of 770 000 people (5.6 per cent) from the third quarter of 2008 to the third quarter of 2009. During this period, the number of people classified as ‘not economically active’ increased by almost 1.1 million and more than half (0.56 million) were classified as ‘discouraged work-seekers’. Manufacturing production decreased by nearly 20 per cent from April 2008 to April 2009, while services sectors, particularly retail trade, declined and lost jobs.

Estimates by companies such as Auction Alliance put home foreclosures at around 300 a month during late 2008 and early 2009. In May 2009, Rael Levitt of Auction Alliance projected that mortgage stress (homeowners two months in arrears on bond repayments) would shoot up from 125 000 in the first quarter of 2009 to close to 200 000 in the second quarter of 2009. He added ‘We also are projecting that severe mortgage stress (four months in arrears on bond repayments) will shoot up from 55 000 homeowners in the first quarter to 85 000 in the second quarter’ (Business Day 14 May 2009).¹

ABSA Bank reported that car repossessions peaked at 7 000 a month during 2008 and expected similar levels during the first half of 2009 (Business Day 1 April 2009).² The National Credit Regulator (NCR) reported in September 2009 that it expected 150 000 consumers to be under debt review by Christmas 2009, that there were about 100 000 consumers undergoing debt counseling in September 2009, and that these 100 000 consumers owed R20 billion, of which R12 billion was in home mortgages.³ Therefore, the average debt for consumers under review in September 2009 was R200 000. Clearly, most of the people entering debt review are middle class, since a large proportion of poor South Africans do not have access to credit from the large financial institutions and if they did they would not be allowed that level of debt.⁴ It is also worth keeping in mind that the figures reported by the NCR are only for people undergoing debt counselling and do not show the true extent of middle class indebtedness in the country.

So how did the economy manage to sink so low so fast? The Ten Year Review put out by the Presidency in October 2003 sounded an optimistic note, saying that government’s economic policies had saved the economy from a fiscal crisis and put it on a path towards more investment and economic growth. ‘South Africa has achieved a level of macroeconomic stability not seen in the country for forty years. These advances create opportunities for real increases in expenditure on social services, reduce the costs and risks for all investors, and therefore lay the foundation for increased investment and growth’ (Presidency 2003, p.33).

Figure 2: Official unemployment rates

Total unemploymenr rate drawing on revised LFS 2000–7 and QLFS 2008–9 (Percentages)

Source: StatsSA, drawing on their revised LFS 2000–07 and QLFS 2008–09

That the drafters of the Ten Year Review believed that there was macroeconomic stability in the economy during 2003 shows that they had adopted a neoliberal perspective towards economic policy. Within this perspective, macroeconomic stability is defined as maintaining a low government budget deficit (or preferably a surplus) and low levels of inflation. The authors of the Ten Year Review seem to have forgotten the currency crisis during 2001 when the rand depreciated by 35 per cent against the US dollar and the South African Reserve Bank (SARB) responded by pushing up interest rates by 4 per cent within a year. The impact of the increase in interest rates was increased unemployment: the official, narrow measure of unemployment grew from 23.3 per cent in September 2000 to 26.2 per cent in September 2001 and 26.6 per cent in September 2002. GDP annual growth dropped from 4.2 per cent in 2000 to 2.7 per cent in 2001, recovered to 3.7 per cent in 2002 and declined to 3.1 per cent in 2003. The authors of the Ten Year Review had let their neoliberal ideological blinkers blind them to all that recent macroeconomic instability.

The early 2000s was also a remarkable time because of the volatility in global financial markets as a result of the dotcom crisis. Capital fled equity markets in the US and went in search of high returns in real estate, subprime and securitised debt markets to set up conditions for the next financial crisis. The impact of the dotcom bubble was felt in South African markets; the 2001 currency crisis, referred to above, was caused by huge foreign investment portfolio outflows during 2000 that grew into a flight of capital in 2001 and the volatility in the South African economy was a result of largely uncontrolled movement of short-term capital flows into and out of the economy. The massive depreciation of the rand against the US dollar had a huge impact on the inflation rate because of the higher rand cost of imports, such as oil. The SARB responded with interest rate hikes and unemployment grew.

Figure 3: Household debt to disposable income (ratio)

Source: SARB

Uncontrolled flows of short-term capital (often referred to as hot money) were also important contributors to the relatively high levels of economic growth from 2004 to 2007. There was a massive recovery in foreign portfolio investment inflows to South Africa from 2004, and by 2006 net portfolio flows to South Africa were 7.4 per cent of the size of GDP. The impact of such large flows of the economy was huge; they caused the rand to strengthen, which had a negative impact on exports but a huge stimulatory effect on imports, and as a result, the negative balance on the current account as a percentage of GDP grew rapidly from −3.4 per cent of GDP in 2004 to −7.3 per cent of GDP in 2007 notwithstanding the large increase in global demand for minerals commodities and the large price increases for key South African exports such as platinum, coal and gold. The large current account deficit was a huge risk to the South African economy and its ability to maintain its balance of payments. In other words, the risk of a currency and financial crisis increased significantly.

The large and rapid growth in short-term capital flows is also associated with increased liquidity in the South African financial sector and increased extension of credit to the private sector. This increased credit was not used for long-term productive investment but instead was associated with increased debt-driven consumption and speculation in financial and real estate markets. The huge increases in household debt and the increased investment and employment in the retail and wholesale services sector were due to the increased credit extension made possible by increased hot money flows into the economy.

One of the consequences of the process of global financialisation was that events in financial markets shaped developments in the real sector. The debt-driven, consumption-led economic growth in South Africa was driven by increased inflows of short-term capital. At the same time, the South African financial sector was emulating the behaviour of its US counterpart (which boosted leverage and loosened lending conditions) and increasingly securitising debt and extending more debt for mortgages, car finance and consumption. There was very rapid growth in derivatives markets. The large South African corporations had also become increasingly financialised and seemed to follow the global trend whereby increasing product market competition caused many corporations to earn a larger share of their revenues and profits from financial activities and speculating in financial assets. The South African Reserve Bank’s flow of funds data shows that the South African corporate sector was speculating in financial markets more than it was investing in fixed investment (see figure 11 below).

The broader context for these economic events in South Africa are the industrial structural weaknesses of the economy and massive changes in corporate structure that have occurred in the economy since the end of apartheid. The industrial structural weaknesses stemmed from the development of the economy around mining and minerals or the minerals and energy complex (MEC), as argued by Fine and Rustomjee 1996). Much of the change in corporate structure occurred because of the responses of big businesses to democracy. The global context of increasing financialisation of nonfinancial corporations led to a massive global corporate restructuring and increased concentration of the global economy, and this process influenced the change in South African corporate structure. The global process of concentration entrenched and deepened the existing global division of labour between the rich countries of the North and the developing countries of the South. In general, rich countries controlled global economic value chains and the design, engineering, branding and distribution of products while the developing countries were, in the main, involved in either assembly manufacturing or providing low cost agricultural or minerals inputs into the global value chains. The corporate restructuring in South Africa began a reversal of previous industrialisation, leaving the economy more concentrated and more dependent on the mining and minerals sectors. These developments had a significantly negative impact on workers in South Africa.

The short period of growth at around 5 per cent per annum from 2004 to 2007 blinded many South African economists and economic policy makers to the crisis that was unfolding. The current financial crisis provides an excuse for the poor performance and high job losses in the economy but on the whole, this short period of high growth from 2004 to 2007 left the economy poorer. The decisions to adopt neoliberal economic policies, particularly macroeconomic and financial policies, have had a hugely negative impact on South Africa by allowing short-term financial flows to create macroeconomic instability that destroys industry and jobs. They have directed the misallocation capital towards speculation and bubbles in financial and real estate markets, and away from long-term job-creating productive investment. The relatively little fixed investment that has occurred is largely in services sectors linked to increased speculation in financial and real estate markets and the growth in debt-driven consumption.