The worst is over and the world economy is recovering from its most devastating financial crises in recent times, says Rhodes University Economics Professor Gavin Keeton.
That’s the good news. The bad news is that it will take years to regain the jobs lost in the downturn worldwide.
South Africa is no exception and its recovering economy will not necessarily translate into job creation, warned Prof Keeton.
Speaking at a recent Rhodes Business School forum, he said South Africa’s economy was predicted to grow at a healthy 3.5% – 4% over the next few years - but this was a “long way” from the levels required to create meaningful employment.
International Monetary Fund (IMF) figures showed South Africa had reflected the “highest job losses in the world relative to the size of its labour force” during the financial crisis.
Prof Keeton attributed this to the country having continued to give “very high wage increases” even though the economy was failing. SA reflected the “fourth highest wage increases” in the world during the downturn.
Those who kept their jobs earned more, but the others paid the price by losing theirs.
He said that to create jobs the economy needed to grow faster.
But, much like elsewhere, he added that South Africans “loved debt”. In 2005, low interest rates meant that most could service their debt but skyrocketing interest rates affected many South African’s badly.
These mounting interest rates, the country’s rising debt and its “higher than expected” budget deficit - which would affect South Africa’s ability to meet social spending requirements - were of particular concern, said Prof Keeton.
The developed world – and South Africa – needed to reduce their deficits and their debt, he said. “If anything more goes wrong there is no more ammunition left.” He said Eskom also “continues to fiddle” while South Africa was attempting to resume its healthy growth profile.
Eskom was operating on “extremely tight margins” and as the economy recovered and smelters came back on line, he predicted that South Africa again faced the risk of going through another period of power blackouts.