Low-Middle-Income South Africa on the Rise, Models Show

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Low-middle-income South Africa on the rise, models show. According to a Eunomix Business & Economics Ltd. model, South Africa’s political and economic deterioration will accelerate by 2028.

The analysis by the Johannesburg-based risk-advisory firm underscores the ruling African National Congress’s policies’ failure to accelerate economic growth.

 

By 2020, the country’s per-capita income would be three-quarters of the global average, Eunomix predicted. Achieved worldwide average income and twice that of middle-income nations in 2000.

 

Various political, social, and economic indicators showed a deterioration. Eunomix attributed the ANC’s demise to its inability to change the apartheid-era economic framework intended to exclude the country’s Black majority. Unlike the White minority administration, the ANC has constructed what Eunomix calls the world’s largest welfare state.

 

“Democratization abolished formal political discrimination but failed to reverse economic exclusion,” Eunomix stated.

“Democratic South Africa made the fundamental error of rejecting labor-intensive export-oriented development. The ANC has, therefore, consolidated apartheid’s deadly separation of economy and politics.”

 

“This growth collapse is now approaching the high probability of an economic collapse,” said Claude Baissac, Eunomix’s founder. “We are on the verge of a Greece-like, Argentina-like economic contraction.”

 

The decline is caused by a shrinking tax base, slow economic development, and unwise policies, Eunomix says. That, with escalating unrest and bloodshed, is pushing the country toward “failed state” status.

 

According to the World Bank, lower-middle-income countries have a GDP per capita between $1,046 and $4,095. The World Bank estimates SA’s GNI per capita at $5,410 in 2020.

 

Between 2015 and 2019, the economy grew by just 0.8% annually, making South Africans poorer. Between 2010 and 2014, the average was 2.5%.

 

Unless regulations change, Eunomix predicts a slow recovery from the Covid-19 pandemic.

 

Savings, at 15% in 2019, were below the sub-Saharan Africa average of 19%, according to Eunomix. Taxpayers in the 60 million-strong country declined from 6.3 million in 2012 to 4.3 million in 2019. One in three South Africans gets assistance.

 

“Still, a policy shift may improve the country’s fortunes,” Baissac said.

 

“South Africa is really fortunate to have many low-hanging growth fruits. “Sectors like energy, especially natural gas, transportation infrastructure, and agriculture have tremendous potential,” he stated. “Simple policy clarification and simple actions would immediately spur investment, jobs, and growth.”

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