Introduction
With the South African Budget Speech by Finance Minister Enoch Godongwana, indicating that there is a dire need to find ways to rapidly grow the economy in one of Africa’s largest economies, It may be of interest to look at the successes of other countries around South Africa and see what can be learned.
Business Tech Africa publishes an article from economist Robert McGregor where he outlines its growth trajectory in the 30 years since its independence and draws a stark comparison to the stagnation seen in South Africa.
The Success Story VS Stagnation
Statistics South Africa recently presented their Q4 2024 GDP data, revealing that the South African economy grew by just 0.6% in real terms in 2024 – its lowest growth rate since 2020 (-6.3%).
Over the past decade, South Africa’s real GDP growth has only equaled or exceeded its population growth levels (~1.3% p.a.) twice: in 2015 (1.3% growth) and its initial post-COVID recovery in 2022 (4.9%). South Africa’s real GDP in 2024 was about the same as it was in 2018.
The Namibia Statistics Agency is expected to publish Namibia’s Q4 2024 (and thus also full-year 2024) GDP data on 20 March 2024. We anticipate real GDP growth of 3.4% for Namibia in 2024, which would mark a fourth consecutive year that Namibia has seen real GDP growth above population growth (approximately 3.0% p.a.).
After stagnating from 2015 – 2019 and a major contraction in 2020, the Namibian economy has shown decent growth over the last few years – and we believe there are good prospects for this to continue (should there be no abrupt policy changes).
Better Performance in Namibia over 30-Years
Although the Namibian economy is just a fraction of South Africa’s (for 2024, about 3.4%), on a relative basis the Namibian economy has performed much better over the last 30 years – even with Namibia’s stagnation during the 2010s. When indexed back to 1993 (just after independence for Namibia and just before South Africa’s constitutional democracy), both countries performed similarly. Namibia and South Africa saw nearly like-for-like economic growth from 1993 until 2001, whereafter Namibia started posting much higher economic growth – outperforming until 2015.
While there are many criticisms of real GDP, this measure serves an important function and provides an important indication of the state of a country’s economy and, to some extent, her people. If an economy is not growing, it is unlikely to be creating (net) jobs, seeing wage adjustments, or see sufficient growth in public sector revenues for continued spending on infrastructure and social safety nets. Higher GDP growth, especially above population growth levels (or ‘per capita’), generally means that an economy is creating more jobs and paying better wages – seeing absolute poverty fall while creating a larger and wider tax base for the state.
Living Standards Improving
Improved revenues for a government, particularly in a developing country such as Namibia, means that there is more to spend on improving living standards – whether access to safe drinking water, access to quality healthcare, access to quality education, access to electricity, etc.
This is under the assumption that fiscal expenditure is responsible and targeted at a government’s core functions – something which is often an issue for developing countries.
Based on our forecasts for Namibia and using South Africa’s Treasury forecasts for SA, we expect the relative gap in the two economies to continue widening over the foreseeable future.
Author: Robert McGregor, who is an economist and Chief Researcher at Cirrus Capital
