Did apartheid SA grow at a faster economic rate than post-apartheid SA?

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Anti-apartheid activists hold one of many proteststhat were prevalent overseas at the height of apartheid Picture: Sahm Doherty / The LIFE ImagesCollection
Anti-apartheid activists hold one of many proteststhat were prevalent overseas at the height of apartheid Picture: Sahm Doherty / The LIFE ImagesCollection

Did apartheid SA grow at a faster economic rate than post-apartheid SA? The facts show nothing is further from the truth, writes Pali Lehohla

African think-tank DaMina Advisors boasts a “who’s who” of Africa’s political elite and intelligentsia. On the face of it, you would arguably say “here is Africa’s think-tank”. At least the names are African, and a good number of them are preceded by the affirmation of the source of intellectual excellence, a doctorate.

DaMina has recently published an article that concludes that apartheid South Africa grew at a faster economic rate than post-apartheid South Africa, and that the consequences of the spate of xenophobic attacks will lead to firms relocating elsewhere on the continent.

DaMina’s assertion, particularly that of the author, suggests the economic performance of apartheid-era South Africa – from 1970 to 1990 – was stronger than that from 1991 to 2010.

Having inspected the facts, nothing is further from the truth than this sensational story.

First, I need to engage the author on methods. Second, I address the facts. Third, I focus on the morality of political systems and, finally, I question the integrity of the luminaries of DaMina and ask them to come clean.

The methods that underpin any comparison for a given country cannot be based on a currency other than that of the country concerned. The reason is that exchange-rate fluctuations exaggerate the changes beyond what they actually are.

For reasons of exchange rate fluctuations, the International Comparison Programme uses purchasing power parities to address such fluctuations. The author is advised to use rand-based amounts.

Second, the methodology of interpreting economic growth should use real growth instead of nominal growth because this carries with it differing inflation rates. This is to standardise the rates across high and low inflation periods.

So the methodology of comparison is hidden, which masks the actual changes in compilation and reporting between the different System of National Accounts (SNA) under which the figures have been historically compiled, which, unless reconciled to the SNA 2008 basis under which we compile and report now, will produce sensational but false comparisons. No doubt DaMina has made sensational assertions.

By way of factual illustration of the fallacy of the growth story as suggested by DaMina over the four decades, we must break down the period into 10-yearly periods.

The average nominal growth for 1970-1979 was 15.1% and from 1980-1989 it was 18.4%. However, real average growth in those periods was 3.3% and 2.2%, respectively.

The periods 1990-1999 and 2000-2010 experienced nominal growth of 12.4% and 11.5%, respectively – which translate into 1.4% and 3.5%, respectively. This illustration and fact debunks the myth of higher growth in the apartheid era compared with the post-apartheid era.

The numbers used (although seemingly sourced from the UN’s department of economic and social affairs) are wrong – hence the conclusions reached are equally wrong.

On the basis of facts, the growth rate between 2000-2010 witnessed the highest sustained growth period in South Africa and surpassed any other decade from 1970 to 1990 of apartheid South Africa. I dismiss the arguments of the author on these grounds.

The first decade after apartheid had to pay for apartheid debt incurred in the 1980s when sanctions began to bite and apartheid was trying to buy its way out by expanding national debt.

So the growth story has to be understood in the context of what growth an apartheid regime robbed for generations to come in South Africa.

By denying blacks proper education and jobs, robbing South Africa’s manufacturing capability, indulging in a senseless war and destabilisation of the region and committing generations to debt, render the moral story of DaMina as barren.

Reasonably fine economic assessments on South Africa’s economy are conducted annually by the Organisation for Economic Cooperation and Development, and are also done by the International Monetary Fund.

The credibility of these two entities informs countless investors worldwide on why South Africa remains an attractive destination despite its challenges.

Three macroeconomic statistics are always on investors’ minds: economic growth, interest rates and the value of money.

By this count, a 2% growth in our economy is far better than the halved 1% Eurozone growth or the $11 trillion (R131 trillion) minted “growth” of the US economy.

Our climate of positive real interest rates must be preferred to the near-zero interest rate environment in the US and the EU, and the fall of the nominal value of currencies in all other Brics countries except for the rand, whose fall is not this extreme because of relatively better economic fundamentals inside and outside the Brics bloc, shows there is a departure between reality and what DaMina claims this reality is.

DaMina has published the most unresearched and irresponsible piece of nonsense and wants to attribute the unfortunate situation South Africa finds itself in to a democratically agreed Constitution.

What a load of nonsense!

Reading the DaMina report side by side with its advisory panel leaves me convinced that DaMina and, by implication, its advisory panel is an empty shell devoid of the capacity of theory, methods, facts and moral authority on political systems.

Lehohla is SA’s statistician-general and head of Statistics SA

We live in a world where facts and fiction get blurred
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