This past week, in Davos, President Cyril Ramaphosa claimed that South Africa was emerging from nine lost years.
This rhetoric has gathered storm, with the public divided on whether it is justified. Most of us expected former President Jacob Zuma to protest. This he did, citing that under his watch social grants expanded, the antiretroviral programme is now the largest in the world, the National Development Plan was put in place and two universities were built. These achievements according to Zuma, and a section of the public, disqualify the lost decade label. But what exactly constitutes a “lost decade”?
The term was first coined in reference to Japan’s economy between 1991 and 2000. Between the early 1970s and late 1980s, Japan rose from the ashes of World War II (literary and figuratively) to catch up with the industrialised economies of North America and Europe.
In the 1980s, Japan’s economy was roaring, posting the largest per capita gross national product in the world. Investors were scrambling to invest in Japan, and banks offered easy credit to businesses. In the 1990s the economy went bust, as the number of non-performing loans skyrocketed and the stock markets crashed. Unemployment increased from 2.1% in 1991 to a record 5.5% in 2002.
During the same period, public debt soared to 100% of GDP as the government tried to spend money to kickstart the economy.
The US economy is also considered as having gone through a lost decade, which started with the dotcom bubble burst in 2000 and ended with the burst of the housing bubble in 2008. During this period returns on dividends were lower than during the Great Depression in the 1930s. Net job growth was almost zero, and the crisis wiped out 33% of all manufacturing jobs.
By 2009 unemployment soared close to 10%.
Lastly, Economists argue that Latin America lost about half a century following independence in the 1820s, while Africa lost roughly three decades between 1970s and 1990s. In both cases, the regions were characterised by high levels of political instability, capital flight, economic stagnation and dramatic rise in unemployment.
The structural patterns of contracting national economies as described above, justify the “lost decade” label. In other terms, a “lost decade” refers to spectacular fall of macroeconomic indicators for a period extending about 10 years.
“Lost” as opposed to “gain” also suggests that on the whole, there was little progress made from the period preceding the one under analysis.
So was the last decade a lost one for South Africa?
To answer this question, we turn to the performance of the economy, using 2008 (or thereabout) as a reference point, depending on available data.
First the positives. As the former president rightly pointed out, one of the commendable successes of the past decade was the decrease of Aids-related deaths from 42.06% in 2007 to 22.18% in 2018. This was largely due to the ARV programme under Zuma’s watch.
Zuma is also right that social grants expanded coverage from 11.8 million South Africans in 2008 to 17 million in 2017. This, however, is a double-edged sword. Social grants help cushion the poor. But expanding social grants coverage while unemployment increases means that the number of people living below the poverty line increases, and the economy is trapped in slow growth. This is not sustainable.
If we turn to the negatives, GDP growth declined from 3.6% in 2008 to 1.3% in 2017. The economy went into recession in 2009, following the global crisis. It missed a technical recession by 0.3 points in 2015, and in 2018 it went into a second recession in just 10 years.
Unemployment rose from 22.5% in 2008 to 27.6% in 2017, a mere 0.2% below the highest since 1994. In other words, the combined policy choices and activities between 2008 and 2017 did not contain (let alone reverse) soaring unemployment. In 2017 there were just three million more people below the poverty line than in 2009.
Turning to perceptions on public service corruption, out of 180 countries, South Africa ranked number 54 in 2008, falling to number 71 in 2017.
Government debt to gross domestic product almost doubled from 27.8% in 2008, to 53.1% in 2017. Also, between 2007 and 2017, electricity tariffs increased by 356% compared with 74% of inflation increase.
On the whole, South Africa’s economy was a sinking ship between 2007 and 2017, even if there were few capitalists who made it out with some spoils.
The poor, the working class and the middle classes were all casualties, some in greater ways than others. If we use the Japanese, American, African or Latin American macroeconomic indicators as descriptors of lost or gained decades, then based on the above indicators, South Africa lost a decade.
• Dr Jason Musyoka is an associate researcher (development economist) at the Centre for the Advancement of Scholarship, University of Pretoria.