The state of the nation address delivered by president Cyril Ramaphosa in parliament today is clearly pure wishful thinking and the beginning of the final countdown to the total destruction of the country's economic development and progress," says independent agricultural economist Fanie Brink.
Brink says the shocking contraction of the country's economic growth during the first quarter of this year of -3.2% confirmed this further decline as the first clear indication that the economy will fall into a deep recession this year, from which it will not easily be restored. The president's state of the nation address will do absolutely nothing to prevent it!
The biggest single problem with the economy in South Africa remains the fact that after 1994 the ANC government embraced a mixed socialist and communist ideology that cannot create economic growth, and totally rejected capitalism. This was in fact the starting point for the destruction of economic growth, as has already been clearly demonstrated. In contrast, a market-oriented capitalist system which drives and creates economic growth through the profit motive is still the most successful economic system in the world today. Socialism and communism can only destroy economic growth and prosperity, and that is the main reason why government will not be able to turn the weakening economy around.
The president's announcement after the election that the government will fall back on the old National Development Plan (NDP) which had been released 7 years ago, is very clear evidence that the government has no plan to improve the extremely poor economic conditions. The NDP was never a plan with the objective to improve economic growth and has therefore assumed that it should grow at least by 5,4% per year to implement the plan successfully. The growth rate over the past 5 years has been barely 2% per year and is still deteriorating.
"The ANC government does also not have the expertise and competence in any case to implement the NDP and therefore no improvement in the economy and the country will take place during this term."
Brink therefore says there is no possibility that the president will be able to address the government's policy uncertainty or to figure out exactly what could be done to restore economic growth and where the economy will stands and what can be expected of the country over the next five years. Rather, he should have acknowledged that the economy will not grow this year and will fall into a serious recession. The government will also not be able to get its finances and debt under control and the country's creditworthiness will continue to be downgraded to junk status.
"The government will, as in the past, not be able to find solutions to poverty, inequality and unemployment if the economy does not grow at least 5% a year, while the state's debt burden will continue to rise excessively."
The government's clear onslaught on the capital of the pension funds and the reserves of the Reserve Bank will expose the country's financial stability and survival to incredible risks.
The government has also not made any progress in exploiting the ocean's wave energy, which can have various benefits for the country in terms of a clean and renewable source of electricity, the desalination of seawater and the earning of internationally marketable carbon credits which are available in terms of the Kyoto treaty.
The expropriation of land without compensation still poses a very serious threat to agricultural production and food security that will destroy the economy, and cause much higher unemployment, poverty and famine. Despite all the time, manpower and funds donated to land expropriation over the past year, the government still does not have any acceptable plan that can be successfully implemented.
As expected, the president does not care at all about the increase in farm murders and violent attacks on people's lives and property in towns and cities.
"The strong possibility that the economy will not recover again as long as the ANC is in power and that the country will be totally destroyed within the next 5 years, is extremely worrying," Brink said.
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Bothaville
June 20, 2019
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