Latest news with #RaymondParsons
Eyewitness News
6 days ago
- Business
- Eyewitness News
Experts say economic momentum remains elusive after weak GDP growth
JOHANNESBURG - Experts said economic momentum remains elusive after GDP grew by an anaemic 0.1% in the first quarter of 2025. Agriculture bloomed in the three months under review, giving the economy a massive lifeline of 15%. But chronic challenges in mining and manufacturing offset agricultural wins, pulling performance down. Statistics South Africa (Stats SA) released the latest GDP figures on Tuesday. While economists at Nedbank said they didn't expect fireworks, the quarter one GDP figures were disappointing. Although adverse global developments earlier in 2025 also played a role, an economist at the North-West University Business School, Raymond Parsons, said the weaker economic data was already apparent before then. He said that the ABSA Purchasing Managers' Index for May had remained in contractionary territory for seven consecutive months, despite showing some recent signs of business activity and demand improvement. He said the key manufacturing sector was likely to continue to be a lagging one for now. If the challenges persist, Parsons said the growth outlook for 2025 now seemed likely to be only about 1%, lower than projections by the South African Reserve Bank (SARB) and National Treasury.
The Citizen
13-05-2025
- Business
- The Citizen
Increased unemployment rate red flag for weak economic growth
South Africa needs economic growth of at least 3% per year to create enough jobs for South African. GDP growth of 1% will not help. The 1% increase in the unemployment rate to 32.9% for the first quarter of 2025 is a red flag for weak economic growth after the outlook for GDP growth in 2025 was already downgraded. Professor Raymond Parsons, economist at the NWU Business School, says that with various institutions and economists already downgrading gross domestic product (GDP) growth to about 1.5% and below, it is not unexpected that this is now reflected in higher unemployment levels. 'The overall total unemployment level is now where it was a year ago, and youth unemployment in particular remains at an unacceptable magnitude. The latest increase in unemployment again confirms that economic growth in South Africa has been too low for too long. 'There is no magic wand to create jobs overnight, as the disappointing unemployment picture is the cumulative outcome of seasonal, cyclical and structural factors. The deteriorating employment outlook, nonetheless, again reinforces the fact that the third Budget next week must be a growth-driven one.' Parsons says Budget 3.0 must create a policy environment that promotes economic expansion and boosts investor confidence, and must be dedicated to policies and projects that demonstrably support the commitment of the government of national unity (GNU) to at least 3% GDP job-rich growth in the medium term. ALSO READ: Jobs bloodbath as unemployment increases by 1% in first quarter Unemployed less likely to find a job as sustained growth remains elusive Jee-A van der Linde, senior economist at Oxford Economics Africa, says the unemployment statistics from Statistics SA's latest Quarterly Labour Force Survey show that businesses and households employed fewer people at the start of 2025. 'Weak domestic demand means that South Africans are increasingly downcast about their prospects of landing a job. Sustained job growth remains elusive in South Africa, and unless government can fast-track more business-friendly policies, the situation is not expected to improve. 'The higher-than-expected unemployment rate at the start of 2025 does not fundamentally change our outlook for the labour market, as the baseline assumes that the unemployment rate remains at these elevated levels over the forecast period.' However, he says Oxford Economics Africa will make revisions to account for the higher starting point for 2025. 'The quarterly decline in employment suggests that households came under pressure at the start of this year and indicates that businesses employed fewer people amid deteriorating demand conditions. 'In addition, the increase in unemployment does not yet reflect the impact of US tariffs. This would have weighed on business sentiment, resulting in companies scaling back employment and investment plans due to heightened uncertainty. It is therefore plausible that South Africa's unemployment rate could rise further in the second quarter.' ALSO READ: SA needs real jobs, not cosmetic unemployment figures Need for faster and labour-intensive growth to counter unemployment Thanda Sithole, senior economist at FNB, says the absorption rate decreased by 0.8 percentage points to 40.3%, suggesting a moderate deterioration in the economy's ability to create jobs. 'At this rate, a significant proportion of the working-age population is still left out of the economy, emphasising the need for faster and labour-intensive growth. 'The weak employment data for the first quarter reflects subdued quarterly economic activity and suggests that the labour market remains structurally constrained amid weak economic growth and a persistently high youth unemployment rate. 'The near-term cyclical outlook for the labour market is clouded by elevated global uncertainty, including the impact of US trade tariffs. However, continued structural reforms should, over the medium term, support employment creation.' ALSO READ: SA's economic growth outlook growing increasingly dim Uncertainty around GNU and US tariffs affect jobs Busisiwe Nkonki, Johannes Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, say the labour market outlook appears stable amid easing structural constraints, although cyclical factors are expected to become less supportive. 'Uncertainties related to the stability of the GNU and potential US tariffs are likely to hinder confidence and affect economic activity. The mining and manufacturing sectors are particularly vulnerable, facing challenges from subdued global growth and falling commodity prices, which will affect their export capabilities. 'The anticipated tariffs from the US present additional obstacles, creating a less favourable environment for hiring in these industries. Despite the challenges facing manufacturing and mining, the agricultural sector is projected to thrive due to favourable weather conditions.' They say the anticipated deterioration in economic conditions is a concern, particularly as weaker global demand further affects key industries. 'We forecast GDP to grow by 1% in 2025 and 1.6% over the next three years. Considering the balance of drivers, we expect modest declines in the unemployment rate over the next two years.' ALSO READ: 'Losing the war against unemployment': Higher Education misses skills programme target by 64% Additional interest rate cuts can help to halt decline Frank Blackmore, lead economist at KPMG South Africa, says if we can get additional interest rate reductions before year-end to help support economic growth, we may be able to halt the decline in jobs. 'Otherwise, we will require a much higher growth rate to absorb the economically unemployed in the South African economy, and that will obviously mean policy changes, attracting greater investment and allowing the private sector economy to create jobs by supporting the underlying infrastructure of the South African economy.' ALSO READ: Improvement in unemployment rate, but SA still needs almost 8 million jobs Unemployment casting shadow over country's recovery efforts Casey Sprake, economist at Anchor Capital, says it is clear that South Africa continues to grapple with a relentless increase in unemployment, casting a shadow over the country's recovery efforts. 'While recent key reform measures point to a more positive trajectory, this progress has not yet trickled down to many South Africans in the form of job opportunities. 'Structural challenges, such as a skills gap, labour market rigidities and the lingering impact of the Covid-19 pandemic, have exacerbated unemployment rates, especially among the youth. As the economy expands, the persistent lack of jobs threatens to widen the inequality gap, undermining social stability and eroding the gains of recent economic advancements.' A combination of structural deficiencies, such as a lack of skills, limited access to quality education and training, and inadequate job creation, has resulted in a large portion of the population being unable to find gainful employment, Sprake says. 'South Africa's unemployment problem remains particularly acute among the youth, where high levels of unemployment hinder their prospects and exacerbate social inequalities.' ALSO READ: The dark picture of youth unemployment in South Africa Youth unemployment points to structural issues in SA economy According to Sprake, the increases in the unemployment rate for young people, as well as the unemployment rate according to the expanded definition, point to longer-term, structural issues within the local economy, as it is difficult to reincorporate and entice discouraged work seekers back into the labour force. 'In addition, in the domestic economy, material job creation has only occurred when GDP growth approaches 3% per year. Therefore, the economy is simply not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans. 'At the end of the day, South Africa's unemployment problem is a complex and multifaceted issue that requires sustained and coordinated efforts from all sectors of society to create inclusive and sustainable employment opportunities for all South Africans.'
Daily Maverick
24-04-2025
- Business
- Daily Maverick
After the Bell: Decoding the truth after SA's Budget 2025 Rashomon
Personally, like the legion of cynics before me, I think it's useful to think positively when people are generally thinking negatively, and the other way around. So in that spirit, and without wanting to soft-focus all the problems that undoubtedly exist, what can be said positively about the Budget 2025 fiasco of the past few weeks? There is a paradox involved in appreciating different points of view. If you can see things from all kinds of different perspectives, you have achieved one thing, but have you lost another? If every angle claims the truth, and in some ways is the truth, is it possible to agree on the plot? This phenomenon actually has a name: the Rashomon effect. The name derives from Akira Kurosawa's 1950 film Rashomon, in which four witnesses narrate contradictory versions of a crime. The intention of the film is to highlight how perception, memory and self-interest distort reality. The problem with the excessive flexibility of embracing various perspectives is that truth dissolves into a kaleidoscope of relativism, where no anchor holds. Conversely, being too rigid forces truth into a kind of impregnable fortress, which negates nuance and inquiry. Wisdom is a process of navigation, obviously, supple enough to entertain diverse viewpoints, yet resolute enough to discern a coherent reality. Personally, like the legion of cynics before me, I think it's useful to think positively when people are generally thinking negatively, and the other way around. So in that spirit, and without wanting to soft-focus all the problems that undoubtedly exist, what can be said positively about the Budget 2025 fiasco of the past few weeks? When you think about it, there is a lot. Don't believe me? Try this… Bracket creep First, the obvious. South Africa's taxes are not going up, or at least not by much. As it happens, all the political discussions in the recent past have focused on VAT, but, actually, not adjusting for bracket creep gains the Treasury more than double a half percentage point rise in VAT. But at least we are not going to see a 2 percentage point increase in VAT. There is some debate about whether this will transform South Africa's Budget from a consolidation Budget aimed at reducing debt into a growth Budget aimed at increasing economic growth. Personally, I don't think the change will magically create a growth Budget, but I don't think the original version was actually a consolidation Budget either. It was more a tax-and-spend Budget. But given the ANC's predilection for tax increases that don't actually increase growth, this is a step forward. At least from my jaundiced perspective. Second, one of the things about creating a mess is that it does strengthen the resolve to clean up, and to be more careful about spilling the coffee in the first place. As NWU Business School economist Professor Raymond Parsons points out, the delayed Budget will subject future Budgets to a more intensive consultative process. Nobody wants to see this mess again. Third, as Parsons also points out, the whole process did identify that there were better options available to balance the Budget on both its spending and tax sides. Whether the ANC and the GNU will actually use these options remains to be seen, but at least the notion that all problems should be solved with tax increases is off the table for the time being. Fourth, Parsons says the process has emphasised the urgent need for much higher economic growth. This one I'm not so sure about. I just don't get the vibe from any of the political parties really that they truly think the actual solution lies in higher economic growth. They like the idea, it seems to me, in general terms. But putting it front and centre of the budgeting process? Hmm. Not so much. 'Trickle down' But still, one lives in hope. The curse of modern political parlance is that terrible word 'trickle down', because it makes it seem that ordinary people only get crumbs off the table when meaningful economic growth happens. That is absolutely not how economic growth works, as countless examples in history have shown. South Africa's politicians should know this but, in my experience, don't. But the fifth and most important result of the Budget fandango is that the ANC must now surely understand that the era of acting with impunity is unequivocally over. Since the election, the ANC has been legislating with the kind of haughty dominion that it had over its 30-year reign. Even if the DA leaves the GNU, that's not going to happen any more. So, that is one perspective. The other is that the process of fiscal sustainability is still a goal to be achieved — and that is more urgent now, even more than ever, given the world's more volatile future. And that is the actual plot, as opposed to all the perspectives. DM
Zawya
06-03-2025
- Business
- Zawya
Government urged to push structural reforms as South Africa's GDP grows 0.6%
After a marginal contraction of 0.1% in the third quarter of 2024, South Africa's economy showed resilience with a 0.6% GDP expansion in the final quarter of the year. Growth was primarily fueled by agriculture, finance, and trade on the production side, while household spending remained a key driver of demand. Despite a challenging economic environment, the country closed the year with an annual GDP increase of 0.6% compared to 2023, signalling cautious optimism for the year ahead. Commenting on the latest GDP figures, North-West University Business School economist, Prof. Raymond Parsons, highlighted that while the fourth-quarter recovery is a positive development, it underscores the need for sustained, inclusive economic growth. He noted that the Government of National Unity (GNU) has rightly prioritised higher growth and stronger job creation, as South Africa's long-standing challenge remains its persistently low growth rate. To unlock the country's full economic potential, Parsons emphasised the importance of maintaining a conducive environment for investment and long-term expansion. The modest 0.6% GDP growth in Q4 2024 highlights the tough budgetary choices facing the GNU, he said. "The GNU's Medium Term Development Strategy itself has set an overall growth target of 3%, which is about the minimum needed for SA to begin to make a big dent in its unemployment levels and help to alleviate poverty. "The GNU Budget on 12 March must therefore show a policy 'mix' that carefully calibrates fiscal consolidation, avoids a negative 'tax-and-spend' fiscal cycle, and supports growth-enhancing measures. "Accelerated growth-friendly structural reforms, especially in infrastructure development, need to be urgently implemented to lift SA's medium-term growth to 3%, say by 2027." Weak investment, at 15% of GDP, hinders South Africa's recovery, with household spending driving growth, Parsons added. "Household spending has done most of the 'heavy lifting' in SA's economic upturn so far. Higher sustainable growth also helps to create the economic buffers and resilience needed to mitigate any external shocks caused by elevated global uncertainty."
