How low business confidence affects South Africa's investment and job market

IOL News

4 days ago

Investec says a stronger fiscal position would have had a positive impact on the broader population. Investec's data shows that, had growth averaged 4.5% since 2010, the unemployment rate would be significantly lower.
Stronger business confidence could lead to more investment, better employment figures, and improved outcomes for both households and financial markets.
Recent analysis from Investec Wealth & Investment shows that if South Africa's economy had grown in line with its emerging market peers, at 4.5% a year since 2010, nominal gross domestic product (GDP) would now be around R11.5 trillion.
Currently, it is at R7.4 trillion, said Osagyefo Mazwai, investment strategist at Investec Wealth & Investment International, in a blog post.
Under the higher growth scenario, the National Treasury could have collected a cumulative R5 trillion more in taxes. That would have gone some way toward funding services and reducing the debt-to-GDP ratio, said Mazwai.
Investec says a stronger fiscal position would have had a positive impact on the broader population. Investec's data shows that growth has averaged 4.5% since 2010, and the unemployment rate would be significantly lower. GDP per capita, on a purchasing power parity-adjusted basis, would also be much higher.
The analysis highlights several underlying drivers of growth, including business confidence, policy consistency, and structural reform.
Mazwai points to a statement made by Reserve Bank Governor Lesetja Kganyago in 2019, stating: 'Restoring confidence is the cheapest form of stimulus.'
Data from 1994 to 2024 shows a clear relationship between business confidence and economic performance. For example, real GDP growth averaged above 4% during former president Thabo Mbeki's second term, when business confidence was high. During the same period, the unemployment rate dropped from 28% in 2004 to 21% in 2008.