Kathy Gibson is at IDC Directions 2020 in Sandton – Is South Africa running out of time to turn its economy around? It may well be at the point of do or die right now.

Things are tough, says Gina Schoeman, director, economist and head of research at Citibank South Africa.

“We find ourselves in a place of flux at the moment and there are so many turning points right now.

“We are in dire straits,” she stresses.

The top issue is the rand, which is extremely volatile and highly traded. More volatility can be expected when certain events happen – like CPI release, the budget, the Moody’s review, the ANC National General Council Meeting, the State of the Nation Address and more – all of which are feeding into currency uncertainty.

The ANC National General Council meeting in June is particularly troubling, Schoeman points out. “We cannot predict what will happen. But a one-term president can only do a certain amount fo reform. And the concern about a one-term resident raises uncertainty.”

In fact, everything is about confidence and uncertainty, she says. And never before has the South African environment been so muddy.

A telling statistic is that last year’s voter turnout dropped by 10% – a massive drop by any measure.

What this signals is that there are a lot more people who look at the ballot paper and don’t see anyone who can address their basic needs.

In addition, the narrow margin by which the ANC won Gauteng adds to uncertainty. The National General Council meeting this year, followed by locals elections next year will be key.

This is because there is massive migration into Gauteng, allied to record levels of frustration. People move to areas where the economy is seen to be strong, but people don’t find this to be reality on the ground.

“We have an upward trend in service delivery protests,” Schoeman says. “It is happening because service delivery is poor.”

Protests are also picking up in the rural provinces, arguably because they are far worse at delivering services than urban areas.

“Eventually people pack their bags and move to where they may get better services.”

This makes Gauteng the prime political prize for parties.

Most people in South Africa are young, with 40% under the age of 20, and another 35% between 20 and 40 years old.

This should be an economic boost, but it requires that these young people have income – which means jobs.

Confidence is something that we cannot discount, Schoeman adds.

In terms of business confidence, we are in the longest period of the lowest confidence since it started being measured in 1976.

The concern about this, she points out, is that is has a direct impact on investment and economic activity levels.

Indeed, economic activity has been hovering around zero for a decade.

Schoeman stresses that confidence is the most important measure contributing to economic growth.

Confidence is closely tied to certainty, she adds.

Next month’s budget isn’t looking too promising, Schoeman says.

Cutting the public sector wage bill is going to require co-operation between Treasury and the unions.

There are only three highly unionised sectors: mining, electricity and public sector services.

Schoeman believes the unions are important and have a big role to play in job protection – not to demand unrealistic wages.

Labour reform that has been passed now could be a stumbling block for unions. More significantly is that the union movement is getting older, with the average union member being 49 years old.

While young people are not as unionised, they are also less likely to be employed – 69% youth unemployment is a real issue.

“These are the kinds of push and pull elements that are happening while the economy is trying to chug along,” Schoeman point out.

Additional elements like load shedding hit confidence anew, and has pushed growth forecasts from 0,9% to an unprecedented 0,6%.

This pushes growth per capita to negative – and it has been there for some time. To maintain even moderate growth, the economy has to grow at more than 1,5%, Schoeman explains.

“This economy has been emptied out for a decade and this will have massive impacts.”

For South Africa at a whole, the debt to income ratio is 74%. On a personal level, however, low-income earners are more likely to be in debt, particularly debt that is not asset-based.

“Yes, high income earners are more vulnerable than they have been for a decade. But low-income is the saddest story – 65% of consumers have leveraged up as much as they can, often with unsecured credit with servicing costs of up to 25%.”

This impacts inflation, which in turn can deal a body blow to everyone, especially low income earners.

The reason we haven’t fallen into an inflation spiral is because we have had a hawkish oversight on the economy.

What is the answer? Schoeman points out thatTreasury has written a plan, although whether it will be implemented is open to question.

The only way to expand the economy, Schoeman believes, is to enable the private sector to create jobs – and this has to follow private sector being allowed to be more profitable.

“Capital will expand into capex and labour.”

This will only be enabled by reform, she adds.