With hindsight it is easy to describe last month’s outbreak of xenophobic violence as an accident waiting to happen, but anyone familiar with the hard economic numbers should not have been surprised. While the South African economy has outperformed expectations over the past five years, so enormous was the inherited backlog in income disparities, unemployment and access to basic social and economic services that something much more dramatic than the 2.3 per cent a year recent growth in income per head was required.
But because the economy’s capacity growth rate is no more than 4 per cent, there was no way economic expansion could match the elevated expectations of millions of South Africans. By mid-2008 the consequences of 5 per cent plus growth are there for all to see – one of the world’s largest balance of payments deficits on a current account of 7.5 per cent of gross domestic product, inflation of 10.4 per cent and heading higher, an increasingly acute shortage of skills and gaping infrastructural deficiencies – most obviously in electricity, but also in water and transport. All the more disappointing that this should have happened in the midst of a commodity price supercycle and in the African country with the best recent track-record for sound economic management. So what has gone wrong?
