Efficient Group founder and chief economist Dawie Roodt said South Africans should expect the tough economic conditions to continue this year.
South Africa is suffering economically with slow growth, high unemployment, and rising levels of poverty.
Roodt said the main reason for South Africa’s economic hardship is political and the wrong macroeconomic policies by the government.
The government’s poor performance leads to weak economic growth, which in turn results in a lack of job creation and increased poverty.
An increase in food prices, which has been the case in South Africa over the last year, has greatly impacted many people living close to the poverty line.
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To resolve these problems, economic growth is needed.
The bad news for South Africans is that the country’s economic conditions are unlikely to change in the short term.
Roodt said to grow the economy is simple and straightforward. However, politics is standing in the way of good economic policies.
“Our political problems are not going to be resolved before the general election in 2024,” he said.
“Only then will the financial markets and investors decide whether they like the new government and policies.”
“So, for the next eighteen months, not much will change in terms of economic activity in South Africa.”
Roodt said South Africans should realise the country is facing challenges and advised them to identify their industry’s risks.
They should manage the risks and be prudent in budgeting and making plans to mitigate the impact of these risks.
Efficient Group founder and chief economist Dawie Roodt said the three pillars of a strong economy are private property rights, free trade, and sound money.
Roodt highlighted that economics is not about graphs, formulas, and exchange rates. It is about one thing only – people.
“Economists use tools like graphs, economic formulas and the like to understand people better,” he said.
He added that economics is straightforward to understand and that there are three important principles for a healthy economy.
Private property rights
Roodt said it is crucial to protect private property rights to facilitate economic growth.
If private property is not protected and looting of shops or expropriation without compensation occurs, the economy will get crushed.
Free trade
Another important component of a healthy economy is to allow people to trade with one another.
People must be allowed to buy and sell goods and services, including labour, without impediment. The state’s role is to facilitate free trade.
Sound money
The third principle for a healthy economy is sound and trusted money.
A trusted currency facilitates free trade. For money to be trusted, there must be low levels of inflation, and it must be suitable to measure the price of things relative to one another.
The combination of these three principles creates a great environment for economic growth and a “free lunch”.
“When you allow two individuals to trade freely with one another, they create a free lunch because they are both better off after the transaction than before it,” he said.
“The more trade we can generate, allow, and facilitate in an economy, the more free launches we create.”
As a result, the economy becomes more successful, and the country becomes wealthier.
However, it is not possible to have free trade between individuals if they do not own things. It is why it is so important to protect private property rights.
“If you implement these three principles, it will guarantee success in an economy,” Roodt said.
