Secondary

Unsustainable Growth a major concern

The latest GrayIssue from Allan Gray contains some sobering thoughts on a ticking time bomb that the government appears to be ignoring in their quest to stay in power.

For some time we have been concerned about the sustainability and unbalanced nature of consumption growth in South Africa.

I don’t believe you can consume, spend and borrow your way to wealth while producing less and less. This applies to individuals and to countries. Eventually someone has to pay. I would have thought the events of the last five years would have provided some evidence of this. Sustainable growth requires funding by real capital built up over many decades of saving and retained profits.

The impressive growth in the earnings of consumption/consumer-based businesses relative to mining (excluding iron ore) and production activities in South Africa is a case in point. These businesses have benefited from real wage increases (in an economy with high unemployment) and government spending.

The full article can be read here.

________________________________________

 

Comments are closed.