In marking the tenth anniversary of the biggest financial crisis since the Great Depression, the Bureau for Economic Research (BER) has looked back at the performance of the South African economy from 2010 to 2017.

Since the financial crisis, domestic real gross domestic product (GDP) growth has underperformed relative to both emerging market peers and average global growth.

Since 2014, domestic growth has also come in lower than the average for advanced economies, the BER says in a research note released earlier this month.

The reasons for the malaise have been well documented, with the lacklustre performance of the South African economy after the crisis ascribed to both external and internal factors.

BER economist and research note author Harri Kemp notes that domestic factors rather than external factors explain the bulk of the underperformance.

“These include falling confidence, widespread policy uncertainty, mismanagement of State resources and various other structural constraints, which conspired to weigh on domestic economic activity.”

He adds that domestic growth tracked the global average quite closely prior to the crisis, but began diverging in 2010.

The research note attempts to quantify the cost of these ‘lost years’ in terms of the size of the economy, employment growth and government revenue. Based on relatively simple assumptions, it is determined that real GDP growth could have been between 10% and 30% higher by 2017.

Under the assumption that the domestic growth trajectory matched that of South Africa’s emerging market peers, real GDP growth would have been 29.3% (or R915-billion) higher.

“Under the more realistic assumption that we tracked average global growth postcrisis, the domestic economy would have been 15.4%, or R481-billion, bigger in 2017,” says Kemp.

Kemp notes that the impact of the postcrisis malaise can also be assessed in terms of foregone employment opportunities associated with below-par domestic GDP growth.

After declining in the decade before the financial crisis, the domestic unemployment rate has ticked up steadily between 2010 and 2017 as domestic economic activity was insufficient to absorb new entrants into the labour market.

The BER research shows that, under different assumptions regarding postcrisis growth and the elasticity of employment, the economy could have created between 500 000 and 2.5-million more job opportunities over the eight-year period.

“This means that the unemployment rate could have been 5 to 15 percentage points lower than the 27.5% recorded in 2017,” notes Kemp.

Another direct consequence of the weak postcrisis performance of the economy can be seen in the deterioration of government accounts. Persistent tax revenue shortfalls over this period, partially linked to the underperformance of the economy, contributed to the deterioration in the fiscal situation.