Sentletse Diakanyo
Sentletse Diakanyo

The (No) Growth Path

South Africa has recently been invited by China to join the group of fast-emerging economies, BRICS, as they will be known going forward. BRICS, with the exception of South Africa, each contribute to more than 1% of the global GDP. Our economy has in the past struggled to reach the 6% GDP growth target despite the massive increase in infrastructure spending and the boom in commodities, which was driven largely by an insatiable demand from China.

We have had a number of policies since 1994 that were targeted at stimulating accelerated growth but none have succeeded to spur growth to higher levels. We now have the New Growth Path (NGP), which is being touted by the Jacob Zuma administration as a blueprint for job creation and economic growth. But it merely addresses the symptoms not the causes of the problem of joblessness and lower growth. The ANC appears to have adopted a “band aid” approach to these economic problems. Unfortunately what is contained in the NGP is nothing but a rehash of the same old policies that have failed to stimulate accelerated growth.

The ANC hopes to achieve sustained economic growth and development by adopting a myriad of policies that lack continuation. As a result there will be no meaningful impact on the economy, and most importantly, no meaningful change in the lives of the poor. Lessons can be learnt from China which has been consistent in implementing Deng Xiaoping’s economic reforms launched in 1978.

The NGP reveals the lack of foresight on part of our policymakers. Even after 16 years since the ANC has been in power, there has not been any long-term macro-economic policy that clearly outlines what the end-goal is; how the economy needs to be structured to achieve maximum growth. One would imagine that given the economic structure inherited from the past which was intended for the economic benefit of the white minority, the ANC would have had in 1994 an economic long-term strategy for the country. But none exists. Even the new Department of National Planning has not come up with any concrete proposals other than a Green Paper that simply outlines problems in the economy.

The economy needs to be transformed for the benefit of the majority, poverty needs to be eradicated and unemployment addressed. These are undoubtedly immediate economic challenges that need to be tackled. However, that cannot be an excuse for policymakers to be obsessed with policy short-termism which has no sustainable impact on the economy. Government should not be fighting fires 16 years after assuming power. The usual excuse that this is a new democracy is no longer plausible.

China was already growing at rapid pace already 15 years into its “Gaige Kaifang”; and that rapid economic growth was matched by growth in human capital. China’s quality of education is ranked 36th in the world, according to the WEF Global Competitiveness Report, and South Africa is at an embarrassing112th.

The target of creating 5 million jobs by 2020 is a pie in the sky given the inefficiency of the labour market and poor quality of education.

Industrialisation is one of the objectives of NGP. It is a noble aim but the reality renders this futile as high labour costs would ordinarily impact negatively on the competitiveness of manufacturers. Our economic success unquestionably depends on our ability to develop productive capacity. BEE has only served to recycle wealth and did not do enough to create new wealth by encouraging the emergence of new entrepreneurs and industrialists who establish their own empires without being parasites on white wealth. But before we get there we need to get the basics right.

While the mining and agricultural sectors have largely been those sectors that absorbed more unskilled and semi-skilled labour, a concerted effort needs to be made to overhaul the education system to ensure that the skills produced are matched to the economic demands. The quality of education in SA is appalling compared with other BRICS countries.

An attempt to achieve the aims of the NGP would face major obstacles, besides such aims themselves being unrealistic. It is delusional to think that the economic growth target of 7% would be achieved given endemic corruption, incompetence of public officials, poor quality education, inefficient labour market, budget constraints, etc. The NGP promises massive investments in infrastructure yet the MTEF foresees real growth in expenditure to be just over 2% a year for the next few years.

The NGP reaffirms the ANC’s economic populism in presenting an endless list of promises that are never fulfilled. The Jasmine Revolution in Tunisia should serve as a warning.

This article was first published in the City Press

  • Grant

    The constant growth mindset is a disease. It is not logical nor is it rational. Keep using finite resources at an ever increasing rate and eventually you hit a wall. We need a no-growth system for you, me and future generations to survive.

  • Ian

    Yes, it does seem rather more difficult to create wealth than merely redistribute it.

    And all the focus on tenderpreneurship, BEE, instead of entrepreneurship, does not help the cause. It also creates a false mindset about how true wealth is created, by hardworking individuals, with innovation, vision, and determination.

    These true wealth creators were not after a free lunch.

  • Pakane

    Thought-provoking one Sentletse. However, I realize that you establish facts that negate ANC promises. I wished that you integrated the facts of undoing the illusions created by the ANC administration. Examples: how can budget contraints be understandable with a huge government that even afford not just multiple first ladies but unending list of president’s children and what-ever-children-born-out-of-wedlock are called? How can be done to ensure that even non-ANC members are given equal economic opportunities? You see Sentletse, I have observed that we are a nation that is excellent in identifying problems but very poor in identifying and ensuring actual implementation of resolutions. Given the national outcry about corruption, I would expect that something concrete is being done by now by the people not the misgoverning Zuma administration. When shall the people rule, when shall politicians be servants not bosses calling themselves servants?

  • MLH

    I would like to see you take each point and identify solutions to every concern you raise, in separate columns. It would be especially helpful if City Press would publish those columns. It would be even more helpful if they were translated into all the official languages and published in those languages. My domestic worker claims articles that explain such things are thin on the ground in Zulu, for instance and says that step-by-step explanation would help her and her friends understand why the basic detail doesn’t or won’t improve their lives. They need to know and understand the implications. I’m darn sure, for instance, that she would be horrified to find out more about that dreadful youth conference in December and what the youth development agency was granted by way of funds in the new budget. She has already changed her vote, she says, but she’s now reached the stage where she’d like to change the world…

  • Wout

    “Arms Deal” – ’nuff said. Another thought-provoking one, thank you!

  • Mr Y

    @Grant
    “Only when the last tree has died and the last river been poisoned and the last fish been caught will we realise we cannot eat money.” ~Cree Indian Proverb
    The world is totally blind to the fact that what we really need is a totally new kind of economy, not more of the same.

  • Kwame

    I see a lot of critisicm in your article, but no clear wholestic solution. Pls do take into account that world economies have generally slumped, and we have faired well under the circumstances. In 1994 the ANC not only inherited, but also had to work within a global system that was not designed in the interests of the freedom charter. During negotiations, the ANC had to sacrifice many of its policies as the owners of capital, simply refused a new dispensation that would have resulted in bolder initiatives as you suggest. The alternative for not having a compromise would surely have resulted in a Zimbabwe situation.

    I think we all need to appreciate the progress made so far and make the necessary refurbishments when the opportunity arises, especially as the tranformation agenda starts yielding results i.e the emerging generation of young black professionals. The challenge however, is we can’t do it alone. Any change of policy has to speak to the markets.

    Its still early days for us to praise economies such as China, as we have learnt in Tunisia, that an economy is not sustainable without democratic principles driving it.

  • Grant

    Great proverb. Check out this article:
    http://kickitover.org/2009/08/07/beyond-growth-paradigm

  • Frantz Fanon

    In 1976, SA was the world’s 16th biggest economy. Bigger than South Korea. In 2011 SA is the world’s 30th biggest economy. Tiny compared to South Korea and the Asian giants. Makes you think, doesn’t it?

  • http://hismastersvoice.wordpress.com/ The Creator

    You have a point, although you could make it better. Fundamentally, what is needed is well-targeted investment. This is not happening, because the government lacks the power to direct capital, and this is because it has never tried to develop the power (or the capacity) to direct capital. The other problems which South Africa faces are comparatively unimportant (the educational systems of East Asian countries were no better than ours when their economies took off into over-5% growth).

    However, we also need some kind of control on imports to protect local industries, and we also need a better distribution of wealth (poverty levels such as ours cannot sustain a consumer boom). The grim fact is that our ruling class does not want any of these things (they like exporting capital, prefer cheap imports to more costly domestic production, and want all the cash for themselves). Until we have a government prepared to challenge the ruling class we will not have sustainable economic growth.

  • Grant

    There is no such thing as “sustainable economic growth.” It’s an oxymoron. It amazes me at how unintelligent “intelligent” people are.