Vusi Gumede
Vusi Gumede

Poor policy slows SA’s growth

James Carvelle, Bill Clinton’s 1992 campaign strategist, coined a phrase that remains pertinent the world over, especially in South Africa, when he said “the economy, stupid”. As we now paraphrase Carvelle’s phrase, “it is [indeed] the economy, stupid”. In the case of South Africa, I insist that it is both the economy, and more fundamentally, policy, stupid.

The recently released census results confirm that South Africa’s social and economic transformation has been slow. The economy is stuck in low gear. Poverty and inequality remain disturbingly prevalent, especially for a country with a high per capita income. I believe the cause is to be found in poor policy and delayed policy reforms.
By policy, I mean the clarity of strategic intent of the government. Policy involves hard choices: it is a combination of instruments, which may be contradictory, used to pursue lasting socioeconomic transformation. Policy is the art of negotiating trade-offs and contradictions.

Ideally, policy should be disentangled from politics, and it should always take precedence: when politics flounders, as it often does, policy should still stand the test of time. Policy clarity would ensure that the bureaucracy understands the government’s strategic intent. It should be able to pursue that strategic intent even in the midst of political pollution.

Policy that is of critical importance for a country like SA should be concerned with social and economic development — and the interface between them. The transformation of societies requires robust social and economic policies that talk to each other. Social policy in particular is about advancing social wellbeing, along the lines of addressing what Amartya Sen, who was awarded the 1998 Nobel in economic sciences, terms undoing “unfreedoms” such as poverty, lack of access to social services, and so forth.

South Africa’s economy has, since 1994, performed below its potential. Thankfully, it stabilised in the mid-1990s, after its worst performance during the dying years of apartheid. Economic policy focused on macroeconomic stabilisation, through the necessary but controversial policy reforms akin to the Washington Consensus. The frequency and intensity of public protests and wildcat strikes lately show that social welfare, social institutions and social relations remain poorly transformed — these are important aspects of social policy according to Thandika Mkandawire, who is the chair of African development in London School of Economics.

In the 2000s, economic policy turned again to redistribution with the accelerated and shared growth initiative of South Africa, but that was left hanging after about three years and a new “policy” was introduced: the new growth path (NGP). Although the economic analysis contained in NGP is robust, the policy is not clear. Or, rather, its infrastructure development programme is not really policy. It is still unclear where the money to finance it will come from in the context of a weak global economy and worsening economic performance in South Africa. Besides, the main policy instrument proposed in the NGP to address unemployment — that wage settlements should be moderated — misses the point: reducing labour costs does not automatically increase employment. There are numerous determinants of employment that this narrow policy view ignores.

Then we have the more comprehensive and policy-oriented national development plan from the high-powered national planning commission. The NPC’s 2030 vision offers us a chance to “write our future”, as the commission puts it. It appeals for leadership, unity and cohesion for the plan to be implemented successfully. Yet it also highlights “policy instability” as an issue that requires attention.

We face a host of urgent social and economic issues. In many analyses, topping the list are unemployment (especially youth unemployment), poverty and inequality, education and skills. These challenges are a function of poor policy and weak conceptual clarity. In other words, the so-called poor quality of education is related to policy, as is high unemployment. Often it is argued that the economy requires certain skills and that those (high-level) skills are scarce. Policy could ensure that the skills needed by the economy are created: graduates, who surely can learn some skills, can get in-service training as an example.

It is hard to concur with the argument that mainly poor education and lack of skills is to blame for high youth unemployment. This view avoids confronting the real issue: the demand side of the labour market. It seems to me that almost all countries view their education systems as weak, but most countries do not have our painfully high unemployment rates. Besides, the education system in South Africa has always been poor: Bantu education was, arguably, worse than the post-apartheid education system, but the graduates of the 1990s, who imbibed Bantu education, managed to find jobs.

Because of weak policy thinking, we end up with targets that are clearly unachievable. It appears obvious that the jobs promised by the new growth path are a pipe dream. Strangely, the NPC falls into the same trap: it is hard to imagine, given unclear economic policy, that the economy can create six million jobs between 2020 and 2030 to reach full employment by 2030, as the NPC promises.

The envisaged national consensus, as important as it is, cannot miraculously create jobs. Policy creates jobs by ensuring an economy that performs at the level it should. The Achilles heel of our economy, compounding the policy challenge, is this notion of a “mixed economy”, which tries to balance a free market and state intervention. But it is not helpful to proclaim this: all economies, the world over, are effectively mixed economies. The real issue is the policy mix that will achieve sustainable economic growth and redistribution.

It seems the government has flip-flopped on the clear boundaries between what constitutes a “mixed economy”, and what mix is right for us. Perhaps we should go back to the analysis contained in the ANC’s 1998 discussion document “State, Property Relations and Social Transformation” because there has been no better clarification from the governing party since.

Fundamentally, the role of the state in the economy has to be clarified. China, Brazil and India are all mixed economies, but they are very different kinds of mixed economies. These countries are performing far better than South Africa in most respects. It seems they have a vision for their respective economies and have decided on an economic model that ensures a vision is attained. South Africa, through our government and through the ANC as the governing party, tends to get lost in the detail. We too often try to do everything all at once. We need to refine and clarify both our social and economic policy.

We could aim squarely at an economy that grows substantially, redistributes wealth and creates jobs. Such an economy would require a robust industrial policy, an economic empowerment policy that works, an effective policy for the development of small and medium enterprises, a trade policy that addresses the unintended consequences of international trade, tax and fiscal policies that promote redistribution, monetary policy that does not punish the emerging black middle class, and other microeconomic policy reforms.

With regard to the labour market, this might mean a change in government’s attitude to the informal economy: South Africa has a strangely small informal sector, or it is underreported and undervalued, but in many developing countries the informal economy is a temporary cushion for many people and can become a bridge to the formal economy. The government barely addresses this possibility.

We must invest more in policy thinking: ideas matter a lot in the transformation of societies. Without policy and conceptual clarity we end up with the Marikana tragedy — and there may be worse to come. The recent three-way economic discussion between the government, the private sector and the trade unions is a step in the right direction, but it will bear fruit only if it wrestles with the complex question of a vision for our economy.

It is not enough to tinker with policy challenges at the margins. To take the South African economy to the next level, substantial policy reforms are necessary. The “capable state” which the NPC yearns for or the “developmental state” that the ruling party is pursuing cannot achieve much without policy and conceptual clarity. “Writing our future” could prove futile if we do not have the correct policies to achieve the future we want to write.
Needless to say, the argument that policy is at the centre of development dilemmas confronting post-apartheid SA does not imply, or it does not intend to imply, that other challenges are not an issue.

Tags:

  • The realities of social mobility in South Africa
  • Africa’s 2040 employment problem
  • South Africa as a democratic developmental state: Bureaucratically not there yet
  • South Africa’s development paradigm
  • 46 Responses to “Poor policy slows SA’s growth”

    1. Mr. Direct #

      Interesting article.

      Hope the right people are reading it…

      November 23, 2012 at 3:13 pm
    2. Economist #

      Poor policy is not just slowing SA’s growth, it is destroying whole sectors of the economy. As you note, mining, manufacturing, and many small and medium businesses are in fact being destroyed by current policies. The bloated state is growing, but destroying real jobs whilst creating massive costs and pushing huge inflation into the economy. The basic problem is state policies are driven by a bankrupt ideology – socialism. All the other failures spring from this, and are smaller failures caused by the overarching bankrupt ideology. A social democratic state can work. A socialist state can’t – socialism, or communism, contains the seed of its own destruction and can never succeed. SA is much like the UK in the late 70′s – declining, with growing inflation and unemployment, over-powerful unions and a vampire state, and total disregard for individual freedom, for hard work and effort, and in fact for any productive parts of society. The UK was able to free itself because a few brave people stood up and said the whole idea of socialism is rubbish – and said this loudly and clearly. SA, hobbled by its ideological blinkers and in thrall to the 1970′s ideology of the ruling party, is unable to do this – it would be treated as heresy. And until this happens, the SA economy is going to get worse and worse.

      November 23, 2012 at 3:20 pm
    3. Sterling Ferguson #

      @Gumede, it’s alright to point out the economic problems in SA but, you don’t give any answers.

      November 23, 2012 at 5:03 pm
    4. Momma Cyndi #

      A large part of the problem is Cosatu. From the teachers who don’t feel that teaching is necessary to the violent strikes which chase away business. Maybe basic economic should be mandatory in our schooling system – although if they can’t teach reading, (w)riting and (a)rithmetic, that is a tall order!

      We have the information we need to halve the unemployment levels in 5 years. There is just no political will or trust in the political system to achieve that. NAMEC comes out with a goldmine of information every month and a number of viable plans have been put forward. Every year the government pays for studies which are then used as doorstops and never read or are given models which have been successful in other countries. Unfortunately, only those which can line the pockets of a ‘cadre’ are ever even considered.

      November 23, 2012 at 8:47 pm
    5. Sterling Ferguson #

      @Momma Cyndi, you hit the nail on the head about COSATU being part of the problem. The other part of the problem is the way the government is setup in SA, where the people can only vote for the party and can’t hold the officials accountable. The president of SA is only accountable to the kingmakers that put him in office and not the people.

      November 24, 2012 at 8:20 am
    6. Juju Esq. #

      Most South Africans are incredibly lazy and want something for nothing. Government is great on discussing policy and deciding policy, then they just don’t get around to implementing it because it takes planning, foresight and work.

      There is no policy solution for those who want something for nothing.

      November 24, 2012 at 10:08 am
    7. Social Worker #

      The current SA government economic policies are completely upside down, and are guaranteed to make the economy fail. They are: high taxes to destroy individual effort, a closed economy employing people based on patronage not merit, enough red tape to destroy thousands, if not millions of jobs, very low interest rates to ensure very high inflation -ask the poor what the price increases have been on basic food and groceries in the last year – a massive welfare state paying people to have babies and not to work, rather than allowing people to work. It will be the destruction of the economy that eventually topples this dreadful government, nothing else. Eventually the poor and the workers of all races will not be able to take it any more.

      November 24, 2012 at 10:58 am
    8. Stiglitz #

      There is a simple answer here – get the state out of the economy. Sell off the bloated and useless parastatals. Get rid of the whole class of state apparatchiks on massive salaries. Cut taxes so people can keep the money they earn – they earned it after all, not the state which takes it from them. Get the state to do the few things that it is supposed to do properly – starting with education and health. You could cut the education budget in half and deliver twice the results if you got rid of every useless trade union administrator deployed into some meaningless job. Get the state OUT of the economy. Watch the cost of living drop, and the number of jobs increase, and the life of the ordinary worker improve.

      November 24, 2012 at 11:07 am
    9. Policy Making Student #

      As a South African Public Policy making student and concerned young South African. Yes South Africa has poor policies but, I really think its not a matter of having “poor policies” as Prof Gumede stated in his article hindering our countries growth and development but of poor implementation of policies and incompetent/corrupt minsters and leaders running the country and its departments. For intense as long as foreign minorities companies such a Lonmin are in control of our resouces and so called leaders such as honourable C. Ramabuffalo… Policy implementation is and will continue to be the number one problem hindering our contries development and growth.

      November 24, 2012 at 11:17 am
    10. Yaj #

      @ Vusi

      You are right. The NPC spews out very fuzzy wishy-washy rhetoric and a grand wish list, stating the obvious.
      This is not rocket science. The Washington consensus was little more than a fiscal austerity IMF -inspired structural adjuustment programme that is directly responsible for our economic woes culminating in Marikana. For this disaster, Trevor Manuel, Thabo Mbeki and Tito Mboweni must be held responsible and accxountable. Sadly, the inept Zuma regime is no better, just plundering resources while our economy languishes in a state of paralysis.
      We need independent economic policy built on a level of protectionism ( import tariffs,subsidies and capital controls) and state /public banks to finance and fund all investment in new productive infrastructure(renewable energy, light-rail public transport network and agriprocessing) and redistribution of income through a universal basic income(universal credit) and a labour policy based on a substantially higher minimum wage.The focus must be on economic sovereignty through food and energy security weaning ourselves of increasingly more expensive and scarcer fossil fuels.We need an innovative tax policy-introducing a financial transactions tax in the form of a small levy on both sides of all transactions which together with a land tax will replace and displace income tax and VAT. Finally we need to reign in the power of the private banks by raising their reserve requirements in order to control inflation.

      November 24, 2012 at 11:46 am
    11. Perry Curling-Hope #

      a country with a high per capita income????

      No Vusi, we are NOT!

      South Africa weighs in at No. 76, along with places like Mauritius and Guatemala, which are regarded as ‘struggling 3rd Word’
      The Scandinavian countries whose enviable social welfare systems we think we should emulate post haste merely with a little bit of ‘policy’ magic, Sweden and Norway, are respectively eight and twelve times as wealthy as us with regard to per capita income (which is why they can afford the welfare and we can’t)

      In this regard I don’t much care what the ‘transformation’ / redistribution advocates might claim.
      You simply can’t have the same or similar fancy welfare on one eighth of the money

      Yet our taxation upon the productive sector of the economy engaged in capital formation, (income, profit and capital gains) is sixth highest in the world, and seven times as high as that of Sweden!!

      It should be obvious why we can’t prosper economically…we’re getting a bad deal from our outrageously pricey government/public ‘service’ complex.

      These people are expensive while being hopelessly ineffectual…they grab much of the productive capital formed and consume it themselves while delivering little in return, stunting growth and economic mobility (AKA economic ‘freedom’) hence the protests; rioting, shootings and ‘unrest’

      ‘Policy’ is not the only thing which is poor about this ‘administration’, barring their income, of course

      November 24, 2012 at 12:49 pm
    12. Enough Said #

      @Stiglitz

      You should read some of the work of Nobel Prize winning economics Professor Joseph Stiglitz before you make such statements. You must have the real Stiglitz rolling around in the isles laughing with your above statement.

      November 24, 2012 at 3:33 pm
    13. Enough Said #

      @Stiglitz (Mk II)

      Read up on the real Stiglitz:

      “In his latest book, Professor Stiglitz offers an imaginative and bold new prescription for global equality, one which he argues will result in a fairer world. He is concerned that globalization has not benefited as many people as it could and should have. Accordingly, he outlines what needs to be done to make this process work for the poor and for developing countries. He tells us why changes are needed in government policies, in world economic institutions, in the rules of the game, and in the general mindsets of the public at large.

      Professor Stiglitz knows that development is complex. He has seen how the “one size fits all” solution does not work for everyone……….”
      http://www.carnegiecouncil.org/studio/transcripts/5397.html#

      November 24, 2012 at 3:44 pm
    14. I agree with you Vusi, we really do not have an industrial policy that aligns government, parastatals and the private sector around an achievable growth strategy. South Africa needs to re-industrialise and shake itself free of the Minerals Energy Complex based on cheap coal, cheap labour and providing commodities to support China’s urbanisation. We need to focus, align and galvanise around African export markets and put real money into leading edge entrepreneurship.

      The NGP is as unrealistic as the NDP but at least it is focused and has signed up Labour and Business. The NDP proposes no feasible trajectory or set of steps and fails to articulate scenarios or choices and their implications. The language is odious for its flowery sing song tone, sorry the RDP era is over South Africa need an achievable inspiring strategy to move fast in a highly competitive global and continental scenario. The fact that the NGP and NDP don’t even talk to each other and came out within a year of each other is quite embarassing, I can imagine our global competitors having a quiet chuckle at our expense.

      Let’s hope we can get back to the drawing boards soon, lets get serious South Africa is a great country on the portal of the continent’s huge growth leap to 2030 and beyond

      November 24, 2012 at 4:09 pm
    15. The Realist #

      Judging from the comments the arch capitalists and free market fundamentalists are fighting for their lives. They must see the writing on the wall.

      November 24, 2012 at 4:13 pm
    16. The_Hun #

      I can not imagine any feasible policy which could increase the country’s growth rate above 4-5%. Liberalising the very strict labour and affirmative action laws would help a bit, but I can not imagine the type of jobs which would require very large number of new workers. Just the opposite is true, mechanisation is steadily reducing the number of jobs for workers with low education level around the world.
      In today’s internationalised economy a company setting up new manufacturing facility can choose literally any country in the world. Why would anybody choose SA? The workers are uneducated, their productivity is very low, they strike at a drop of a hat (often violently), BEE type of laws require giving away 20-30% of the company to somebody politically connected, they would be required to employ blacks even if a white person could do the job better, etc.
      I challenge anybody to come up any kind of manufacturing, mining or agricultural investment which would be attractive for an investor. Sorting out the education mess might help, but it could not be done in a year, so the current generation is already lost. If the government would decide to become more investor friendly and rein in the teachers tomorrow, we would not see the effect for at least 10-20 years.

      November 24, 2012 at 6:19 pm
    17. Sterling Ferguson #

      @The_Hun, you are so right and when Moeletsi Mbeki wrote the book “Architect Of Poverty” he was called a bitter man and an arm chair critic. In his book he says the same thing you are saying and go into more details. He also claims in his book that post apartheid South Africa’s economy is shrinking while the population is growing. He says in his book that 70% of the people voting for the ANC have never had a job in their lives.

      COSATU is calling for Lula’s Moments, when Lula sold off all of the state owned enterprises and reformed the pension system of Brazil.

      November 25, 2012 at 12:04 am
    18. Jack Sparrow #

      Good analysis Vusi and some good comments. Policy does not exist in isolation and looking upstream I think it is poorly formed due to the influences of COSATU and the SA Communist Party who, in reality, care little for growth and jobs, particularly new jobs. In addition, their being in government results in the appointment of ideologically bankrupt “comrades” of limited capability (cadre deployment).. These handbrakes on the economy tend to appoint their incompetent comrades below them. Downstream of policy making this results in paralasis, incompetence and corruption leading to non-implementation of most policies.

      SA needs simple policies implemented by appropriately qualified, competent, honest and hard working people. We currently have virtually none of the above in policy making and implemntation positions.

      November 25, 2012 at 4:30 am
    19. Lalapanzi #

      For 20 years now the ANC has been stuck in “who is to blame?” instead of focussing on “what needs to be done?”.

      White people could have made a huge contribution to the SA economy and its transformation, but they couldn’t and still can’t because they are constantly side-lined by the old socialist style “transformation” that we see in SA.

      I think prof Gumede must realise that he is part of designing this failed ideology of focusing on “who is to blame”. As a result “Transformation” simply equates to “Self-enrichment of a privileged few”. Ironically, Blacks have exploited this failed policy to the utmost!

      Little has changed and nothing fundamental really will change, except that South Africa’s economic viability is now under serious threat as a result of the disastrous “transformation” policies of the past 20 years. Even more ironic, the failed education system now lies at the heart of failed expectations. Clearly there is not enough skills in SA left to plan and execute the change that is required to make economic progress for all a true reality. (MG)

      November 25, 2012 at 6:11 am
    20. Enough Said #

      South Africa must go green. Green (renewable) energy and sustainable ecological agriculture are creators of thousands of jobs plus food security. Make South Africa self sufficient, go green.

      November 25, 2012 at 12:52 pm
    21. jandr0 #

      @Enough Said:

      1. Stiglitz is a sucker for the Nirvana fallacy. His problem is that he has built up an untrue “ideal type” of human being in his head (likely based on his own self-view – see egocentric fallacy), and he now wants to force his “ideal type” on regular, flawed human beings. That kind of approach makes Stiglitz nothing less than a dictator in my mind. (Of course his self-delusion is the same as many dictators, in that he deludes himself that his approach is benevolent – so justified.)

      2. People are not equal:

      a) Please refer to empirical results in physiology, biology, cognitive science etc. for the truth, that makes the “bleeding heart” emotional people so blind to reality.

      b) Every where that equality was or is forced onto people by a state, be it communism, socialism, social liberalism, or whatever, inequality rears its head again… unfortunately often with even worse results – millions upon millions killed in particular under communism.

      But, I am on the equal opportunity side of the debate, and therefore making it clear to all that I vehemently oppose the forced equal outcome side (because that can only be achieved by STEALING from me and others).

      Note: I started with NO capital, except for my sweat capital, and you bleeding hearts have no right to come and STEAL the fruits of my labour because YOU feel guilty.

      If YOU feel guilt, use YOUR sweat capital.

      PS. I do contribute to charity. But of my OWN free will.

      November 25, 2012 at 5:24 pm
    22. Sterling Ferguson #

      @Enough Said, nothing hasn’t worked in Africa because of the lack of good governance in Africa. This is the part that Joe Stiglitz pointed out when he spoke at the Carnegie Institution that there is more poverty in Africa today than twenty years ago. The people running the governments in Africa are not reading the works of Joe Stiglitz or Paul Krugman.

      November 25, 2012 at 8:48 pm
    23. MrK #

      What is needed is demand driven economics.

      The need is to:

      1) Raise ordinary people’s incomes, so they can buy the South African made goods they produce
      2) Protect South African manufacturers from foreign competition and dumping practices
      3) Build infrastructure to increase internal commerce

      1) People’s incomes need to be raised by increasing taxes from the mines and hand them out as small business grants. People need to be employed in infrastructure projects – lots of small on-farm dams, roads connecting South African population centers (not connecting the mines to the nearest port) to stimulate commerce.

      2) Local manufacturers need to be protected with tariffs that raise the price of an imported product to the price of a South African made product. That would maintain competition for quality, but eliminate competition on price (dumping). It would probably mean getting out of a few trade agreements, and facing the retaliation that comes with that. Goods not manufactured in South Africa would be exempt from tariffs, until a South African manufacturer makes the same product.

      3) Infrastructure development and maintenance could employ tens of thousands of people, creating a domestic market for local businesses (see point 1).

      Real economic growth is inwardly directed. Colonialism was all about exporting raw materials for foreign manufacturers’ profits, which is what is still ailing many ‘developing’ nations.

      November 25, 2012 at 9:29 pm
    24. South Africa's Zeitgeist #

      @Economist

      Speaking socialism and acting neoliberal capitalism! You refer to a political ideal that cannot be applied for a country striving for the principles of individual improvement of well-being, while talking about rise of communal structures.

      November 25, 2012 at 10:12 pm
    25. Sterling Ferguson #

      @JandrO, when nature gave out resources they weren’t given out equality. Some countries like North America gets a lot of rain for growing food and many countries hardly get any rain for growing food.

      November 26, 2012 at 2:25 am
    26. Enough Said #

      @Ferguson

      You also really need to read Professor Joseph Stiglitz work properly and completely to be able to understand the magnitude and complexity of what that great man says, and not try and explain his work in four lines that suit your own narrow ideological boundaries.

      November 26, 2012 at 8:40 am
    27. Enough Said #

      @jandr0

      “Stiglitz is a sucker for the Nirvana fallacy.”

      You make me laugh but I can see why free market fundamentalists don’t like him.

      “Joseph Eugene Stiglitz, ForMemRS, FBA (born February 9, 1943) is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is also the former senior vice president and chief economist of the World Bank. He is known for his critical view of the management of globalization, free-market economists (whom he calls “free market fundamentalists”), and some international institutions like the International Monetary Fund and the World Bank.”
      More here:
      http://en.wikipedia.org/wiki/Joseph_Stiglitz

      The next Joseph Stiglitz book I will be purchasing is:

      “The Price of Inequality: How Today’s Divided Society Endangers Our Future”

      http://www.amazon.com/Price-Inequality-Divided-Society-Endangers/dp/0393088693/ref=sr_1_1?s=books&ie=UTF8&qid=1337877574&sr=1-1

      .

      November 26, 2012 at 8:57 am
    28. #EradicateCapitalism&Communism #

      I think 1 area we fail to critically reflect on is the legacy of capitalism. I think capitalism not only caused the extinction of some species but also the extinction of real philosophers. Since capitalism you can realise that a focus has been driven towards economic scientists but we forget that economics is a subset of morals and virtues. Rousseau says that ancient government politics had the task of mitigating the harshest effects of economic inequalities, ancient politicans he writes spoke mostly of morals and virtues while ours speak only of commerce and money. So we are arguing on an economic level to address our challenges when we would need to start above with morals, values and virtues because that is where the root of the problem is.

      it is apon this assertion and realisation that since capitalism needed slavery to be propelled it is naive to reactively design economic policies relative to the capitalist system and believe it would succeed at growing freedoms as Amartya Sen argues or complete liberation, Sen is write to an extent. Fundamentally there will always be perils as our current age has legitimised slave wages.

      I think as a nation we must also come to terms with a different level of struggle, that created by our ineffective and incapable government and reflect on the legacy or culture our tenderpreneurship generation has created. I think people dont realise that it is not necessarily about privatisation to drive successful governance or liberalisation

      November 26, 2012 at 11:27 am
    29. #EradicateCapitalism&Communism #

      but capability and capacity of the personnel mandated to drive economic policy and by this we would need to reflect wether the current electoral will is the correct 1 to address the ills of poverty, inequality and unemployment. For this i believe it is about time for the technocrat or intelligentsia generation to take over and this incidently was an important factor for the success of the east asian development states.

      I fear that since we failed to redesign our nation after liberation and ultimately are managing neo apartheid and colonialism, we will fail to rid ourselves of the neo classical dependance culture – the new level of struggle compounded by the current government structure. I feel the only way we can achieve this would be a violent revolution within the ruling organisation (not in society) to kill the toxic culture. I can compare this to Aime Cesaires anology of a class suicide but thats another issue or arguement altogether.

      I think when considering designing economic policy, it is also equally important to account for policy implementation. I remember asking Prof Jeff Sachs apon releasing his price of civilisation book when he presented sound economic and financial models to drive the US budget how he planned to implement impacting society and he admitted that that has also been a weakness of the US government so globally there is no sound formula for policy implementation. Here I think important factors to consider would be actively driving policy thro

      November 26, 2012 at 12:55 pm
    30. #EradicateCapitalism&Communism #

      further design of success measures, performance monitoring dashboards and key performance indicators to make sure that goals are met at set deadlines.

      November 26, 2012 at 2:08 pm
    31. The Creator #

      Yaj and MrK are essentially right. We can’t grow our economy without growing employment, and since the private sector won’t invest in productive activity, the state must do so. But to do that we need capital, so we need exchange controls to block capital flight. And to protect a fledgling manufacturing industry (of the kind which has been destroyed by the “free market” policies of the last thirty years) we need tariffs and subsidies for the manufacturers.

      We also could use a lower interest rate, which also requires exchange controls (because at the moment a lower interest rate would mean that short-term money would stop flowing into the country, and we need to counter that).

      Stiglitz has his merits, but he is far from infallible. He endorsed the current infrastructure development programme because he likes public spending and thinks Obama should do it, whereas he failed to see that the cash was almost entirely going to be spent in China. What we really need is a twenty-year programme to develop our light and heavy industries to the capacity where we can make most of the stuff we need instead of importing it. And we need to develop our agricultural potential. At the moment, we have no plans to do any of that.

      November 26, 2012 at 3:20 pm
    32. Yaj #

      I agree with Mr K and The Creator on the protectionist policies that are required and the reinstatement of exchange controls.

      But I must re-emphasise the absolute necessity of etablishing state banks to finance all new infrastructure and productive enterprise so as not to borrow at interest from private banks and financial institutions.

      Credit creation by the private banks must be controlled through raising their reserve requirements substantially so as to control inflation and curb wasteful consumption.

      November 26, 2012 at 5:52 pm
    33. The Trusted Advisor #

      Policy will NOT change everything unfortunately, especially when the wrong policies are being focused on. By implementing policy you implement laws of what someone must do, and you force your view on someone. That only works in Communist countries and Dictatorships.

      South African should focus on Wealth Creation and NOT Wealth Distribution.

      The differences between South Africa and the countries mentioned, China, India and Brazil is exactly that. They are not focused on redistributing wealth and condemning people based on race or religion, or focusing on mistakes our forefathers might have made (which isn’t our mistakes), but focused on investing in entrepreneurship and innovation, immaterial of race or religion.

      Only when South Africans can drop their issues with race and religion, and stop holding their hands out waiting for someone to give them something (because its easier than earning it), and when government invests in existing entrepreneurs and innovators, without bias, and upskilling our youth with the skills to become innovators and entrepreneurs, only then will your economy grow, jobs be created, and will you reduce poverty.

      I participate in international discussions with policy makers on sustainability, investment and entrepreneurship in Africa, and the view of the rest of the world is simply that us Africans would rather stand with our hands out and enrich ourselves, well blaming the past for our current situation rather than building our countries.

      November 26, 2012 at 8:05 pm
    34. Sterling Ferguson #

      @Creator, once again you hit the nail on the head. Why SA doesn’t give subsidies to her farmers and the US is giving subsidies to her farmers? China is giving subsidies to her manufactures by manipulating her currency. Since 1994, SA has exported many of her industries to China such as, the footwear and clothing sectors.

      November 26, 2012 at 8:58 pm
    35. Sterling Ferguson #

      @Enough Said, I was quoting Joe Stiglitz when he was asked why his economic theories aren’t working in Africa and his answer was the lack of good governance in Africa. In other words, these economic theories don’t always work in countries ruled by the Santo of Angola and the Mugabe of Zim.

      November 27, 2012 at 12:51 am
    36. Sterling Ferguson #

      @Enough Said, the intellectuals in Europe and the US write all of these books on development and none of these theories apply to Africa. Most of Africa is a thousandth years behind most of the world and the people are living in a feudal state. Zuma is more concerned with keeping the country feudal then developing it. Joe Stiglitz would be better off writing a book on how to get rid of feudalism in Africa.

      November 27, 2012 at 8:25 am
    37. MrK #

      ” What we really need is a twenty-year programme to develop our light and heavy industries to the capacity where we can make most of the stuff we need instead of importing it. And we need to develop our agricultural potential. ”

      That would be excellent, and should be implemented all over the globe. We would be living in a different world if that was the WTO’s policy.

      ” At the moment, we have no plans to do any of that. ”

      So how do we go about changing that? The so-called ‘bread and butter issues’ are very good politics, it means giving the people what they want.

      The problem is the resistance that comes from ‘capital’ itself. (Think: Anglo-American De Beers.) They would have to pay real taxes, or even better, lose the mineral deposits and have them be 100% state owned. That would certainly accelerate things.

      November 27, 2012 at 8:44 am
    38. The Creator #

      MrK, certainly a lot of our biggest businesses are opposed to the kind of development which South Africa needs, but it’s worth remembering (as Lyndall occasionally points out) that the apartheid regime had very little difficulty brushing big business aside when it needed to sponsor its megaprojects. The current government is supported by an electorate which is, broadly speaking, leftist — remember that Zuma won at Polokwane partly through pretending that he had a socialist agenda. If the government followed the lead of the mass of its electorate, they could take action. Specifically, they could renationalise the Reserve Bank and reintroduce capital controls, even if it might be trickier, because of our WTO obligations, to subsidise production (Notice, however, that the WTO allows Rob Davies to pour money into the pockets of successful businesses in the pious but futile hope that they will create jobs!)

      November 27, 2012 at 11:28 am
    39. Enough Said #

      Ferguson – When Joe Stiglitz was chief economist of the World Bank he did lot of work in Africa. And your little quote probably does not cover one thousandth of what he has written about Africa and the developing world. What Joe Stiglitz says works, works. If you read his work you would see he quotes real world examples in Africa, Asia and the developing world.

      November 27, 2012 at 11:40 am
    40. Sterling Ferguson #

      @Enough Said, I am not trying to put Joe Stiglitz down but, what I am saying is none of his economic theories aren’t working in Africa. Almost all of the economic development in Africa is based on extraction and this is dominated by multi-national companies. If you know of a country that Joe Stiglitz economic theories are working, please advise me. I know that he was in Africa when he was working for the world bank and saw what was going on in Africa.

      November 27, 2012 at 11:44 pm
    41. Enough Said #

      Ferguson – In answer to your question: – I have advised you repeatedly to read his books where he documents numerous examples of policies that work in the developing world and in Africa. Now what part of that simple instruction do you not understand?

      November 28, 2012 at 11:04 am
    42. Sterling Ferguson #

      @Enough Said, speaking of reading books, you should read Tavis Smileys book “The rich and the rest of us”. This book deals with the subject matter you have been talking about and that is inequality in the societies.

      November 29, 2012 at 8:15 am
    43. Vusi Gumede

      Important points have been made – thanks to all those that have taken time to engage. The blog, as we all know, is unable to cover all issues because of limited space. That said, the blog hinted on a number of important issues. For instance, the blog acknowledges that there are many other challenges confronting SA. I am however arguing that there is another fundamental issue which relates to policies and or policy reforms. It seems to me that it must be damn hard to implement an inappropriate policy, for those that argue that the problem is implementation. As for the way forward, I think the debate that has unfolded has given some direction. The blog mainly gives pointers: that lets rethink policies. In time, detailed suggestions on the specific policies would emerge.

      There is an important point that I think requires more attention, as the article highlights. That is, the structure of the South African economy is still capital-intensive, mineral-energy laden, pro-financial and globalization biased and predominantly favouring the white minority. Changing this requires policy/reforms that are probably very compex.

      Let a thousand flowers bloom…

      November 29, 2012 at 8:33 am
    44. MrK #

      Hi Vusi Gumede,

      ” There is an important point that I think requires more attention, as the article highlights. That is, the structure of the South African economy is still capital-intensive, mineral-energy laden, pro-financial and globalization biased and ”

      I think the way to move beyond that is to take profits from mining and re-invest them in agriculture, manufacturing and infrastructure.

      What it comes down to is the ownerhip of the mines. People have grown used to the idea that the South African state owes De Beers a living – or owes it to give up it’s gold and diamonds to them.

      There is an interesting UN resolution called UN General Assembly Resolution 1803 of 1962 – one year after the murder over resources of Patrice Lumumba:

      Quote:

      ***

      http://www2.ohchr.org/english/law/resources.htm

      General Assembly resolution 1803 (XVII) of 14 December 1962,
      “Permanent sovereignty over natural resources”

      Desiring that there should be further consideration by the United Nations of the subject of permanent sovereignty over natural resources in the spirit of international co-operation in the field of economic development, particularly that of the developing countries,

      November 30, 2012 at 10:02 pm
    45. MrK #

      I

      Declares that:

      1. The right of peoples and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and of the well-being of the people of the State concerned.

      2. The exploration, development and disposition of such resources, as well as the import of the foreign capital required for these purposes, should be in conformity with the rules and conditions which the peoples and nations *freely* consider to be necessary or desirable with regard to the authorization, restriction or prohibition of such activities.

      ***

      End Quote.

      I emphasize freely, because right now elected officials all over the world enter government heavily restricted in what they can do by international trade agreements and facing retaliation from the IMF and World Bank.

      ” predominantly favouring the white minority. ”

      Both the colonial British government and the apartheid government certainly managed to racialize economic class. The idea was to make class divisions permanent.

      What we need to do globally, is to elevate everyone into the middle class – home and land ownership, professional education, easy access to credit for entrepeneurs (including small farmers).

      ” Changing this requires policy/reforms that are probably very compex. ”

      And which will be met by a lot of resistance by De Beers, the IMF, World Bank, etc.

      November 30, 2012 at 10:03 pm
    46. Vusi Gumede

      I apologize MrK I never got to react to your posts, which came after I had thought the debate ended. Thanks for your insightful points. Indeed, SA/we have a long way to go! I intend posting a piece/blog taking forward the piece/blog being debated.

      March 28, 2013 at 4:46 pm

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