A plan to build our country

2010-12-01 10:19

Government this week ­released the framework for a new economic growth path – a broad strategy to set the ­economy on the road to more equitable, inclusive and dynamic growth.

The result has been, as we hoped, a public discussion about both the broad aims and the modalities of ­economic policy.
Reports on the new growth path have raised some questions about ­specifics.

Here, we respond to some of the ­issues raised most frequently.

» What’s new in the new growth path?

The new growth path contains a host of proposals – ranging from how to step up mining output to ambitious targets for education and training, to proposals on greening the economy.

This represents a combination of existing policies together with new ideas to expand employment.

It brings a new sense of urgency and focus to our core economic and social policies, enabling more rigorous prioritisation and taking some long outstanding decisions.

The new growth path reinforces three directions in economic policy:
1. It is built on the recognition that to succeed, economic policy must do more to benefit the majority of our people, above all, through employment creation.

The strategy sees measures to ­enhance competitiveness and, by ­extension, to accelerate growth as central to sustaining employment ­creation. It adds targeted measures to support the creation of new ­opportunities for the many South ­Africans who are currently excluded from the formal economy.

And it emphasises the need to ­address explicitly the deep inequalities that undermine political unity and ­social cohesion. Above all, it promotes a massive expansion in training, agreement on closing the exaggerated gap in remuneration left by apartheid, and measures to open new opportunities through support for small and ­micro-enterprises as well as employee and community ownership;

2. In that context, the new growth path identifies key microeconomic interventions to make the economy as a whole more efficient – ranging from support for a more competitive rand to improved infrastructure and ­ambitious targets for education and training; and

3Finally, the new growth path recognises explicitly the need to address the social and political underpinnings of economic policy.

We live in a democracy that is ­simultaneously deeply divided by ­inequalities in economic conditions and opportunities.

Any effective ­economic policy must build on the strengths of core ­stakeholders – especially organised business and labour – while bringing benefits to the majority of our people.

That means social dialogue is ­critical for any economic strategy to ­succeed over time. A policy that ­simply ignores the need to bring stakeholders on board will end up as a source of growing conflict and ­instability in the long run, even if it achieves its aims in the short term.

» Where will the jobs come from?

The complexity of setting the ­economy on a new road to more ­inclusive growth means the new growth path doesn’t rely on a single measure or sector to create jobs and ­opportunities.

It identifies five main areas – “jobs drivers” – where employment creation is possible on a large scale. These jobs drivers are:
1. Infrastructure, with the state ­continuing to invest more than 5% of the GDP to raise living standards and make the economy more efficient;

2. The main productive sectors of the economy; especially by ­opening new opportunities in the ­mining and agriculture value chain, in manufacturing, and in tourism and ­high-level services;

3. The green and knowledge ­economies, where South Africa can take advantage of new ­technological trends and needs;

4. The social economy and the ­public service, which provide ­opportunities for employment while building solidarity and ­improving conditions for our people; and

5. The spatial economies captured by our commitment to rural ­development and African regional development, based on a combination of improved infrastructure and ­investment in people with new ­programmes to support production.

The new growth path proposes ­targeted measures to support growth and employment creation in all these areas.

At the same time, it puts in place a package of macro- and ­microeconomic measures to increase competitiveness, productivity and ­equity across the economy.

Finally, it points to the need to take advantage of changes in global ­markets, which have seen China and India become major sources of growth while South Africa’s traditional ­trading partners in the global North have struggled to emerge from the global economic downturn.

» Why not a more conventional growth strategy?

Conventional growth strategies ­generally set a growth target and then identify the main interventions to achieve it, usually centred on models that determine the required level of savings and investment.

The problem is that deep poverty and unemployment have persisted in South Africa even though the growth rate has normalised by global ­standards.

Since the transition to democracy, growth has averaged about 3.5% – ­exactly the same as other ­middle-income economies if we take out China and India.

In contrast, in the last 15 years of apartheid, ­economic growth was only 1.2%, far slower than the ­international norm.

Yet South Africa continues to rank among the ten countries with the ­lowest levels of employment in the world.

Less than half of working-age South Africans are employed, compared to an international average of about two thirds.
This high level of joblessness emerged in the 1980s.

Given these realities, growth that is not labour absorbing would fail to achieve our employment targets.

That is why the new growth path ­focuses on how we can both bolster growth and ensure it does more to ­address joblessness, rather than ­simply ­seeking to maximise growth by itself.

» Why the emphasis on social partnership and engagement?

In a democracy, functional policies ­require a certain level of support from stakeholders, especially organised business and labour. If key ­stakeholders agree to a policy, it will likely be more effective.

A developmental state cannot, of course, simply be hostage to ­individual interest groups. It has to represent the broader interests of ­society as a whole – in this case, to bring about increasingly inclusive and green growth.

But while it cannot give up on those key positions, it must try to mobilise as much stakeholder support as
possible.

The proposed partnership around remuneration, prices and employment seeks from stakeholders a degree of agreement about what they can ­contribute to more equitable growth.

Critical proposals are that ­stakeholders adopt a longer-term ­perspective to build the economy, with a short-term commitment to ensure the benefits of growth are shared more fairly while inflationary ­pressures are reduced.

As with any effective partnership, it is crucial that the partners all feel they get some real rewards for their sacrifices.

In other words, we are asking ­stakeholders to find real trade-offs, rather than looking for a winner-takes-all solution.

That requires a constructive attitude and management of expectations – but it is the only strategy that will work for all of us in the long run.

» Promises, promises: government policies ­always look good on paper, but don’t deliver...

Government is more aware of this problem than anyone else. We are ­determined to make the new growth path work through:
1. The use of the new outcomes-based approach to public-sector ­management, which will let us ­monitor progress and intervene where necessary; and

2. Setting clear priorities for all ­departments and working across the state to ensure that programmes are sufficient to achieve their aims.

Perhaps most importantly, Cabinet has collectively taken responsibility for implementing the new growth path and will oversee its implementation.

» Patel is the minister of economic development

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