‘SA needs growth, not nationalisation’

2011-08-04 11:16

South Africa needs to maintain a sustained economic growth rate of more than 5% a year to solve its unemployment problems, various speakers said at a debate on nationalisation today.

“If South Africa can’t maintain a growth level of over 5% for at least 10 years you can’t solve this problem,” Frans Cronje, the head of risk analysis at the SA Institute for Race Relations, said in Joburg.

He said despite a growing economy over the last decade or so, the only time South Africa’s unemployment level dropped was when the growth rate was briefly more than 5% in 2005.

Two vacuums had been allowed to occur in South Africa, he said.

An economic vacuum had been created, where half of black South Africans aged 15 to 35 would probably never work because of poor education and lack of access to labour markets.

A political vacuum also affected this demographic, as no political party represented black youth.

Cronje said this had led to economic and political radicalism – and calls for nationalisation of natural resources.

Chamber of Mines economist Roger Baxter said nationalisation was not the right medicine to prescribe for South Africa’s ills.

He said average gross domestic product (GDP) of 3.3% in the last 15 years was “just too slow”.

South Africa needed a 7% yearly growth rate, which would mean the economy would double every decade.

Nationalisation would not achieve this, but have the opposite effect. It would lead to a collapse of equity, chase away foreign capital needed to fund fixed investment, and see a flight of skills.

When looking at how nationalisation had worked elsewhere in the world, Baxter said “in most cases it was quite negative, [the countries] have forfeited three to four decades of development by pursuing the policy”.

Krister van Rensburg of the Federation of Unions of SA said there were two ways to reduce South Africa’s poverty, high unemployment, poor education and income inequality.

The first option was to empower the masses through better education and skills development, and stimulate new businesses to create new jobs.

The second option was to nationalise natural resources, which was seen as an easy way out.

He said whichever route South Africa chose, it should make informed decisions.

In investigating nationalisation, South Africa should answer questions like: Where did it work and fail? How and why? Is nationalisation viable? Will its benefits be sustainable?

“We need to be careful of race-based and ideologically inspired arguments,” he said.

South Africa also needed to avoid shortcuts and expensive experiments, like outcomes-based education.

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