A decade of difficulty: reasons for South Africa to be fearful and reasons for hope

2012-01-28 00:00

WHILE the economic recovery of the developed world over the past two years has been anaemic, many other economies have seen swift growth. China, India and Brazil — the clear drivers of the emerging economies — grew by 7,5% in 2010 and an estimated further 6,0% in 2011. At this rate of growth, these economies are doubling in size every decade. In this vein, the African economy continues to grow quickly, now having grown faster than Asia in eight of the last 10 years.

For South Africa to address our structural unemployment problem effectively, the economy needs to grow at 10% per annum, far in excess of recent figures and well above government’s target of six percent. To move the economy from pedestrian and stale to greater dynamism requires bold policy steps, and vibrant economic partners. The most obvious option, in terms of the latter aspect, would be for the South ­African economy to integrate with the Sub-Saharan Africa (SSA) region.

Six factors are key.

• A high savings rate.

• A favourable demographic structure. If more people are entering the workforce than leaving it, this adds to the nation’s productive capacity and economic welfare.

• An improvement in the nation’s relative physical health.

• Rising education levels with improved access to education and the education infrastructure.

• Improving quality of a country’s institutions and policy, ­including monetary, fiscal and industrial policy.

• The degree of economic openness. The extent to which the ­factors of production (goods, services and capital; people and ideas) are able to move freely ­between nations plays a role in determining growth and economic performance.

This country needs to ensure that these factors are embedded in our society, our economy and our political landscape. We need to be effectively integrated with the rapidly growing world economies — not just being among them, but working together with them.

We stand on the cusp of 2012 with a new set of policy initiatives launched by the South African government. But, in reality, we don’t need new policies. As Demosthenes said 2000 years ago, our three most important needs are “action, action and action”.

• Adrian Saville is the chief investment officer (CIO) of Cannon Asset Managers.

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