Johannesburg – The South African economy needs an overhaul to address persistent inequality, said former deputy finance minister Mcebisi Jonas.
Jonas was speaking at the Mapungubwe Institute for Strategic Reflection lecture at the University of Johannesburg on Tuesday night. He unpacked eight features of the South African economy which need to be addressed.
Jonas defined radical economic transformation as a “progressive, structural” change in the “fundamental features” of South Africa’s political economy.
The fundamental features or areas which need to change are:
1. South Africa’s underperforming mixed economy.
2. Inequality, especially along racial lines, as a result of the apartheid legacy. If the wealth of the country were equally distributed, it would be possible to feed all families. Jonas pointed out that 8% of black households have a monthly expenditure of R10 000, compared to 63% of white households.
3. South Africa is only partially industrialised, with a high unemployment rate and low labour market participation.
4. The private sector is dominated by large-scale capital and capital intensive industry. This indicates that capital is highly centralised, with limited distribution among small businesses and entrepreneurs.
5. The South African economy’s integration into the global economy relies on trade of minerals and foreign capital flows. The country is too reliant on minerals as exports, which shows that industries need to be developed. Secondly, the country is highly dependent on foreign assets: guards should be placed against capital flight or disinvestment.
6. The economy is dominated by the financial, insurance, business and real estate sectors, which have grown rapidly in the past 20 years. These sectors must be more responsive to increase fixed investment.
7. Although there are large fiscal allocations to education and training, the outcomes still remain poor. This is a binding constraint to all facets of social development.
8. The public sector is weak. It must become more effective, capable, less wasteful and less corrupt. We need political leadership.
These issues are mutually reinforcing, said Jonas. “We can’t address some and neglect others… It is possible to make progress with all eight at the same time.”
WATCH: Mcebisi Jonas on effecting radical economic change