The (No) Growth Path

South Africa has recently been invited by China to join the group of fast-emerging economies, BRICS, as they will be known going forward. BRICS, with the exception of South Africa, each contribute to more than 1% of the global GDP. Our economy has in the past struggled to reach the 6% GDP growth target despite the massive increase in infrastructure spending and the boom in commodities, which was driven largely by an insatiable demand from China.

We have had a number of policies since 1994 that were targeted at stimulating accelerated growth but none have succeeded to spur growth to higher levels. We now have the New Growth Path (NGP), which is being touted by the Jacob Zuma administration as a blueprint for job creation and economic growth. But it merely addresses the symptoms not the causes of the problem of joblessness and lower growth. The ANC appears to have adopted a “band aid” approach to these economic problems. Unfortunately what is contained in the NGP is nothing but a rehash of the same old policies that have failed to stimulate accelerated growth.

The ANC hopes to achieve sustained economic growth and development by adopting a myriad of policies that lack continuation. As a result there will be no meaningful impact on the economy, and most importantly, no meaningful change in the lives of the poor. Lessons can be learnt from China which has been consistent in implementing Deng Xiaoping’s economic reforms launched in 1978.

The NGP reveals the lack of foresight on part of our policymakers. Even after 16 years since the ANC has been in power, there has not been any long-term macro-economic policy that clearly outlines what the end-goal is; how the economy needs to be structured to achieve maximum growth. One would imagine that given the economic structure inherited from the past which was intended for the economic benefit of the white minority, the ANC would have had in 1994 an economic long-term strategy for the country. But none exists. Even the new Department of National Planning has not come up with any concrete proposals other than a Green Paper that simply outlines problems in the economy.

The economy needs to be transformed for the benefit of the majority, poverty needs to be eradicated and unemployment addressed. These are undoubtedly immediate economic challenges that need to be tackled. However, that cannot be an excuse for policymakers to be obsessed with policy short-termism which has no sustainable impact on the economy. Government should not be fighting fires 16 years after assuming power. The usual excuse that this is a new democracy is no longer plausible.

China was already growing at rapid pace already 15 years into its “Gaige Kaifang”; and that rapid economic growth was matched by growth in human capital. China’s quality of education is ranked 36th in the world, according to the WEF Global Competitiveness Report, and South Africa is at an embarrassing112th.

The target of creating 5 million jobs by 2020 is a pie in the sky given the inefficiency of the labour market and poor quality of education.

Industrialisation is one of the objectives of NGP. It is a noble aim but the reality renders this futile as high labour costs would ordinarily impact negatively on the competitiveness of manufacturers. Our economic success unquestionably depends on our ability to develop productive capacity. BEE has only served to recycle wealth and did not do enough to create new wealth by encouraging the emergence of new entrepreneurs and industrialists who establish their own empires without being parasites on white wealth. But before we get there we need to get the basics right.

While the mining and agricultural sectors have largely been those sectors that absorbed more unskilled and semi-skilled labour, a concerted effort needs to be made to overhaul the education system to ensure that the skills produced are matched to the economic demands. The quality of education in SA is appalling compared with other BRICS countries.

An attempt to achieve the aims of the NGP would face major obstacles, besides such aims themselves being unrealistic. It is delusional to think that the economic growth target of 7% would be achieved given endemic corruption, incompetence of public officials, poor quality education, inefficient labour market, budget constraints, etc. The NGP promises massive investments in infrastructure yet the MTEF foresees real growth in expenditure to be just over 2% a year for the next few years.

The NGP reaffirms the ANC’s economic populism in presenting an endless list of promises that are never fulfilled. The Jasmine Revolution in Tunisia should serve as a warning.

This article was first published in the City Press