Our nation needs courage and ideas to grow: Sandile Zungu writes.  There is no choice to be made between economic growth and poverty alleviation. The past 35 years demonstrate that fast growth in a modernising economy can be potent in terms of poverty alleviation. China is the poster economy of this phenomenon. Over the past 35 years, China’s growth has lifted 500 million people out of poverty. Since 1994, we have seen some of the economic growth effects in our own country as the democratic government first fostered growth, and then put programmes in place to support the poor. According to recent research, government grant programmes have elevated 3.6 million South Africans out of poverty. We felt we could afford extensive grant programmes because relatively fast growth in the economy during the decade before 2008 transformed our tax base. During that period, growth also added a substantial number of jobs in the service sectors and allowed government to add jobs in the public sector. The world changed in 2008. The global financial crisis brought to a screeching halt a decade of easy credit, expanded export markets and a commodities supercycle. Since 2008, South Africa’s economy has grown by no more than 1% to 2% a year and we have flirted with recession a number of times. It would be an error, though, to blame our slowdown in growth entirely on the crisis of 2008. If we compare South Africa to our peer group of large emerging economies – including countries such as Indonesia, Mexico and Turkey – we see that we have, after 2008, consistently had slower growth, higher inflation, less job creation and lower export growth. Let’s consider first how the world and circumstances have changed. The first change is that the engines that powered South Africa’s growth between 2000 and 2008 have been switched off. The first “engine” was the unprecedented growth in Chinese demand for commodities during that period, which led to historically high prices for commodities, sustained over a number of years. But that trend has reversed. Economic growth in China has not only slowed down, but it has become more “commodity light”, with less heavy infrastructure. The other engine of growth in South Africa was a rapid increase in household consumption, fuelled by debt. As the demise of African Bank shows, South African households have reached, or perhaps exceeded, their debt ceilings. Government has also intervened, rightfully so, through the National Credit Regulator to stop households, abetted by reckless lenders, from doing themselves harm. As with commodity prices, South Africa’s growth path in the short term will not be able to rely on a sea change in household consumption. We must continue to transform to deal with our peculiar challenges. To do so, we need to enter a new era of growth and prosperity, one that we have to create ourselves. Challenges notwithstanding, we are in a world filled with new opportunity. The revolution in digital communications is only in its infancy. As individuals and as a country, we are part of global networks of knowledge, collaboration and friendship. In the region, Africa has turned a corner in terms of economic dynamism. Africa is now a spritely fountain of global economic growth. It is a source of world-class entrepreneurs and a generator of new business models. Back in our own country, 20 years on, democracy has created not only a large black consuming class, but a new group of business creators and business managers. Opportunities allow us to explore new growth logic. Here are a few beacons to help us find a route: . First, our growth path will be outward-looking, based on exports. We have to grow by servicing the world and by competing in it. We have to be competitive in terms of human capital and its cost, in terms of physical infrastructure, and in terms of the quality and sophistication of our businesses. . Second, the growth path will harness the skills, capability and capital of the private sector more than before. Clearly, the need for development is undiminished. But looking around us at key parts of the economic infrastructure, such as power, communications and transport, it is clear that the state cannot carry this burden alone. We need to move from a developmental state to a developmental society, in which the dynamism of the individual entrepreneurs and the private sector is both encouraged and utilised – even in areas that traditionally were the preserve of the state, but where there has been underperformance, such as education and power. . Third, our growth path will require good ideas and courage in equal parts. We need good ideas because we need to upgrade the operating system of our economy to be competitive in the world. . Fourth, we have to forge our growth path in a shared and inclusive sense of the South Africa we want to build. In becoming more explicit about our destination as a country, we cannot forget where we have come from. We are a nation that can do great things.
Posted on: Wed, 21 Jan 2015 08:04:26 +0000
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