On a recent swing through London talking to analysts and
journalists I was struck by how much people wanted SA to be a success. Not
that SA is top of their minds with the global meltdown on the one hand and the
shenanigans of British parliamentarians’ expense claims on the other. (The
fury around the latter was quite palpable).
There were, of course, also the few that insists on seeing
SA through the prism of a Zimbabwean analysis. They usually became unstuck
with the counter-question what are the similarities with Zimbabwe? The
discussion could then revert to a more thoughtful level.
Whose success?
The areas where those I encountered wanted SA to be
successful are also the areas where South Africans themselves want to see
success: unemployment, poverty, health, education, crime. There is not much
difference between what most South Africans want and what well wishers overseas
want. There was a nuanced understanding of the importance of social
development. I had the obligatory few things to say about crime, but even that
took a back seat to the imperative of social development.
The focus, domestically and globally, is increasingly on the
results of democracy and not so much the miracle of democracy.
Against this backdrop the successful hosting of the IPL
cricket tournament, the Confederation Cup and the British Lions tour of SA
could not have come at a better time for this country. Talking is one thing,
actually delivering something else. And on these matters SA has delivered.
The benefits for South Africa in terms of social as well as financial capital
are obvious.
Growth
The one question that kept on popping up (and again, it is
also a question we ask ourselves here) was what our growth expectations are for
the next few years. It seems as if everybody is on Joseph Stiglitz’s wavelength:
“Without growth there cannot be sustainable poverty reduction”. High growth is
important for social progress and social development. One cannot have the one
without the other. It is thus understandable that the question keeps popping
up.
In response, I always played our growth prospects down
because I think the international environment is going to be tough for quite a
while. Thus I suggested around 2,5% to 3% growth per annum over the next few
years.
If one compares that with a population growth of less than
1% p.a. the sums add up quite surprisingly. Over the 15 years of democracy our
per capita incomes have increased by some 30%. At a 2,5% growth rate that
figure can again be achieved over the next fifteen years. Nothing like putting
one foot in front of the other and just carrying on, regardless.
There is another reason I played SA’s growth prospects
down. Globally we have entered a period of state capitalism. Stiglitz
summarized it well: “Old style Communism won’t be back, but a variety of forms
of excessive market intervention will return. And these will fail. The poor
suffered under market fundamentalism – we had trickle-up economics, not
trickle-down economics. But the poor will suffer again under these new
regimes, which will not deliver growth. Without growth there cannot be
sustainable poverty reduction”.
Ambition
This brings to the fore what our economic ambitions are.
Are we happy with 2,5%? Or do we want to achieve more? Do we want to be like
Botswana and South Korea? Or are we happy to be like Brazil in the 1980s or
India in the first 30 years after independence?
What the economists would call our trend line growth rate (a
rate at which we can grow consistently without running into boom and bust
cycles) is probably around 3,5% pa. Well, if we grow at that rate and not at
the 2,5% that I hung my hat on, we can cut five years off the 15 years needed
to increase per capita incomes again by 30% - the number achieved during the
first fifteen years of democracy.
Or to put it in a different way, at 1% extra growth per
annum we can add one million extra jobs to the economy over a six to
seven year period – slightly more than the lifetime of a parliament. Given
that one job supports at least 2 to 3 people, it means a difference to the
lives of 2 million to 3 million extra people. Not bad for just 1%
growth.
If in the mean time we chip away at the constraints that
inhibit our growth potential, that 3,5% ceiling can in due course be lifted.
And so we can end in a virtuous circle.
But it is all dependent on our ambition. It is a conscious
choice.
Planning Commission
Perhaps this is where the new Planning Commission can play a
role i.e. to set a vision and a growth target for our economy, backed up by a
credible plan and actions to achieve that growth.
Let ‘s not forget the constraints that we must
systematically chip away to lift our growth potential. That will mean that we
must commit ourselves to an ongoing program of reform as we learn from our
experience.
The ANC’s election manifesto of making unemployment and
decent jobs a top priority is now, correctly the goal of the government. The
question is how to change that manifesto promise and government goal into
reality. “Employment opportunities” created under the public works scheme,
important and useful as that is for poverty relief and giving hope, cannot
compete with sustainable jobs created by sustainable economic growth. We need
more. Stiglitz again: “Without growth there cannot be sustainable poverty
reduction”.
Learn from the BRICs
A study of the remarkable economic turn around and take-off
that took place in Brazil, India and China (Russia is a bit of its own story)
reveal some common experiences. Those countries embraced openness and an
export orientation; and used markets cleverly to achieve high growth rates. I
am fairly certain a study of Botswana’s remarkable success would reveal the
same.
In the BRICs there was no slavish devotion to neither free
market fundamentalism nor to socialism. Rather, there was a search for what
works and what can make the difference. Thus Deng Xiaopeng’s famous “What does
it matter if the cat is black or white, as long as it catches the mice”.
India escaped from three decades of low growth and took off
after the 1991 reforms of the Rao government which embraced more openness and
an export orientation. Brazil scuttled its decade old policy of import
substitution and upped its growth rate from 0,3% p.a. in the 1980s to eight
times that in the 1990s and fifteen times that in the 2000s. China’s story is
well known. Suffice to say it came from nowhere and is now on its way to
reclaim the position of a few centuries ago when it produced 1/3 of the world’s
GDP.
Some people argue that the growth-through-export economic
model is dead as a result of the current global crisis. Under pressure,
certainly. Dead, no. Tourism is a form of exports, so is hosting cricket, the
Confederation Cup and sport tours. There is also the natural market in Sub-Sahara
Africa with which we trade to mutual benefit. Protectionism can of course kill
an export orientation, but fortunately we are not quite there yet.
There is no reason why SA cannot set itself the goal, in
pursuance of its job creation and anti-poverty goals, to double the size of the
economy, create millions of extra jobs, lift incomes and hit poverty for a
six. It all comes down to our ambition.