2013-02-27 – Johannesburg
South Africa’s economic growth remains sluggish, and continues to be slower than many other developing economies. On the surface, the slow growth of the South African economy can be linked to the effect of strikes crippling the mining sector and exposure to the Eurozone, which remains one of South Africa’s main trading regions. The recent downgrades by the ratings agencies Fitch, Moody’s and S&P have also dented confidence.
However, there are more fundamental reasons for the persistent under-performance of Africa’s leading economy, when compared to the economic growth of China and India.
One has to look closely at the fundamental policies and solutions that South Africa has put in place to tackle its socioeconomic problems over the last two decades. Unemployment is still above 25% and it is almost double this rate among those under the age of 25. This is the age group which will be required to lead the economy’s continued growth over the coming decade. Youth unemployment and poverty cannot be solved amid such continued slow growth in the economy.
The mining sector, a mainstay in South Africa’s economy, was hit by major strikes and this had a significant impact in total economic growth. Farm workers also may have harmed economic growth prospects with demands for a doubling in wages, as justified as such increased wages may seem. Such situations can leave the government with very few workable options, as a compromise is not easy to reach in such circumstances. The challenge for the government remains whether to increase wages to avert strikes, thereby alleviating poverty yet negatively affecting international competitiveness; or allow highly damaging and visible strikes to proceed, harming continued international investment and future industrial growth.
The South African government’s ‘New Growth Path’ and its very ambitious ‘National Development Plan’ to eliminate poverty by 2030 have been lambasted by world analysts and critics as politically motivated initiatives, which have so far fallen well short of their objectives. One could argue that this is the right path to sustainable long-term economic growth, provided such policies are based on sound economic principles, with feasible targets and regular reviews.
Positive signs have emerged from other sectors such as agriculture and manufacturing, which have boosted economic growth. There is still growth, though lower than expected, and this offers a glimmer of hope. With bold ideas and successful implementation of highly targeted policies aimed at tackling poverty, improving equality and reducing unemployment, South Africa may well achieve a higher sustainable economic growth rate for several decades to come.
To read the Industrial Policy Action Plan 2012-2014, published by the Department of Trade and Industry in 2011 follow the link to the DTI website:
http://www.info.gov.za/view/DownloadFileAction?id=144975
