BUSINESS LIVE / 20 JANUARY 2019 - 12:00 / ISAAH MHLANGA
In order to boost economic growth that will reduce unemployment, poverty and inequality we must go back to the basics
SA’s economic strategy suffers from short-termism, wherein the immediate pressing social issues derail the achievement of the long-term goal. The result is that we have had at least five economic plans since 1994 — the Reconstruction and Development Programme (RDP), the Growth, Employment and Redistribution (Gear) policy, the Accelerated and Shared Growth Initiative for SA, the New Growth Path (NGP) and the National Development Plan (NDP).
Quite simply and bluntly, the education sector produces engineers who can’t build engines, teachers who can’t teach, accountants who can’t count and economists who are just good at history, says the writer. Picture: SOWETAN
Current debates, summits and colloquies suggest there is a scramble to put together yet another plan. I am tempted to believe that it will not be anything new. What is needed to boost economic growth that will reduce unemployment, poverty and inequality is going back to the basics.
Let’s take a few of the structural problems. First, SA has a shortage of the critical skills that are a prerequisite for a fourth industrial economy, yet it is business as usual within the education sector. An overhaul of this sector is required for the country to produce the skills it needs.
Quite simply and bluntly, the education sector produces engineers who can’t build engines, teachers who can’t teach, accountants who can’t count and economists who are just good at history.
Essentially, we produce the best theoretical experts, but as a country we can’t eat or export theory. We need to refocus on technical and vocational skills so that people can make things that can be consumed locally or exported competitively. If we can’t produce these skills, let us import them by relaxing immigration requirements for scarce skills.
Whatever strategy is adopted, there must be an understanding that it’s a multigeneration strategy that will take more than five to 10 years to complete, and require sacrifice from the current generation.
Secondly, network industries such as roads, rail and telecommunications need to be upgraded and properly repurposed. Bulk rail transport that is safe, reliable and fast will reduce the cost base for goods and the majority of people across cities. Yet we build the Gautrain, which saves a few rich people time and money. Affordable public transport should be the priority for every major city and township. Access to telecommunications has improved significantly, but it remains too expensive compared to other African countries. Reducing this cost would boost the gig economy and improve the efficiency of the general economy.
Thirdly, for an economy to grow a healthy population is needed. Our health sector is in a precarious state. I know this because in 2012 I spent a week in a hospital bed because the original procedure wasn’t done properly in 2003 due to lack of specialist medical practitioners. Skilled medics get attracted by incentives in other countries. That said, I was encouraged by President Cyril Ramaphosa’s stimulus package, which included immediately filling 2,200 critical medical posts and buying linen and hospital beds.
Once these have been fixed, an economic strategy for the productive sectors will need to incorporate trends in the global economy. I believe those countries that have managed to develop have done so through building a strong manufacturing sector before transitioning to the service sector. The latest of these countries is China, which benefited from the migration of manufacturing from the US.
Africa, and SA in particular, must take the opportunity to be the next manufacturing hub in the forthcoming manufacturing migration from China.
Whatever strategy is adopted, there must be an understanding that it’s a multigeneration strategy that will take more than five to 10 years to complete, and require sacrifice from the current generation. The construction of the Great Wall of China offers lessons in this regard — it was built as a wartime defence feature starting from 771 BC and its length exceeded 20,000km — if dynasties and kingdoms in Northern China are included. Historians say it took more than 22 centuries and about 20% of the population to complete. Today it is a Unesco world heritage site and attracts more than 10-million tourists a year.
In 2019 and possibly the next five years economic growth might be lackadaisical, and will not solve SA’s high unemployment, inequality and poverty problems. However, short-term social pressures must not derail tackling the structural impediments to foster faster economic transformation. Politics must not be allowed to get in the way of doing what is in the best long-term interests of the broader society.
• Mhlanga is executive chief economist at Alexander Forbes.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER