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COLUMNISTS: Economy in desperate need of overhaul

SOWETAN LIVE / 12 FEBRUARY 2020 - 14.00 / KHWEZI MABASA

The post-apartheid economy has produced a mixed bag of policy outcomes over the past 25 years. The country experienced its longest period of sustained economic growth between 1994 and 2008.

The positive macroeconomic developments in that period did not sufficiently address persistent inequality, poverty and unemployment across SA. This is particularly concerning because unequal race and gender power relations find expression in the inequality data.

We need to unlock potential of collaborative economy. Image: 123RF/dolgachov

Apartheid spatial development patterns persist, and the country has experienced premature deindustrialisation, which has dented job creation efforts over the past two decades.

Sectors with high potential for labour absorption, such as manufacturing and agriculture, have declined in the post-apartheid era.

There has been minimal transformation in market structures, which, to a large extent, reinforces market dominance by a few companies across varied sectors. These negative socioeconomic trends were carried over into the post-2008 crisis era and exacerbated by state capture and a deteriorating macroeconomic policy context.

The president and his cabinet colleagues can only resolve these structural and governance impediments by introducing structural reforms.

The process of restructuring the South African economy should commence with reconfiguring Black Economic Empowerment (BEE) policy and strategies for growing black business. Past iterations of the policy have failed to produce the intended outcomes, and the solution lies in a different approach.

It must redirect black business towards productive sectors or what economists describe as the real economy. Evidence suggests that most BEE deals have taken place in the financial, mining and energy sectors. South Africa needs an empowerment policy that is linked to industrial diversification and rebuilding manufacturing.

Furthermore, black business development should not be limited to the Johannesburg Stock Exchange (JSE). The fixation with transformation in listed companies overlooks companies that operate outside the JSE.

Policymakers and stakeholders also have to consider practical steps to increase black female and youth participation in business.

Another crucial element in restructuring policy debate is the persistence of uneven spatial development and investment.

The ANC national executive committee has proposed that SA introduces a district development model, which seeks to address local economic development challenges. This proposal is laudable, however, it is important to detail how the implementation process will unfold.

One salient consideration is the incapacity of local government, which is documented in the auditor-general's report. Therefore, any attempt to implement this proposition successfully must include improving local government capacity.

Effective spatial development requires partnerships with private enterprises and nongovernmental organisations. This is essential for identifying common development challenges and implementing district development models that complement existing economic development interventions.

*Mabasa is a policy researcher and thought leader

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LINK : https://www.sowetanlive.co.za/opinion/columnists/2020-02-12-economy-in-desperate-need-of-overhaul/

Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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