Championing economic growth will provide better life for all - Daily Dispatch

Apr 03, 2024
When South Africans go to the polls in May, a key question that will influence who they vote for is whether their quality of life has improved.
Championing economic growth will provide better life for all - Daily Dispatch

John Endres and Anlu Keeve

When South Africans go to the polls in May, a key question that will influence who they vote for is whether their quality of life has improved.

For many, the answer is a resounding no. It does not need to be this way, and could be very different if SA set growth as its priority, and removed every threat to achieving it.

On the evidence, the performance of the incumbent government has been underwhelming. In 2008, SAs GDP per capita was on par with the global average, at around $13,600 (R254,770). Fast forward to 2022, and the world's GDP per capita had surged 28%, to $17,523 (R328,260), while SAs had fallen to $13,479 (R252,539).

In purely local terms, the news isn't good either. Unemployment has climbed from 23% in 2008 to 32%.

Load-shedding, considered a crisis intervention in 2008, has become a fixture of daily life for South Africans. The roads are crumbling, the trains have, mostly, stopped running, and investment has slumped.

Sentiment on the ground reflects this. A 2022 opinion survey by the Brenthurst Foundation found that 80.1% of respondents felt that the country was heading in the wrong direction. Other polls have confirmed the finding.

In a survey conducted by the Institute of Race Relations IRR in 2023, 71.7% of respondents said their lives had not improved over the previous five years. These surveys, like the daily headlines, reveal a pervasive sense of gloom across the country.

The government's response to the polycrisis has been lacklustre at best, marked by an inability to devise innovative solutions capable of reversing trends in unemployment, inequality and poverty suggesting that it is resigned to managing decline rather than aggressively pursuing growth and prosperity.

This brings into sharp focus the IRR's proposals for stimulating economic growth. The starting premise is that in the continued absence of growth, SAs indicators will not improve.

The core policy focus of the current administration or, indeed, any future administration should therefore be to create conditions conducive to rapid growth.

A growth rate of 7% a year would double the size of the economy in 10 years and bring the unemployment rate down into single digits. Achieving rapid growth, even if in a series of rising steps, is therefore the single most radically transformative intervention any government can make.

SA has many strengths that it could capitalise on, given appropriate policies and the requisite political will.

The IRR proposes the following steps: Expand capital inflows and foreign direct investment into SA so as to start raising the growth rate and increasing fixed capital formation; Build and maintain essential economic and social infrastructure to stimulate growth and provide a solid foundation for further economic expansion; Translate increased growth into increased employment; and Help the disadvantaged climb the economic ladder to increased prosperity, while sustaining current social protection.

These proposals are de scribed in greater detail in The IRR's Blueprint for Growth: Arming SA's ProGrowth Forces, published on February 20 and available on the IRR website. Decentralisation, and protecting life, liberty and property are key to this growth plan.

For example, if SA wants investment to flow, it must protect private property rights. This means abandoning expropriation without compensation by scrapping the nil compensation clauses in the Expropriation Bill of 2020, bringing the bill into line with the constitution under a revised bill such as the draft put forward by the IRR, and jettisoning the idea of the state's taking custodianship of any land, whether urban or rural.

To build and maintain infrastructure requires outsourcing many of the functions of the state to the private sector through effective public-private partnerships that promote competition and improve efficiency, as well as by responsible privatisation of state-owned enterprises. This would free ordinary South Africans from the burden of having to fund perpetual bailouts for the SOEs.

If brought to profitability, however, stateowned enterprises would become tax contributors to the fiscus instead of being a drain on it. To create jobs, the labour market must be deregulated. Race-based hiring laws must be scrapped and employers freed to make hiring choices for their businesses on commercial, nondiscriminatory criteria.

Barriers that prevent young people from getting their first job, like extensive protections for jobmarket insiders that keep out the jobless, must be eased. The IRR also argues for a fresh approach to empowerment, called Economic Empowerment for the Disadvantaged EED , to replace Black Economic Empowerment. EED recognises the importance of incentives to any economic activity and argues that if we want more of anything wealth, entrepreneurship, employment we need to make creating or fostering them attractive.

Among other measures, the nonracial EED concept would accelerate social mobility by giving disadvantaged South Africans taxfunded education, health and housing vouchers to spend as they see fit. In the meantime, the social welfare net would have to be kept in place to protect destitute South Africans from the effects of serial state failure until the economy starts growing. This blueprint is not just about reviving the economy, but rekindling hope and ensuring prosperity is within reach of every South African.

The solutions are practical, cost-effective, and grounded in a vision that prioritises growth as the cornerstone of public policy. The way forward requires a mindset shift away from the belief that prosperity can be produced through redistribution.

Research across the world shows that sustainable poverty eradication is only ever achieved through rapid economic growth, underpinned by the protection of life, liberty and property.

In under three months' time, SAs voters will have the chance to reward the country's pro-growth parties and to punish the pro'-poverty parties that have brought the country to its current low point.

Dr John Endres is CEO of the IRR, and Anlu Keeve is a researcher at the IRR

Championing economic growth will provide better life for all - Daily Dispatch

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