29 July 2005

South Africa: China-Style Growth Not a Model for SA to Follow -- Mbeki

Johannesburg — PRESIDENT Thabo Mbeki yesterday re-stated government's belief in a bigger role for the state in the economy, but said SA would not follow the Chinese model of economic development.

He said the free market alone and a minimal state could not defeat poverty.

Speaking in Sandton at a conference on Progressive Governance attended by social democratic movements from around the world, Mbeki said "market fundamentalism" had proven ineffective in fighting poverty. Even the European Union (EU) used massive resource transfers to fight underdevelopment, he said.

He said SA and other African states could not replicate China, whose massive private capital inflows fuelled rapid export-led growth.

"The market won't do it. This notion that Malawi can create market-friendly conditions as a result of which you are going to get billions in Malawi coming to invest -- I don't believe that story," the president said.

Government has been talking increasingly about what Minister in the Presidency Essop Pahad called a "robust developmental state" in his speech to the conference yesterday.

Mbeki did not lay out any clear plans but said government would not want to undermine business.

Centre for Policy Studies director Chris Landsberg said it was a sign that the presidency was thinking about policies of greater redistribution now that there was fiscal stability in SA.

Independent policy analyst Aubrey Matshiqi said the speech was a "signal that the state will become more interventionist". He said government had previously spoken of "a leaner and meaner state machinery as a road to greater effectiveness".

Matshiqi said Mbeki was intent on leaving a legacy of delivering social services in the last years of his term "now that he has done well on the continent and put Africa on the global agenda".

Mbeki told conference delegates: "We say (that) for the poor parts of SA to develop is going to require large resource transfers from the richer parts of SA."

Mbeki said: "It may be difficult to find the ways and means and mechanisms to effect that transfer, and to do it in a way that doesn't weaken and destroy the richer part that produces the wealth.

"The EU has taken precisely the same position with regard to itself -- that it's not possible to develop the underdeveloped part of the member states of the EU without large resource transfers from the richer parts of the EU to the poorer parts," he said.

Mbeki said it was impossible to say all that was needed was to create the "appropriate conditions" to attract capital. "If this policy is correct in fighting underdevelopment in the context of the EU, it surely must be correct in regard to fighting underdevelopment globally.

"People will talk about China and so on, which has received vast quantities of capital from the rest of the world, but not many of us are China," he said.

Mbeki also stressed that Africa should not rely entirely on outside transfers and that there was enormous scope for the domestic use of African public sector pension funds for investment on the continent.

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