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South Africa: Harvard Voice
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Business Day (Johannesburg)
EDITORIAL
12 May 2008
Posted to the web 12 May 2008
Johannesburg
NOT long after the government first announced the accelerated and shared growth initiative (Asgi-SA) more than two years ago, it commissioned a team of economists, led by Harvard University's Ricardo Hausmann and Dani Rodrik, to evaluate Asgi-SA, to confirm that it had identified the right problems and that the proposals to deal with these were adequate.
By the end of last year, this "Harvard panel" of international and local economists had produced 20 research papers and 21 recommendations on what SA had to do if it wanted to break through the constraints preventing it from reaching the 6% growth rate Asgi-SA has targeted.
Though a few of those papers had been made public over the two years, it's only now, finally, that the list of recommendations has been released and all the papers published.
The recommendations have yet to go to the cabinet, and no timeline has been set for when the cabinet might pronounce. Meanwhile the treasury, which commissioned the research, is being very careful not to comment on which of them it's for, and which against. But it has put them out, calling for public discourse.
It's a welcome move, even a little belated. It's also quite bold, not only because some of the recommendations are likely to be controversial but also because some are highly critical of the direction of government policy in particular areas. The panel is entirely unimpressed, for example, with what it calls "a pervasive policy paradigm in SA" -- the notion that just because we have minerals, we must focus on developing downstream industries to beneficiate them. There's no evidence showing that downstream processing is an appropriate development path, the panel says.
It's even less impressed with the direction government policy on black economic empowerment has taken. Though it supports the principle, it clearly finds the rigid empowerment codes that have now been put in place entirely inappropriate. The panel's ideas on what kind of industrial policy SA needs are also fairly far from the industrial policy action plan the government released last year.
Then there are its views on labour, which include a proposal for a wage subsidy and a recommendation that SA open its doors to skilled immigrants fairly indiscriminately. Trade unions and some in government will find those unacceptable.
Opinion is likely to be divided too on the Harvard panel's call for much tighter fiscal policy than we have now. And its emphasis on the need for a cheap rand and suggestion that the authorities should intervene more actively to weaken the rand will annoy many private sector economists and a good few in government.
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It's all to be discussed at a workshop next month that will include the Harvard team plus local economists, government departments and other interest groups such as trade unions. Controversial it may be, but the team has zeroed in on key weaknesses preventing SA's economy from sustaining a higher level of growth, highlighting the way in which the large current account deficit and rising inflation point to the fact that we have not, after all, done much to remove the constraints on our economy. All sides need to engage with its findings.
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