Mfanafuthi Tsela
3 December 2008
opinion
Johannesburg — A COMMON perception of SA's economic record under former president Thabo Mbeki and Finance Minister Trevor Manuel is that while it has been disappointing in terms of creating employment and reducing poverty and inequality, it has done well at least in terms of growth.
In fact, even growth has been nothing to write home about. SA has actually slipped down the world rankings of income per person since the implementation of a conservative macroeconomic framework in 1996 -- and is now in 88th position.
SA grew more slowly than most other African countries: its growth rate was below the median African growth and SA pulled down the average African growth rate.
One might think this is simply because SA is already at a higher level of income per person than most other African countries. However, SA also shows up poorly relative to other middle-income countries -- growth in SA since 1996 has been below both the average and median for other middle-income countries.
Recent years have been relative boom times for commodity-producing countries, which have benefited from an upswing in demand and buoyant commodity prices. Improved growth rates in SA in the past few years are in part a result of this. However, SA has not grown as much as have other commodity countries. This does not bode well for future growth prospects: with the global economic downturn, demand for commodity exports is likely to stagnate, and if SA could not achieve reasonably rapid growth under the recent favourable conditions then its future performance is likely to be even more disappointing.
Even if we compare growth in SA and internationally for more recent periods (such as 2001- 07), it is still below par, internationally. The growth projections for SA and Africa presented recently in Parliament by Manuel anticipate our growth being significantly below the African average in the coming few years.
Perhaps of still greater concern than the unimpressive growth performance of recent years is that even the growth that has materialised has not laid a good foundation for future growth. For instance, cuts in real spending on infrastructure have led to the running down of infrastructure vital to future growth. While there has been an improvement in budget allocations on infrastructure in recent years, even the medium-term budget policy statement announced by Manuel last month plans for real cuts in spending on economic services over the next three years. This is particularly shocking given the acknowledged need to improve SA's infrastructure, as well as the need for countercyclical public investment spending in the coming economic downturn.
It goes without saying that there are some positive aspects of the economic legacy of the Mbeki-Manuel years. For instance, growth has been relatively stable by international standards. However, much needs to be done to repair some critical problems. These include a worrying current account deficit; high unemployment; low rates of saving and high levels of household debt; a manufacturing sector that has yet to recover from ill-advised rapid tariff liberalisation and high interest rates; a financial sector more vulnerable than it should be because of financial and exchange control liberalisation; and infrastructure run down by conservative expenditure.
While not all of these can be blamed on policy, the economic policies pursued since 1996 in particular have certainly contributed to these problems and, at the very least, have not done enough to deal with them. The effects of these problems for growth are lagged to some extent, such that the negative effects of, for instance, the current account deficit or of inadequate public investment are yet to be fully felt.
Even if policies were to remain unchanged after next year's elections, growth is almost certain to slow down in the coming years, both because of the global economic downturn and due to the rather weak foundation that has been laid for future growth. Without a significant policy shift -- including more expansionary macroeconomic policies and more active industrial policies -- we are unlikely to see improved growth performance.
It is important to point out too that growth is not the be-all and end-all, and that economic performance ultimately needs to be evaluated in terms of its effect on people's lives. Even if SA had achieved high growth rates, this would not necessarily have benefited the majority of South Africans -- this depends on the character of the growth path.
In evaluating current economic policies and considering new ones, we should not buy into the idea that SA has had an impressive growth run under existing policies. It has not even been average by the standards of comparable countries. SA's record has been worse when it comes to employment and distribution but, even in narrow growth terms, we can do a lot better.
Tsela is research co-ordinator in the Congress of South African Trade Unions' parliamentary office.
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