Finance Minister Pravin Gordhan is looking for ideas that would catapult the economy into a growth rate of around 7% per annum in order to create jobs while keeping the country globally competitive.
Speaking at the University of Cape Town on Tuesday evening, Gordhan described second quarter GDP data as “disappointing”, although he did not say if this would impact on government’s expected growth rate of 3.4% for the rest of the year.
According to Statistics South Africa the economy slowed in the second quarter to a below expectation of 1.3% year-on-year compared to a revised 4.5% rate in the first three months of the year.
Students, mainly from the Congress of South African Students, questioned Gordhan about the country’s economic performance, particularly on the slowdown in the manufacturing sector, the ownership of mines, black economic empowerment and the country’s competitiveness.
Gordhan pointed out that after the ruling African National Congress (ANC) came to power in 1994, there was an implicit understanding that economic liberation would follow that of political emancipation. However, the rate of transformation had been slow and government had, up to 2008, created two-million jobs, about one million of them had been lost due to the 2009 recession.
“[During the recession] we also lost R60-billion in revenue and it will probably take South Africa another two to three years to get back out of recession,” Gordhan said.
Unsustainable BEE model
Gordhan said that the current model of black economic empowerment was not working and that an alternative needed to be found.
“Clearly some people have done very well for themselves. But [the model we have now] won’t work into the future and we don’t have adequate models for the future,” he said.
Gordhan went on to say: “There seems to be, let me call them, dinner party elites, who like to make deals and get ownership of companies without getting involved directly in the operations of the companies.”
Related to that point, Gordhan went on to call for a new group of people who would become entrepreneurs and become directly involved in the running of companies and thereby create jobs.
The students asked if there was any point in trying to prop up the manufacturing sector as it continued to slide.
Gordhan said that South Africa was key to the African market, which was becoming more powerful in terms of global economics therefore it would make sense for South African manufacturers to look to it.
He acknowledged that government could have done more to support the smaller business sector but that the organisations it had set up were hampered by lack of capacity and they needed to employ people who had run businesses in the past.
Mineral ownership
Gordhan pointed out that because of the apartheid legacy South Africa had ended up with the smallest business sector of any economy of its size.
Answering a question on minerals ownership, Gordhan said South Africa was not considering imposing a “super tax” on mines as had been done in Australia. However, he did say that South African tax legislation was continually being reviewed.
“When I came to power our tax legislation was 30 pages, now it is about 200 pages,” Gordhan said.
He said that South Africa had made a start in ensuring that all could access the country’s mineral wealth when it passed legislation that any one person or company would not own minerals in particular.
Gordhan made a call for the students to think about working for government as well, with less than a quarter of the 400 present saying they were considering such a career.
He said the country needed ideas to help create its economic growth path — as articulated in the ANC new growth path policy — and that it needed a positive contribution from government, labour and business.
Gordhan said that Germany was one of the few countries that were able to weather the European sovereign debt crisis because of such a compact between business, labour and civil society in the country. — I-Net Bridge