Economists question DA's new economic plan
Economists have called into question the Democratic Alliance’s goals of 8% growth as part of the opposition party’s new economic plan.
"Eight percent is achievable, but not with this plan. They are making the right noises and politicking very well, but it’s not offering anything inherently different to what the ANC has," Dawie Roodt, chief economist at the Efficient Group told the Mail & Guardian.
The DA's new economic plan, unveiled in Pretoria over the weekend, centres on the nurturing of an 8% annual economic growth rate through the introduction of a raft of polices that aim to fundamentally change how the economy is structured.
Initially, the DA wants to introduce a raft of measures that will ease the tax burden on companies, in the hopes this will spur them into absorbing excess labour from the unemployed sectors of the population.
The official opposition argues this growth and reduction in unemployment should be driven by small businesses, who they propose to be given assistance in establishing operations and by relaxing regulations.
Additionally, there are hopes to enhancing the education system through legislation that will prevent teachers from striking and setting minimum targets for school principals, along with improving general skills and training through a national apprentice system.
The party’s calls for the youth wage subsidy to be implemented, with a view to encourage the employment of young people, were also renewed as part of their economic plans.
While the plan has been initially lauded, economists polled by the M&G believe the aim of 8% growth is unfeasible – especially in the medium to long term.
“It is possible but not sustainable. Realistically speaking we could go for 5% or 6%. There are elements of this plan that also don’t speak to the specifics of a lot of what they plan on doing,” said Chris Hart, chief economist at Investment Solutions.
This was echoed by Stanlib chief economist Kevin Lings, who argued the constraints currently found in the economy - ranging from logistical capability and power capacity –means the plan is not realistic.
“There is absolutely no point in growing rapidly, only to find a couple of years down the line that you run into constraints and then have to rapidly apply the brakes to your growth plans,” Lings said.
Lings argued that while a spike in growth would offer a certain level of immediate satisfaction, lower growth numbers over an extended period would better suit South Africa.
"Long term sustained growth is far more effective than a high growth rate over a short period that would probably end up in South Africa experiencing growth induced housing and banking bubbles or the like," Lings said.
Roodt said that while the DA’s proposals of further tax incentives are "encouraging", he would opt for an "entire tax overhaul".
"The two key words for me when I look at how I'd go about changing our economy for the better are simplicity and liberalisation. We need to liberalise and keep things simple, we can’t reinvent the wheel," he said.
Hart also said he remained sceptical about the objectives set out in the plan, for as long as household savings were at low levels.
"Things like small business growth is important but to truly aspire to a growth rate of 8%, you need to assure you have a great depth of household savings. Consumers must have the security of at least some savings before you begin thinking about large sustained growth," Hart added.