Gear may soon be a thing of the past as the ANC debates what our new economic strategy should be Howard Barrell Yes, it appears it may really be happening. The seemingly endless – and little understood – economic debate about the government’s market-friendly macroeconomic policy may be coming to an end. Gear, the acronym that many of us have been bandying about with the alacrity we normally reserve for choice swear words or mantras of salvation, may soon fade from earshot.
This is not because Gear – the government’s policy on growth, employment and redistribution – is dead. Far from it: it is very much alive in the stability that now characterises government finances and in our much-reduced inflation rate. Nor is it because we have grown tired of arguing among ourselves. Very much the contrary. No, the reason Gear may soon fade into memory is that we may have found something new and better to argue about. The economic debate, as conducted by the political laity, may be about to move on. This much is evident from the report of the economic commission at the African National Congress’s national general council in Port Elizabeth last week. And it has been presaged for some time now in the concerns of professional economists. The new concern appears to be: what economic growth strategy should we be setting for ourselves?
According to Iraj Abedian, chief economist at Standard Bank: “Gear was more of a stabilisation strategy – with growth dimensions to it. It enabled the economy to grow in a turbulent environment. But having stabilised the economy, we have now got to think of second generation reforms, and we haven’t arrived at that point yet. “We need a growth strategy which has a coherent, integrated framework. And time is running out.” According to Nicoli Nattrass, professor of economics at the University of Cape Town, who is concerned mainly with labour issues: “No one would disagree that economic growth in South Africa needs to be more labour- demanding, that it must create jobs. But what is the best way of achieving that end? “On the face of it, the problem is simple. Job creation depends crucially on investment growth. Hence appropriate strategies are those which encourage capital accumulation and ensure that as many jobs as possible are created per unit of investment. “But this just raises two further fundamental questions,” says Nattrass. “What drives the total level of investment? And what kind of investment produces sustainable growth and will create more new jobs?”
ANC delegates on the economic commission at the ruling party’s national general council spent a lot of their time asking and trying to answer, in effect, the two questions raised by Nattrass. The implication was that the stabilisation package that is Gear was taken as a given. Nattrass takes the view that a growth strategy is evident in current government policy. And she questions whether it is appropriate to South lll Africa’s needs. She characterises it as a “high productivity now” strategy. That is, the government’s policy is encouraging capital and skill-intensive investment in the belief that it will be a catalyst for more dynamic and labour-demanding growth later. In the present, however, the way wages are being set is discouraging and, in some cases, even eliminating low-wage, low productivity activities and jobs. This strategy, she argues, “essentially asks the currently unemployed generation to make a sacrifice for the sake of the employed and better skilled among them as well as for the next generation which will supposedly enjoy the fruits of a more dynamic economy”. Abedian does not agree that South Africa has a growth strategy at this stage. And, in trying to find an appropriate way forward, he warns against the notion that “there is a magic growth strategy that can generate millions of unskilled jobs”. He says: “My concern is that structurally the South African economy is becoming more like a First World economy. Growth is occurring in the tertiary sector, the service sector, and in this sector the number of new jobs created is low. So you have the jobless growth phenomenon. “I am convinced that, at a national level, there is no chance whatever of creating the level of large-scale job creation that we need.”
The only hope Abedian can see of the kind of growth that might create jobs on the scale necessary both in South Africa and in neighbouring states lies in greater regional integration. He argues that a considerably more integrated Southern African Development Community (SADC) -in which labour, like other resources, has far greater mobility – would allow different areas within the region to develop their comparative advantage within a larger market and, so, to foster labour-intensive growth in some areas, such as Zambia, Mozambique and Tanzania, where the agricultural and mining sectors are relatively undeveloped. An area such as that around Johannesburg, on the other hand, could develop its comparative advantage in the region as an industrial centre, with relatively high-skilled, high wage jobs. “The impediments to this happening are political, not intellectual,” in Abedian’s view. “When people reflect on the obstacles – such as the wars in Angola and the Democratic Republic of Congo – the vision begins to fade. lll”But,” says Abedian, lll”I am optimistic. What brought Europe together was not only intellectual vision, but a lack of alternative options. “If you manage to bring all 14 member states of SADC together, their economy would still be only as big as Denmark’s. And Denmark’s economy is insignificant in world terms. If that reality begins to dawn in our politics, then we will begin to see that the way to go is towards internal comparative advantage in the region.”