South Africa’s potential economic growth rate was relatively good — at between 2,8% and 3,6% per year — but was not good enough to reduce unemployment significantly.
This was the view of Dr Iraj Abedian, group economist of Standard Bank, addressing reporters in Johannesburg on Wednesday.
The economy’s output potential had been in an upward trend since 1992, said Abedian. If the forecasts of the Standard Bank were correct, the early 1990s would prove to be the starting point of a long-term uptrend in economic growth. The early 90s were significant, Abedian said, because it had then become clear that South Africa’s transition from apartheid would probably succeed.
There were a number of factors counting in the country’s favour. South Africa had very low volatility of economic growth among emerging market countries. People did not want to invest in countries like Argentina which had a boom one year and a bust the next year, Abedian said.
The economy had become diversified since the 1950s, and was no longer dependent on gold mining. Multi-factor productivity — the combined productivity of land, labour, capital and entrepreneurship — had all been in a rising trend since 1992.
The rate of increased labour productivity and unit labour costs were converging, which was normal in a democracy. From the 1970s through to the mid-90s unit labour costs had risen faster than labour productivity.
This had been necessary to compensate for ”slave wages” under apartheid. The two figures now closely correlated, and were likely to remain so in future.
Private sector investment was in a rising trend, the take-off point of which was also the early 90s.
South Africa’s balance of payments was favourable, with the value of exports now exceeding the value of imports, a trend he expected to continue.
Exports had also become more diversified, and much less dependent on gold exports. Non-resource exports in general had grown, Abedian said, and the increase in exports had been achieved in a time of restricted world economic growth.
South Africa was socio-politically stable; tax administration and tax morality had both greatly improved, allowing government to increase expenditure while reducing borrowing.
A respected constitution, an independent judiciary, and an independent Auditor General’s office — a little known but very important institution — all contributed to the country’s advantages.
But all of these positive factors would not alleviate unemployment, Abedian said.
On the one hand there were unfilled vacancies in business and government. On the other hand there were millions of people looking for work — but they lacked the skills to fill the vacant jobs.
Skills augmentation had to be a top priority, Abedian said. ”Growth (alone) is not going to solve the problem of unemployment in South Africa.”
On poverty alleviation, Abedian said one could not talk about the poor as if they were homogenous. Among the poor there were orphans, the elderly, the illiterate, the literate but poorly educated, and unemployed graduates. A poverty alleviation strategy that did not treat these different groups in different ways would be ”merely politicking”.
Abedian outlined what he called ”the next steps”. These included redressing historical imbalances; an integrated poverty alleviation strategy; and a strategy for dealing with unemployment and skills mismatch.
He also said the effectiveness of local government should be improved. National government could provide a framework for helping the poor, but the actual delivery would come through local government. – Sapa