There has been vigorous debate since democratisation about the best economic way forward. An idea expressed by people in business and the government is that labour-intensive production in South Africa cannot compete with developing economies in the East.
This is a bleak view of our prospects. We have a sea of unemployed people and an inferior education system, which means the unemployed are ill-equipped to work in capital- or technology-intensive industries. So a great number of South Africans eke out a hand-to-mouth existence in the informal sector or rely on social grants.
But I have never seen the pessimistic view expressed in print, at least not by a leading economic policymaker.
Alan Hirsch, chief director of economic policy at the presidency, has published Season of Hope: Economic Reform Under Mandela and Mbeki.
He writes: “There is an underlying and rather obvious point that must be made. There are few labour-intensive manufactured tradeables that South Africa is likely to be competitive in.
“The competitive labour-intensive sectors will be those where South African producers are able to exploit an underlying advantage, such as cheap or special access to natural resources, or a preferential market arrangement.
“To put it another way, no matter how much the labour market is made more flexible or the currency is depreciated, South Africa will never have tens of thousands of workers making Nike shoes for export, like Vietnam or Thailand.”
Hirsch says the reasons for this include the strength of the trade unions combined with the country’s human-rights culture.
“Another reason for relatively high wages is the high cost of living in South Africa. Apartheid raised living costs for all South Africans, especially the poor, one of the main costs being the apartheid-determined residential locations.”
Poor location coupled with the collapse of public transport systems and fiscal pressure to reduce transport subsidies have all conspired to raise the floor price of labour in South Africa.
Hirsch says the deterioration of access to public services such as education, health and social security for Africans under apartheid meant the diminution of the social wage. And land expulsion programmes reduced the non-wage income portions that people earned from their rural land-holdings.
“It will take time to bring down the cost of living and raise the social wage for the poor and working poor in South Africa.
“Trade liberalisation has already helped to reduce the cost of living and raise the social wage of the urban poor, and there is further downwards potential for the price of wage goods in southern Africa.”
Given the scale of the problem, one may have thought government would implement greater interventions, such as tax breaks for companies that site themselves near large concentrations of urban poor. This could be coupled with a coordinated strategy to upgrade the quality of education and provide skills training in these areas.
In at least one labour-intensive sector — clothing — leading players say that the government appears uninterested, seeing it as a sunset industry and one in which the country will never be competitive.
Job losses are already in the tens of thousands and the organised part of the industry is prosecuting hundreds of smaller employers — representing 25 000 workers — through the industrial council system, while the government sits on the sidelines mouthing support for small and medium enterprises.
Even the Southern African Clothing and Textile Workers Union (Sactwu) is running from it. It has built up an investment asset base of over R1billion and has holdings in clothing and textile firms, but these are dwarfed by the billions it has poured into sectors such as casinos and television. It appears the union cannot see a labour-intensive future either.
Hirsch notes that the growth, employment and redistribution strategy called for industrial agreements, which reach across diverse firms, sectors or regions, that should be sufficiently flexible to avoid job losses and extended to non-parties only when this can be assured.
He says issues such as the capacity to extend bargaining council agreements to non-parties “should be carefully managed so as to avoid bidding unemployed people out of the system”.
Hirsch is well qualified to write about the recent economic history of the country. He was formerly a chief director at the Department of Trade and Industry and has either had his hands on the policy levers or was close enough to the action to see what was going on.
He does more than a workmanlike job of piecing together the economic policymaking that has accompanied democratisation. He is an insider but is still able to voice criticisms of past and present mistakes, particularly those made by the Reserve Bank under Chris Stals and Tito Mboweni.
We study the past to understand the future. I would have welcomed more detail on how we get to that elusive 6% growth level.
Season of Hope: Economic Reform Under Mandela and Mbeki by Alan Hirsch is published by the University of KwaZulu-Natal Press