South Africa has two choices in its economic future, but the Democratic Alliance feared the country was on the wrong course, party leader Tony Leon said on Wednesday.
Addressing the South African Business Club in London, Leon said South Africa could retain market orthodoxy or go backwards towards a statist command economy based on an outmoded Stalinist model.
”While there appears to be clear blue water between these visions, many aspects of the statist conception have lately become part and parcel of [President Thabo] Mbeki’s economic trajectory, as he has made significant concessions to the leftist constituency in the tripartite alliance,” Leon said.
Using the government’s Growth, Employment and Redistribution (Gear) strategy that envisaged an open export-led economy as example, Leon said its key policy reforms have driven South Africa’s growth and stability.
”However, it is the six Gear reforms that have not been implemented, which explain South Africa’s persistently high rate of unemployment, disappointing growth rates and low rates of saving and investment,” he said.
According to Leon, the government failed on Gear’s three major initiatives: radical reform of exchange controls, liberal tax incentives and increased flexibility of the labour market.
”The Mbeki government has faltered on all three counts; consequently, our economy has failed to attain sufficiently high levels of expansion,” he said.
He said economic growth has become increasingly dependent on state involvement promoting the Accelerated and Shared Growth Initiative for SA (Asgisa) programme.
”Concerns remain about this ambitious venture placing so much faith in the agency of the state — which presently lacks the capacity to spend what is urgently required in education, health, transport and other essential infrastructure. This year alone, only 17% of the budget for capital expenditure has been spent to date,”
Leon said.
He said ”economic liberalism” was needed because it would accelerate growth by fostering job creation required to eradicate poverty.
”Only by freeing the capacity of the market — reducing the bureaucratic burden on business, abolishing exchange controls, pushing through labour market reforms, relaxing BEE and affirmative action requirements, will we achieve our desired economic success,” Leon said.
He is on a two-week working visit in the United Kingdom that would also see him debate climate change at the Oxford Debating Union on Thursday.
He would then travel to Morocco to address the 54th Congress of the Liberal International. – Sapa