South Africa is no longer just a political miracle, it is also now a serious economic growth contender in the league of “the Chinas, the Indias, the Russias and the Brazils of this world”, Deputy President Phumzile Mlambo-Ngcuka told business leaders on Tuesday.
In a speech to a group of business people gathered together by Economist magazine in Sandton, the deputy president said in a prepared speech that South Africa has identified the “binding constraints” to faster and equitable growth.
“According to our measurements we are currently producing jobs at over 500 000 net new jobs per year. This is a 4% growth in employment per year. Unemployment has fallen from a peak of 31% in 2003 to 25% in March this year.”
It is still “very high” but is moving “quite rapidly in the right direction”.
“At this rate we will meet our objective of reducing unemployment to 15% or lower by 2014. We will also meet and hopefully considerably exceed our poverty targets,” she told the group, including Coca-Cola division president in South Africa David Lyons, Old Mutual South Africa MD Paul Hanratty and Sasol CEO Pat Davies.
Asking herself the question whether South Africa is making progress in achieving its own economic targets, she said: “We certainly think we are. The rate of economic growth has definitely stepped up to a new level. From an average of 3% per year in the first 10 years, we are now definitely achieving a higher rate of growth — currently we are on target to meet or beat our 4,5% average growth rate target for 2004 to 2009.
“Investment has risen from 14% of GDP to 18,5% of GDP. Last year, we received record levels of both direct and indirect foreign investment.”
Looking back at the economy inherited from apartheid, she said “the golden goose was sick, seemingly terminally ill”.
“The treasure chest was empty. We brought the golden goose to life and we started to refill the treasure chest.
“We did this by being very careful — not spending money when we weren’t sure of the outcome, not borrowing money unless we knew we were spending it on something which would increase our competitiveness, our productivity, our output.
“We didn’t employ new people in the civil service unless we were sure they would add value. In fact, employment in government fell quite sharply during the first six or seven years of democracy.”
Turning to the government’s industrial strategy, the deputy president said: “We have reduced tariffs in some key areas such as steel where they are down to zero, and we have developed and are implementing sector strategies for three selected areas: business process outsourcing and off-shoring, tourism and bio-fuels.”
Companies such as IBM and JP Morgan Chase, among others, already have major investments in back-office operations in South Africa.
“The bio-fuels strategy is about to come to Cabinet for approval and implementation. The tourism marketing budget has already been significantly boosted. We will soon announce a new aviation policy that will still allow greater air access to South Africa.”
Looking back at the apartheid era, she said before 1994 the economy was growing at less than 1% per year, and income per person, on average, was falling.
“Income per person, on average, fell by 15% from 1984 to 1993. The government deficit was close to 9% of GDP. Inflation had been in double figures for 30 consecutive years. Government debt was unacceptably high, even dangerously high. Capital was scarce and the county’s foreign reserves were perilously low.
“Our first battle was to turn an insolvent country into a solvent one. We had to reduce government’s debts, support the fight against inflation and turn the finances of the country and the government around.”
She noted that the average wealth of a person has risen about 3% every year since democracy.
The government’s approach of accelerated and shared growth for South Africa has now identified the need for even greater macro-economic stability, better competitive logistic and infrastructure services, a better-skilled labour force, industrial initiatives that promote competitiveness and a better regulatory environment for small and medium businesses, she emphasised. — I-Net Bridge