By Brian Mahlangu
For South Africa to accomplish the imagined prosperity and wealth to feed future generations, she requires more than 2.5% economic growth.
At this rate, the country is under targeting. As of now the required growth should be 6% consistently over a period of 10 years, as oppose to the projected 2.5% for the financial year 2018.
If 6% growth rate is sustained over 10 years, then substantive prosperity could be achieved in a foreseeable future of the contemporary generation.
This is a realistic projected economic growth that may guarantee the accomplishment of the National Development Plan 2030.
To reset a reasonable target of 6% is not illusionary, but pragmatic, provided our leadership across all sectors manages natural national endorsements and resources productively and responsibly in the national interest.
In the southern part the landlocked Rwanda achieved and sustained 6% growth for more than 10 years. If it became possible for Rwanda, it should also be feasible for South Africa to reach the growth rate of 6%.
One of the most pertinent questions to be asked and answered is: what monetary amount of savings is required to stimulate sustainable inclusive economic growth that could led to employment creation at the high rate of the economies of scales?
How can South Africa overcome the syndrome of permanent rather than seasonal paradox of thrift that seem to militate against efforts of mobilising financial resources for investment?
This paradox of thrift is largely based on non-factual false perceptions, yet one of the major obstacle for the most needed investment whose rate of return could further grow the economy and possibly increase employment opportunities for the unemployed people in the country.
While the 2.5% growth is appreciated but it cannot be automatically translated into 2.5% of unemployment decline or 2.5% job creation. The bounce back of 2.5% of economic growth from below -1.5 for two successive quarters should not precipitate misplaced hopes that the country is yet out of the economic quagmire of her own making.
However, this favourable improvement signals the possibility and prosperity for the economy to be rehabilitated. The prospects of reversing impressive poor economic performance of our country to restore the low confidence in South Africa’s economy are inherently embedded in the huge natural endorsements and other resources at the disposal of our country.
With such natural endowments and resources it should not be so impossible to expand the economic base and its absorptive capacity for the approximately 9.4% of South African citizens who find themselves in an unenviable plight of underdevelopment that undermine their human dignity and further to grinding poverty.
Apparently it is one thing to have huge stock of natural endowments and resources on the one hand, and how do you manage, distribute and use them productively equitably to create employment to the eradicate the stubborn tide of poverty and inequality that characterise our community in the rural villages, informal settlements and in the township where many poor black live.
It also does not imply that the growth of 2.5% will be reinvested to regenerated further economic expansion that stimulate job creation whilst decreasing the current unprecedented wave of what seems to be the investors is the unemployment. One of the serious concerns in ability of South Africa to sustain economic growth of any significant prestige over a long term period.
This observation may suggest that the 2.5% growth is seasonal and is not underscored by effective the fundamental economic policy instruments. So far there is no overwhelming evidence that this growth is not an artificially driven as a result of government capital injection in market rather than the pure economic performance in its merit.
As the economy displays some positive signs of moderate recovery, it is important to avoid the temptation of being trapped in the attribution syndrome of associating the underlying causal factors behind the 2.5% growth to the wrong economic variables. The most vital thing is to understand correctly the valid attributable causal factors of any favourable economic performance and its ensuing growth thereafter.
The economic growth of 2.5% does not even necessarily take the country out of the junk status as perceived by the international rating agencies. This growth has not dented stubborn unemployment, poverty and inequality because it did not result from any one plan with the 2.5% specific target.
However, it could have been prompted by a confluence of factors. Growth friendly conducive conditions should prevail the economy to achieve 6% growth on annual basis over a 10-year period.
Included amongst other factors are the above 10% investor/ business confidence, adoption of economic and financial liberation reforms that will ease conservative regulation that hinder new prospective business investors, political volatility precipitating policy uncertainty should be resolved at a political level first, addressing the high rate of corruption, crime, improve trade competitive edge of the country, rehabilitation of the ailing public entities and state-owned enterprises as well as restoration of moral integrity of the leadership, top management, governance and oversight structures to execute their roles and responsibilities in a meaningful and productive manner.
The quality of leadership governance structures and organisational management fabric that should be conditions of the national and resources assets in the form of state own enterprises leave much to be desired.
While the performance of the global economy and emerging economies in developing countries are witnessing the economic recovery and growth of approximately 4.5%, South Africa economy is still displaying how economic under-performance indicated by her legging behind other emerging economies at 2.5% of economic growth. With all her abundant resources her performance is not impressive to attract new direct and foreign investments.
There are factors that account for poor economic performance. These range from institutional constraints and other factors such as perceptions and stigma of corruption, fraud, lack of accountability and unethical leadership conduct in economic, social, political management and unfavourable governance landscapes.
Equally, internal and external forces are attributable and sometimes accredited for the critical role they play in influencing either positive or negative developments in the growth or decline of domestic national economy. The share of the gross domestic product attributable to both the primary and secondary sectors has been consistently decreasing over the past few years.
Hence this slight economic growth is welcomed although it does not seem to be underscored by the element of sustainability for a long term. These two economic sectors are no longer prominent as they used to be the backbone of economy; as such they were replaced by the tertiary sector service and knowledge-based economy that account for approximately 73% of gross domestic product of the country.
This sector will underpin the economy for a long time, in the areas of productivity growth, provision of expanding and sustainable employment opportunities, especially in high-skilled capital and technological intensive labour market and can guarantee international competitiveness for our country to use comparative advantages competently and productively.
Huge investment in training and skills development may optimise sustainable and inclusive economic growth; provided the structure of the economy is transformed and de-racialised through national resources redistribution targeting historically disadvantaged groups.
The growth of the tertiary sector has been critical in contributing to economic growth; however its low skills sub-sectors have been generating indecent job opportunities with unintentional results of literal migration of economic resources from the primary and secondary sectors to the thriving tertiary sector.
Brian Mahlangu is writing in his personal capacity. Mahlangu is an independent governance and public policy analyst and former member of the council: Vaal University of Technology.
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