Joel Netshitenzhe
Article: Letter from Tshwane
24 November 2000
Beyond macro-economic stability
South
Africa has attained macro-economic stability.
The challenge is how more decisively to sue
for faster economic growth, combined with
massive job-creation and poverty alleviation.
This
is the overwhelming consensus of economic
stakeholders in our country. International
economists and the IMF and World Bank agree.
Says James Wolfensohn, President of the World
Bank: "…we are comfortable with
the degree of progress that has already been
achieved on the macro side. I think South
Africa has come to a different stage"1.
So
what should we do? There are as many answers
to this question as there are schools of thought.
But South Africans need to change their mindsets
if we are to make the desired progress.
This
is because a struggle to achieve macro-economic
stability does have its own psychological
side-effects, including the craving for approval.
Very much like the vain "beauty queen
or stud": hours spent in front of the
mirror, and if one soul disapproves, then
paralysing self-doubt sets in.
Some
trader in London reads about an Argentine
company being downgraded by a rating agency,
and because "Pty/Ltd" in Spanish
is "SA"2,
the immediate assumption is that this must
be South Africa; someone mischievously whispers
that Trevor Manuel is about to resign …
and a spanner is thrown into the financial
markets. We then start to wonder whether there
is something wrong with us.
We
must continue to manage the vagaries of such
volatility. But, at a broader level, ways
should be found to tame irrational and deliberately-staged
movements which impact on the real economy.
This applies particularly to developing countries
that suffer profoundly from developments that
have nothing to do with their macro-economic
fundamentals.
What
about the real economy? The paradigm problem
here is the recycling of myths, repetition
of conventional wisdom, and preaching caution
where decisive action is required.
The
following ten common assumptions illustrate
what can inhibit creative thought:
Privatisation
should drive foreign direct investments (FDI).
In other words, the purchase of existing state
capital stock, with some new injections here
and there, will lead to faster economic growth.
If
society consumes less and saves more, there
will be greater local investments. So,
the savings will necessarily go to productive
investments; and exports will drive faster
internal growth.
On-going
expansion of capital stock within the current
economic structure will result in requisite
job-creation. Yet the ratio of new capital
stock to labour absorption is much higher
in South Africa compared with other developing
countries.
A
labour subsidy should not be considered because
it is too complex to administer and can lead
to corruption. In other words, it has
to be complex, and it is impossible to find
creative ways of avoiding the possible pitfalls.
Pro-poor
policies undermine economic efficiencies.
So optimal efficiencies can be attained even
if the majority have no sense of ownership,
and therefore do not have to worry about the
consequences of their actions.
Technological
innovation and knowledge-based production
are critical for export-driven production
and irrelevant for labour-intensive projects.
What about knowledge-based organisation and
cheaper products that locals deserve? Besides,
information and communications technology
can massively improve the performance of the
smallest and most rural of enterprises.
The
lower the wages of workers and the less rights
they have, the higher will be the number employed.
As if stability can be realised where firing
takes place at will and where workers are
locked up during night-shift.
Business
confidence within South Africa is mainly a
function of macro-economic policies. What
about problems of our consumer base? Is there
a feeling of belonging among all entrepreneurs
towards democracy and the consequent programme
of social change?
A
strong national centre should run with the
main ideas and get sub-national governments
to implement the decisions. What about
capacity, integrated planning and implementation,
across all spheres?
Macro-economic
balances are the most critical elements to
endear South Africa to foreign investors and
financial institutions. Yet, globally,
the parameters of discourse are changing;
and financial reporting is increasingly being
coupled with indicators of sustainable growth
and poverty alleviation.
These
assertions are over-simplified. The issues
themselves, in their complexity, did feature
at President Thabo Mbeki’s recent "retreat"
with international economists, including the
IMF and World Bank. There are no quick-fix
solutions.
Tshwane’s
injunction is for all South Africans to think
beyond the traditional confines. Not recoiling
from creativity – and not succumbing
to inertia – is what is required in this
period. Failure looms larger where it is a
consequence of missed opportunity.
Joel
Netshitenzhe
CEO, GCIS
Issued by Government
Communication and
Information System
(GCIS)
Published
in Independent Newspapers
1James Wolfensohn, President of the World bank,
Press Conference, 05/11/002
Soceidad Anonima (SA), meaning Proprietary
Limited (Pty, Ltd)
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