By Thembi Mabhula

Over the past decade the South African government has come up with various development strategies to improve the economy’s performance. The most recent initiative is the Accelerated and Shared Growth Initiative for South Africa (ASGISA), an outgrowth of GEAR, the economic strategy which was largely based on neo-liberal economic policies and the principles of a free market system.

Launched in July 2005, the initiative was designed to enhance the country’s growth performance to an average of 4,5% from 2006 to 2009 and 6% from 2010 to 2014, to halve unemployment and poverty by 2014 and increase investment towards 25% of GDP, including public investment of +/- R416b from 2007 – 2010.

Some of the constraints that were identified in achieving these targets were cited as currency volatility, skills shortages, logistics and the costs of doing business due to infrastructure backlogs and deficiencies in state capacity, organisation and leadership. To overcome these constraints and to achieve set targets, six focus areas were put in place as macroeconomic initiatives, infrastructure investment, education and skills, sector and industrial strategies, second economy initiatives and public administration and capacity.

ASGISA is still suffering serious shortcomings which raise questions as to whether it is potent enough to face the challenges threatening the SA economy, which include the global economic slowdown, political uncertainty within the ANC, high inflation, high levels of unemployment, widening inequality in income and wealth distribution, the worsening electricity crises and infrastructural bottlenecks.

Moreover, the removal of former President Thabo Mbeki from the office signaled the possibility of a critical shift of ANC policies towards the left. ANC President Jacob Zuma has been viewed as very much inclined to the pursuit of populist and leftist policies. COSATU and the SACP have criticised what they refer to as a liberal capitalist economic system, “The economic system in South Africa is in fact one of colonial and racial capitalism which can neither be defined neither as a free market nor as serving the interest of all South Africans. It is highly concentrated in the hands of a few with the unequal distribution of wealth, property and power often defined in racial and gender terms.” The ANC and mainly its associates are sending signals of an anti ASGISA campaign.

ASGISA’s major target has been to share the benefits of growth with a larger segment of South Africans. Economic growth has occurred side by side with a widening gap between the rich and the poor and a large majority of citizens still remain excluded from the mainstream economy. The poor are getting poorer and the impact of the “trickle down effect”, which is central to neo-liberal policy as a means of supporting the poor, has remained insignificant.

The rich and businesses have benefitted a lot from reduced taxes and redistribution from rich to the poor through taxes has been minimal. According to the OECD, “South Africa’s income distribution is amongst the worst in the world”. The disparity between the first and the second economy is not closing quickly enough and the grants programme remains a major tool to reduce poverty and to redistribute income.

However it is an unreliable tool to promote sustainable growth among the poor and remains very dependant on government policies that can be reviewed anytime.

Presenting his medium-term budget framework in parliament Trevor Manuel highlighted the fact that the unforgiving global economic climate intensifies the need for SA to address its main challenges, poverty and unemployment, in a more concerted manner, adding that due to the impact of inflation on the poor, an immediate R20 monthly bonus will be paid to all old pensioners and other grant recipients. The news was received with shock by pensioners since R20 can only buy bread and milk, with a loaf of brown bread costing R7 and milk costing slightly more.

About 12 million South Africans live on grants and roughly 20% live on less than R2 500 a month. According to the South African Human Rights Commission, 30% of South Africans or 14 million people do not have access to sufficient healthy food with rising food prices.  The unemployment rate remains very high and the possibility of halving unemployment by 2014 looks unlikely.

At a time of a declining global economy and high inflation, South Africa has experienced a serious energy crisis resulting in rising electricity bills. South Africa has always been one of the countries in the world with unrealistically cheap electricity. This is a thing of the past and South Africans will now be paying 20-25% more for their energy use.

ASGISA is also challenged by a skills mismatch in the economy. School leavers and students newly graduated from universities find themselves with skills that do not match the requirements of the economy. Many school leavers are functionally illiterate and innumerate while the economy is developing in a skill-biased manner. The new curriculum and systems introduced to schools are an attempt to align the education system with the liberal economic system. It also seems likely that a leftist government will not get on well with such a system.

There is a strong feeling among certain economic analysts that ASGISA is falling short due to constraints such as HIV/Aids, crime, high taxes, labour costs, corruption and costs of financing black economic empowerment. Crime is rated as one of the major constraints crippling the economy.

To be fair, ASGISA has made its mark in certain areas, notably that over the past four years economic growth has exceeded 4,5%, with employment increasing though levels of unemployment and poverty are still very high.

What remains certain is that SA is facing major challenges that require a potentially efficient economic policy for us to see a turnaround of current economic threats. In 2009 a new president will assume office and will face unprecedented economic challenges with the global recession.

References:
1. Daily Dispatch: 22 October 2008
2. Sunday Times : 09 November 2008
3. http:// viewswire.eiu.com/article 1373656522.html
4. http://www.iol.co.za
5. http://www.polity.org.za
6. http://www.environment.co.za
7. http//www.gcis.gov.za/media/reales/2007/070322.htm

The Transformer Vol. 15 No. 1 / February - March 2009