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All records and findings included in this report, originate from
a panel discussion on developing a new economic blueprint for South Africa,
which took place in February 2022 Author: Olivia Main Editor: Daryl Swanepoel
Contents
Introduction
Key growth constraints
Neoliberal macroeconomics
Lack of localisation
Corrupt politicians roam free
Too many policies
Not enough urgency
Foreign nationals and casualisation
Towards a new growth path
Conclusion
References
Cover page image: www.mg.co.za
Introduction
On 2 March 2022, Employment and Labour Minister, Thulas Nxesi, officially tabled the National Labour Migration Policy (NLMP) for public comment and engagement. Touting the policy as the first time in the history of South Africa that government has formulated a comprehensive NLMP, the Minister said that “government have researched extensively and benchmarked internationally in search of policy based on best practice”. Together with the tabled NLMP, amendments to the Employment Services Act (of 2014) were proposed to limit the extent to which employers can employ foreign nationals (BizNews, 2022).
And this is all good news. It points to the government’s willingness to look at labour laws that are not working and change them. But it is not enough. South Africa’s reputation – in fact its very standing – as the industrialised leader of the African continent is diminishing. On Statista.com, South Africa is listed as the third-largest economy in Africa in 2021 with a GDP of US$329.53-billion, trailing behind Egypt (GDP US$394.28-billion) and Nigeria (GDP US$514.05-billion). Our strength on the world stage has never been weaker (Statista, 2022).
The situation does not look any better back home. According to the Quarterly Labour Force Survey (QLFS) carried out by Stats SA, the number of employed persons declined by 660 000 to 14,3 million for the 3rd quarter of 2021 compared to the 2nd quarter of the same year. South Africa’s unemployment rate in Q3:2021 increased by 0,5 of a percentage point to 34,9%. This is the highest official unemployment rate recorded since the start of the QLFS in 2008 (Stats SA, 2021). It seems there is room for improvement in just about every sphere of the economy.
The Inclusive Society Institute has committed to an intensive three-phase research project, culminating in a blueprint for rejuvenating and reigniting South Africa’s flailing economy. This map will, ultimately, be shared with government representatives in the presidency and other important policy institutions and public bodies, such as Parliament, in 2022.
A dialogue, hosted by the institute, brought together trade unionists from across a number of unions – as part of the second phase, to interrogate what in terms of the generally accepted economic architecture of the world South Africa is doing wrong. And to explore fresh out-of-the-box ideas that could grow the economy beyond the expected 2-3% to the 4-5% trajectory that is needed to really start chipping away at unemployment and backlogs (National Treasury, 2021).
Key growth constraints
Neoliberal macroeconomics
The panel largely agreed that the South African government’s seemingly unapologetic neoliberal approach to running the economy is problematic. It was felt that the government relies too heavily on the private sector to cure social ills such as unemployment, while not doing any of the heavy lifting itself.
In addition, the austerity measures that result from this neoliberalism is not speaking to the lived realities of South Africans. With no state-led development – and the private sector seemingly on an investment strike – money is not ending up in the pockets of the people. The trickle-down effect that the country has been waiting to witness for years has not come, which means the people are excluded from taking part in the economy and, so doing, contribute to growth (Mail and Guardian, 2021).
As things stand, South Africa finds itself in the so-called middle-income trap with a middle-income economy, failing to transition to a high-income economy due to rising costs and declining competitiveness (Daily Maverick, 2019). The country’s macroeconomic policies are not assisting its social and industrial policies. Expenditure on industrial incentives is lacking, which does little to grow manufacturing. As a result, South Africa’s social cohesion is being tested as economic strife is compounded by the high levels of inequality still seen in the spheres of healthcare and education, among many others.
Lack of localisation
Far too little of the South African rand is circulating in the country. Whether it is officials receiving kickbacks from imports or consumers not buying local products, discussants felt that South Africa is losing out due to a lack of localisation. Although good work has been done to get big clothing retailers like Foschini, Woolworths and Markham’s to buy local, a lot more is needed. And not only from industry. As one discussant put it, ordinary consumers must also contribute, saying that “we should all make a little bit of effort to check the label on the trousers we choose to wear”.
Additionally, too much revenue is lost to manufacturing done overseas. South Africa is a large producer of raw materials. The fact that those materials are shipped elsewhere and turned into consumable goods amounts to big losses when it comes to taxation, job creation and keeping money circulating within our borders.
In a sign of the country’s lagging manufacturing capability, Trade, Industry and Competition Minister Ebrahim Patel recently requested the social partners at the National Economic Development and Labour Council (NEDLAC) to consider an import-substitution target of 20% for non-petroleum imports, which he argued could drive progressive localisation worth up to R200-billion over the coming five years. According to the minister, South Africa’s “propensity to import is out of line with peer countries and developed economies and more can sensibly and sustainably be produced locally” (Engineering News, 2021).
Corrupt politicians roam free
The panel was unanimous in their assessment that the South African prison system has too few corrupt politicians in its jails. The individuals who have stolen from South Africa for what seems like an eternity must be punished – and punished publicly and with consequences. Simply put, the crooks must go to jail.
South Africa lost R1.5-trillion through corruption in the years between 2014 and 2019 (News24, 2021). And it is not only the government’s coffers that are being cleaned out. All over the country, copper cables are disappearing from railways faster than they can be replaced. Transnet and PRASA have seen the systematic destruction of their infrastructure by criminal syndicates over the past two years. Without money, the economy cannot grow. Without cables the trains cannot run. Commuters cannot get to work. Goods cannot get to ports.
The panel felt that if the police and the National Prosecuting Authority (NPA) do not act, SOEs like PRASA will soon be gone. In addition, the public will not have confidence in the integrity of the leaders of society. Leaders such as Siyabonga Gama and Anoj Singh, former executives of state-owned infrastructure firm Transnet, as well as Brian Molefe, former CEO of public utility firm Eskom, who the Zondo Commission recommended be investigated for corruption and racketeering amounting to millions of dollars. The latest part of the report also implicates senior political leaders of the ruling African National Congress itself (Al Jazeera, 2022).
Too many policies
South Africa’s long history of policy changes reads as follows: In 1994, the Reconstruction and Development Programme (RDP) was chosen as the primary socio-economic programme. Two years later, government introduced the Growth, Employment and Redistribution (GEAR) programme to stimulate faster economic growth than RDP had managed. GEAR was replaced in 2005 by the even faster Accelerated and Shared Growth Initiative for South Africa (ASGISA) as a further development on the first two developmental strategies. Shortly after ASGISA came the New Growth Path (NGP), which was followed, in early 2013, by the National Development Plan (NDP) 2030 (South African History Online, 2014). In 2019 the Department of Trade, Industry and Competition (DTIC) put forward proposals for Master Plans for all 15 priority industries in the country in order to “target specific action points relating to the respective industries” (IOL, 2021). In total, therefore, a staggering 20 policies have made it onto the desks of government officials so far (SA History, 2014).
The panel felt that such a large number of policies and the shifting ideologies between them is not the best way to take the country forward. The Master Plans have been in the making for three years and some are still not even concluded, while those policies that are currently in place are not being delivered on. Also problematic, is a dual system of social policies whereby one set of policies applies to the poor and another for the rich. A discussant also highlighted that to establish economic policies that are progressive, the youth and gender development must be considered.
Not enough urgency
South Africa’s economy is growing at a snail’s pace. Although growth was projected to rebound to 5.2% in 2021 (but that is still not enough to recover to pre-Covid 19 levels), the forecast is for the economy to slow to 1.9% in 2022 and 1.6% in 2023 (OECD, 2021). For a country brimming with natural resources, the growth rate is well below what can be achieved. In fact, it seems the only sphere showing real growth in the country is that of unemployment. The recent unemployment statistics released by Statistics South Africa show the rate of growth now sits at 34.9%, while under the expanded definition of unemployment, it rose from 44.2% to 46.6% (Daily Maverick, 2022).
Yes, the recent social upheavals in the form of the looting in July 2021 are major setbacks that point to the fragile nature of the country’s social cohesion. But solutions to these problems have been tabled and are waiting to be actioned. Across the board, however, these well-thought-out policies and ideas are not being implemented. Promises are not kept as people in key positions seem to lack the energy, the will, or the know-how to act.
A pertinent example is the National Anti-Corruption Strategy 2020-2030 (NACS). The first step in implementing the strategy is to establish an interim National Anti-Corruption Advisory Council, which has yet to happen, despite President Ramaphosa’s promise that it would be established by mid-2021 (Corruption Watch, 2022). Furthermore, from the names of those responsible for sabotaging Eskom, to the persons who stole directly from the State, the information about who did what has been made public. The natural – some might say inevitable – next phase to root out the problem would be to swiftly go into action and apprehend the criminals. But that is not happening.
The panel felt that the slow speed of progress and political criminals still at large is, in large part, the result of a lack of political will. The ANC as the governing party has been indecisive and has thus far failed to restore the organisation to its former glory. It still has the overwhelming confidence of the majority of people in the country, but it is not able to lead a society as it has in the past.
Foreign nationals and casualisation
The twin issues of immigrant workers flocking to South Africa to gain employment and the country’s shift towards casualisation has profound implications both in terms of employment and social cohesion. At present, about three million of South Africa’s 60 million residents are migrants (Stats SA, 2022). Never, since the xenophobic attacks of 2008, has anti-immigrant sentiment been this high.
In Gauteng recently, the Alexandra Dudula Movement and Operation Dudula have emerged with the joint purpose of ridding their townships of foreigners. Dudula loosely means to "push back" or "drive back" in isiZulu and gives an indication of the growing discontent among South African communities who feel marginalised. The campaigns of the two groups include a call for all undocumented African migrants to stop trading in Alexandra – a call they made clear by closing down all the stalls owned by foreign nationals who could not show the correct papers for running the business or a valid passport (BBC, 2022).
The panel described foreign nationals working on a casual basis in South Africa as having a detrimental effect on the money earned and spent inside the country’s borders, together with taking employment opportunities away from hard-working citizens. As mentioned in the introduction to this report, a law is being finalised by government which will cap the number of foreigners that businesses owned by locals can hire. It remains to be seen whether the legislation will have a noticeable effect on the dire unemployment rate.
Towards a new growth path
Conclusion
South Africa is a country with tremendous potential. As a discussant rightly pointed out, we are not dependent upon a single cash crop or commodity, like most African countries. We have a very diversified agricultural sector. We have all the infrastructure in the world, and we have a significant education system. Unfortunately, we are bearing witness to large parts of that potential coming to nothing through the actions – and inaction – of those we elected to represent us in what we hoped – and still do – is a democratic society.
South Africa’s unemployment figures are dismal. The labour force is becoming less skilled. We are losing jobs to outsourcing and desperately poor people attracted to a country which until very recently still had the fastest-growing economy on the African continent. The outlook is poor, but the resolve of the people is not.
Despite all the challenges and truly tragic events that have had this country in utter turmoil, South Africans are still pulling together and making things work. The SOEs are in dire straits, but they still exist. We have come through Covid-19 just as the rest of the world has, and let it be said that we still have a Rugby World Cup trophy – and the positivity that came from winning it – safe and secure in the country.
However, people can only take so much, and the social cohesion of the country is not guaranteed. Real change is needed to bring about real hope. The labour sector invites all governing bodies to facilitate tangible changes to South Africans’ lived realities through constructive dialogue and innovative ideas – and action. The spirited discussions and the distilled solutions that come from these think tanks will then be in the public domain. More importantly, they will be within arm’s length of those with the power – and passion – to make a difference.
References
Al Jazeera. 2022. More S African corruption exposed in ‘state capture’ report, March 8, 2022. [Online]. Available at: https://www.aljazeera.com/features/2022/3/8/analysis-south-africas-state-capture-report-questions-anc-leg [accessed March 2, 2022].
BBC. 2021. Dudula: How South African anger has focused on foreigners, March 13, 2022. [Online]. Available at: https://www.bbc.com/news/world-africa-60698374 [accessed March 7, 2022].
BizNews. 2022. National Labour Migration Policy released for public comment, March 2, 2022. [Online]. Available at: https://www.bizcommunity.com/Article/196/717/225576.html [accessed March 3, 2022].
Corruption Watch. 2022. Solutions abound to SA’s graft problem – political will, not so much, February 14, 2022. [Online]. Available at: https://www.corruptionwatch.org.za/solutions-abound-to-sas-graft-problem-political-will-not-so-much/ [accessed March 7, 2022].
Daily Maverick. 2019. China, South Africa and the middle-income trap, April 23, 2019. [Online]. Available at: https://www.dailymaverick.co.za/article/2019-04-23-china-south-africa-and-the-middle-income-trap/ [accessed March 2, 2022].
Daily Maverick. 2022. South Africa needs renewed citizen activism and political imagination to stop the democratic degradation, January 4, 2022. [Online]. Available at: https://www.dailymaverick.co.za/opinionista/2022-01-04-south-africa-needs-renewed-citizen-activism-and-political-imagination-to-stop-the-democratic-degradation/ [accessed March 10, 2022].
Engineering News. 2021. Report warns that industrialisation-through-localisation could stunt South Africa’s development, November 16, 2021. [Online]. Available at: https://www.engineeringnews.co.za/article/report-warns-that-industrialisation-through-localisation-could-stunt-south-africas-development-2021-11-16 [accessed March 2, 2022].
IOL. 2021. Sectoral Master Plans playing a vital role in reviving SA manufacturing, June 30, 2021. [Online]. Available at: https://www.iol.co.za/business-report/opinion/sectoral-master-plans-playing-a-vital-role-in-reviving-sa-manufacturing-6873b700-9d37-47f2-836d-89f68aa589ef [accessed March 7, 2022].
Mail and Guardian. 2021. Intensifying economic insecurity may threaten South Africa’s social cohesion, February 16, 2021. [Online]. Available at: https://mg.co.za/opinion/2021-02-16-intensifying-economic-insecurity-may-threaten-south-africas-social-cohesion/ [accessed March 10, 2022].
National Treasury. 2021. Budget Review 2021. [Online]. Available at: http://www.treasury.gov.za/documents/national%20budget/2021/review/Chapter%202.pdf [accessed March 2, 2022].
News24. 2021. SA lost R1.5 trillion to corruption in five years and continues to bleed – report, June 23, 2021. [Online]. Available at: https://www.news24.com/fin24/economy/south-africa/sa-lost-r15-trillion-to-corruption-in-five-years-and-continues-to-bleed-report-20210623 [accessed March 7, 2022].
OECD. 2021. South Africa Economic Snapshot. [Online]. Available at: https://www.oecd.org/economy/south-africa-economic-snapshot/ [accessed March 2, 2022].
SA History. 2013. South Africa’s Key economic policies changes (1994 - 2013). [Online]. Available at: https://www.sahistory.org.za/article/south-africas-key-economic-policies-changes-1994 2013 [accessed March 7, 2022].
Statista. 2022. African countries with the highest Gross Domestic Product (GDP) in 2021, February 1, 2022. [Online]. Available at: https://www.statista.com/statistics/1120999/gdp-of-african-countries-by-country/ [accessed March 2, 2022].
Statistics South Africa. 2021. The South African economy sheds more than half a million jobs in the 3rd quarter of 2021, November 30, 2021. [Online]. Available at: http://www.statssa.gov.za/?p=14922 [accessed March 7, 2022].
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This report has been published by the Inclusive Society Institute
The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals.
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