A lot of work ahead

Published 7 years ago

Recently, there has been incessant talk about the National Development Plan (NDP) and how it, as our government so eloquently states, will mitigate the triple challenges that South Africa faces: poverty, unemployment and inequality.

Developmental theory tells us that ‘developmental states’ aim to attain industrialization through active participation in the formulation and implementation of industrial policy, while simultaneously implementing policy to redistribute income to minimize the unequal distribution of income resulting from industrialization.

One of the greatest dangers South Africa faces with industrialization is that the tendering processes in the public sector is corrupt. We cannot have a situation where the benefactors of the industrialization will be those with close ties to government and the ruling party. This would be disastrous for the country and will increase social tensions, while widening the income gap. A good education and healthcare system, which is often entirely subsidized by the government, are key characteristics of a developmental state. The equalization of income is also an important factor, with countries, such as South Korea, being considered among the most equal as well as enjoying the highest living standard in the world.

Bureaucratic competence is essential in ensuring that state institutions facilitate the swift and efficient implementation of the NDP. The state will have to bolster its departments with captains of industry and experts to improve its human capital base. In addition, they ought to be able to attract the brightest young minds and look for creative ways to lure them to the public service as opposed to merely giving them higher salaries. How will the National Planning Committee (NPC) fare compared to successful central planning economic bodies of countries such as Malaysia and South Korea? It remains to be seen. In these aforementioned governments, the state had a more interventionist stance in the economy, coupled with establishing a cohesive relationship with the private sector based on common national policy goals.

A competent bureaucracy is an essential, but not sufficient, condition for a developmental state to thrive. Equally important is the political capacity that will ensure that the state is both accountable and transparent. Unfortunately this is an area that the South African government needs to improve.

Although South Africa should draw inspiration and lessons from the developmental states of the Asian Tiger economies, it should note that the blueprint from these nations is not a one-size-fits-all solution. South Africa’s developmental state will require differing arrangements because no single economy is like another. South Africa is a resource-rich nation, whereas South Korea and Malaysia are more technologically-centric and industrialized economies. Our government should focus on formulating our own unique developmental state blueprint that will help tackle and alleviate our pressing challenges within our distinct African context.

The lack of cohesion between the ruling political party, the African National Congress (ANC), and its communist tripartite alliance is also a cause for concern. Very often the two have stark differing ideologies on pertinent issues such as monetary policy. The South African Communist Party (SACP) previously lobbied for a populist stance of growing the economy by removing the inflation target of 3% to 6% and lowering interest rates to stimulate demand for credit. This will result in inflationary pressures in the long-run and will lead to an eventual economic collapse. The communists often fail to understand that in as much as South Africa has pressing unemployment issues, the loss of employment for those who are already employed will permeate levels of poverty throughout our social structures and place an even greater burden on our social welfare system.

The NDP presents the ruling party with the opportunity to make amends for the lag in creation of jobs and reducing poverty. Perhaps the NDP is exactly what the ANC needs in order to salvage some of the lost faith that has resulted in the emergence of opposition parties such as the Economic Freedom Fighters (EFF) as well as the resurgence of the Democratic Alliance (DA) in last year’s elections.

There is no easy solution to attain economic growth. Placing a nation’s economy on a growth trajectory requires patience and, perhaps more importantly, resilience to astute economic policies.