Iraj frequently appears in numerous financial journals and magazines. He writes a monthly column in the African Business Times Magazine entitled “Frank Talk”. He is regularly interviewed concerning financial and economic news as well as other matters of public policy facing South Africa at large. Visit the Articles page regularly to keep abreast with all his latest published interviews and articles.
Now Europe Prints Money
Under the relentless pressures from the European economic structural crisis, the European Central Bank (ECB) has eventually caved in, and has joined the US Federal Reserve Bank and the Bank of Japan to print money, alternatively dubbed as “quantitative easing”, or long term refinancing operations (LTRO). The ECB has pulled the European economies from the brink of a severe credit crunch, and a potential fiscal collapse in a number of EU member countries. The short term benefits are almost self-evident. European and global investors are relieved. And, the European political leaders have a sigh of relief, at least for now. Technically, of course, the ECB’s action is nothing more than a simple measure of “buying time”. In many respects, the ECB’s action is very similar to the US Fed’s action in the period immediately after the 9/11 attack on New York. Allan Greenspan introduced an unprecedented and prolonged monetary easing in the US. For sure, he averted a possible recession, or even depression, in the US and by extension in the world economy. Yet, within seven years, the compound effects of a prolonged monetary easing evolved into a phenomenal financial bubble. Asset prices rose considerably, financial institutions in particular ignored some of the basic rules of credit extension, and investment bankers amassed wealth like never before. To put this into perspective, in 2000 the global GDP was USD 32 trillion; by Q3 of 2008 it had grown to USD 62 trillion. These nominal figures clearly reflect that the world economy expanded at an unsustainable rate. By August 2008, the bubble in the financial system burst and with it the super-cycle of growth came to a sudden and painful halt. One of the oldest and most respected investment banks, Lehman Brothers, was declared bankrupt and many others followed. The global economy went to a sharp decline, some regions more than others. In many respects the global economy has not yet fully recovered. Now, it is Mr Draghi of ECB who is following in the footsteps of Mr Greenspan. The reasons are very different in Europe 2012 than in USA 2001. The economic and financial consequences may not be that different. The short term focus however is on saving Europe, averting a Greek fiscal collapse, and providing immediate socio-political relief. Mr Greespan’s strategy to buy time also led to a number of structural problems in US and elsewhere. Mr Ben Bernanke, Mr Greenspan’s successor, intensified the money printing in US. The Bank of Japan had been doing the same for nearly two decades. Loose monetary policy by these three major central banks caused a range of domestic and international fault lines. In Europe in particular, ‘cheap money’ caused a ballooning of government debt, exacerbated by the bail outs offered to the ailing banks in UK, Italy and France in 2008 and 2009. By 2012, the US federal fiscal debt stood at US$ 16 trillion and rising. At the time of writing, the US is in the midst of a fiscal and economic dilemma. This has also become the number one election issue in this year’s presidential elections. Both in Europe and US, there are deep structural issues that need lasting solutions. No amount of short term palliatives in the form of central bank monetary easing...
read moreGlobal Downturn and African Development
By now it is clear that the global economy is on the downturn cycle. Projections of global GDP have been downscaled substantially. Recent reports from the IMF, World Bank and The UN have all concurred that the rate of growth of the world output is going to hover around 4% at best and possibly as low as 3.3% during 2012. The ILO report in the meantime is cautioning against a “job deficit’ of approximately 400 million worldwide. This means an average of 40 million per year, predominantly youths, are going to be out of the job market. This is a serious risk to the global socio-economic stability. Almost no region of the world, and no country per se, is immune to the potential adverse impact of this situation. What does this mean for Africa’s expected growth and development over the next decade? Overall, this is clearly not favourable for Africa. In a world of integrated trade and investment networks, what affects one region is bound to spill over to the others. So, the expected and looming economic recession in Europe is bound to have some negative consequences for Africa and its rate of growth. As it is said, ’a receding tide lowers all boats’! At the same time, it is not all doom and gloom either. Technically, Africa’s relative position globally is in fact expected to improve over the next few years. This is because the growth rate of the continent, especially in the Sub-Saharan region, is affected less adversely than most other regions. Two factors contribute to this: one is that Africa’s exports are by and large raw materials. The growing regions of the world, such as China, India, South East Asia, and parts of Europe do need such raw materials for their growth. These regions are expected to grow between 5 to 8% per annum over the next five years. Their growth is underpinned by rapid and sustained urbanization. This process, in turn, is bound to secure a high level of demand for Africa’s resources such as iron ore, coal, manganese and chrome- among others. So, the fact that the global GDP growth is slowing down is driven mostly by the rapid contraction in the OECD member countries. These countries, however, have not been the main source of demand for raw material in the recent past. The second driver of Africa’s growth, and increasingly the more significant one, is an internal one. In the jargon of economics, the absorption capacity of Africa has increased markedly in the recent years. The main contributors in this regard have been the growing focus on national and regional infrastructure development, the promotion of local industries and the channelling of national savings towards continental projects. Of course, the commodity boom, and the relentless exploration for oil and gas have been a major force in this process. The upshot of these interrelated dynamics has been the rising inward investment in Africa. Whereas up to the 1990s, as much as 60% of the continent’s annual savings was invested in Europe and North America, nowadays this figure is as low as 30%. At the same time, due to the dramatic changes to the investment climate in the OECD countries, a great deal of direct investments from these countries in flowing out, and Africa is...
read morePan-European Fiscal Crisis and Africa
The prevailing pan-European public debt, and more broadly the European fiscal crisis, has many unintended consequences. Predictably, over the next decade or so, the G7 club of countries will face economic decline, and steadily lose their economic domination of the globe, as well as their geo-political stature, influence, and control over the institutions of governance such as the IMF, WTO, and the World Bank. This gradual but inevitable decline will entail numerous complex internal socio-political consequences, most of them socially painful, politically disruptive and financially uncertain. Systemically, this will test Europe’s socio-political and intellectual limits. It will challenge many of Europeans’ cherished cultural and expected living standards. All said and done, the Europeans (with the exception of Germany) have to get used to much lower living standards, work much harder, save more, and learn to live within their means. The age of debt-financing current generation’s living standards, hoping that future generations will take care of the fiscal legacy, has finally ended. The “future” is upon the Europeans now! Without a doubt, global growth will suffer considerably, and with it Africa’s expected growth will decline accordingly. Meanwhile, through trade, FDI, migrant remittances and ODA, the global financial and economic crisis does have knock-on effects on the continent. Africa is bound to be saddled with the implications of the short term fall in export earnings, decline in number of tourists, overseas development aid levels, the loss of value of national currencies, and remittances from migrant workers. Already a number of African countries are under severe stress, politically, and socio-economically. Whilst Africa has to diversify away from its historic European partners, the socio-economic circumstances in Europe will help reverse Africa’s well-established and much acknowledged ‘brain drain’. Over the past fifty years, as much as 40% of Africa’s human resources capital was drained out of the continent- mostly to the x-colonial capital cities. Together with approximately 60% of the continent’s savings, the loss of skilled human capital was detrimental to the continent’s developmental ambitions. Currently, and in the near future, however, scores of young, educated and skillful Africans will increasingly find the European business environment unattractive and unpromising in terms of its prospects. For such young professionals, returning home will certainly receive serious considerations for the first time in many decades. This provides many African countries with a real opportunity to focus on the evident developmental requirements, knowing that the necessary human capital is available. There is also a critical, and potentially explosive factor, that needs consideration and urgent attention by the political leadership in African countries. The return of professionals requires a socio-political environment that admits their meaningful participation in the planning, implementation, and the governance of the developmental process. Chances are that there needs to be a transformation of the domestic political culture with regard to transparency, accountability, and clean governance. If such transformation is too slow or too cosmetic, the clash of “reality” and “expectations” could become highly disruptive. In effect, a profound mindset shift, underpinned by a new set of moral and ethical value system, is required. Not only should the Europeans abandon their hegemonic practices, exploitative objectives, and historic maneuverings, but also the “African leaders” need to recognize the unsustainability and destructive consequences of their mode of governance. The culture of governance in Africa needs as...
read moreFirst Things First in Development
When exploring the various elements of the sustainable socio-economic development, it is vital that we are guided by the golden rule of “first things first”. To this end, the following five factors are the foundational building blocs of any successful socio-economic policy framework. First and foremost is the creation of a capable state, vastly different from what most developing countries have at present. An effective and efficient state, with appropriate skills and requisite structures, is an indispensible architectural component of a successful economy. In nearly all developing countries, the failure to create a public service working environment, based on merit and performance, has resulted in the deepening of a culture of mediocrity within this sector. This managerial culture generates inordinate amounts of inefficiency and exacts a heavy welfare loss, particularly on the poor. Furthermore, in times of sustained economic growth, an ineffective public sector widens the income distribution gap, thereby deepening the structural unemployment and prolonging systemic poverty in the country. The second basic requirement is to deal with the drivers of the country’s systemic poverty. Poverty, and more precisely the iniquitous pattern of income distribution, will never change until an effective human resource development is put in place. Over the medium to long-term, in the fight against poverty, there is no substitute for an effective education system. The creation and augmentation of human capital is essential for breaking out of the vicious circle of poverty. Historic evidence suggests that it takes at least one generation to make a real dent in systemic poverty, provided a sound education system operates within a well-integrated national human resource development framework. This in turn requires a well-integrated education and training systems. The third basic need of sustainable development is a well-defined industrial strategy that is rooted in the country’s comparative advantages and enhanced by an appropriate mix of factor prices and implementation institutions. The golden rule of any industrialization strategy is to begin with the country’s “initial endowment”. After that, meaningful and extensive consultation across key social stakeholders is vital. It is important to state the obvious that industrialization happens primarily through the private sector. As such it stands to reason that the private sector should have substantial involvement in the process of identification of target industries and the implementation of the set goals. The fourth essential requirement is the alignment of and coordination among the cross-sectoral and inter-generational infrastructure programmes. The economics of limited resource use requires alignment and sequencing. This is more true the more complex an organisation gets. It is stating the fact that the public sector is the most complex organisation in almost any country. As such, the role of cross-sector alignment is so much more critical. Yet, more often than not, the operations of the state departments and state-owned-enterprises are fragmented into various silos and do not favour coordination and alignment. As a result large scale losses occur. Such losses take the form of actual as well as potential lost opportunities. The last, but not the least, of requirements is the toughest of them all. It may be argued that the most critical challenge facing the sustainable socio-economic development is the absence of a set of well-defined and generally accepted ethical and moral values. As the forefathers of modern economics have...
read moreBeneath the Unprecedented Global Glum
The global economy finds itself, once again, on the brink of another crisis. Escalating market volatility, vacillating political leadership in OECD member countries, and the Pan-European public debt combined with the US political stalemates have contributed to the current global conditions. However, there are deep-rooted structural factors that lie beneath these apparent phenomena. The most basic of the structural factors is the failure of Anglo-Saxon governance value system, both in the private and public sectors- most visibly within the financial sector. This failure has been brewing for awhile, and became manifest over the past two decades via the collapse of the US Savings & Loan crisis (1989), Enron (2001), HIH Insurance of Australia(2001), WorldCom (2002), Lehman Brothers(2008) Satyam (2009), and a couple of ‘reputable’ audit firms in the US. It is true that the failure of Anglo-Saxon monitoring and compliance framework was a contributing factor, but so were the US Federal Reserve’s Greenspan ideology and hence the mismanagement of the monetary policy for political ends as well as President Clinton’s desire to see American capital being dominant in the global markets. The economic philosophers of the 18th and 19th century, the forefathers of modern economics, argued convincingly that the market economy could not survive without a set of underpinning moral value system. Nor could the operations of the state be able to complement the outcome of the market economy unless the state’s operational framework had a well-define social value framework based on “the public interest’. The very notion of ‘public service’ arose from the premise that the state’s value system would operationally exercise a check on the inherent and predictable excesses of the market system, would provide a set of checks and balances for the ultimate benefit of the society. This critical line was crossed on the altar of ideological warfare and the so-called ‘the imperatives of the national security’, most prominently and openly after the 9/11 in 2001. When this line is crossed, the failure of prudential and regulatory framework is simply a matter of time! Another structural root cause has been and continues to be the global trade regime. Ever since the 1970s, the global system has been at the mercy of an unfair, unsustainable trade regime that caused structural imbalances from time to time. Economists have been warning on the dangers of this issue for a long while. But expressions of concern and awareness of the issues, per se, do not prevent a disaster! This has been the most spectacular failure of political leadership in OECD over the past three decades. Last year alone, OECD member countries spent in excess of US$750 billion on their misguided agriculture subsidies. From an economic point of view, this is a distortionary expenditure with negative effects on the global GDP. China’s manipulation of its currency, together with others, has been another source of structural imbalances! In effect the global economy has been subjected to a pervasive ‘trade war’ for well over three decades. Since 9/11-2001, we have had another rising structural factor contributing to the destruction of value globally, namely the three resultant wars- the ‘War on Terror’, the Iraq War and the Afghan War. These three wars augment the adverse effects of the above mentioned “trade war” on the global economy. The sum-total of these four wars...
read moreBeware of Economic CODESA
South Africa’s political economy has found itself, once again, in a state of damaging uncertainty. In many respects, the country’s young democracy manifests all symptoms of its evolutionary ‘teenagehood’, namely: pretentious ideological contestations, careless social conduct, self-centred preoccupation with short-term goals, and self-defeating machinations for power and wealth accumulation. The socio-political milieu is burdened by the triangle of market failure, state failure and corruption. The fact that these phenomena are as prevalent in many other emerging democracies and economies is cold comfort for the poor and disadvantaged in South Africa. The root causes of these socio-economic problems are well known and generally acknowledged. Yet the absence of an inspired and principled leadership has allowed this configuration to persist thereby inflicting substantial damage to the country’s social fabric, with widespread negative impact on investment and job creation. The situation calls for urgent attention given the prevailing high and rising unemployment, widespread poverty, volatile global conditions and dwindling investment trends Understandably, therefore, some have called for the formation of a socio-economic CODESA- inspired by the process that helped resolve the political and stability crisis that bedevilled the country in the period preceding its 1994 democratic dispensation. However, an economic CODESA has very little chance of success in the prevailing circumstances. And, in fact there are reasons to believe that it might help delay the interventions that are so urgently needed. For any consultative process to succeed, the first prerequisite is the presence of inspired, trusted and committed leaders within the various participating stakeholders. Otherwise, the process itself is bound to get embroiled in endless contestations about the bone fide of the representative leaders and their credibility to be around to oversee the implementation of whatever is agreed upon. A case in point is the fractured state of the business organisations, their leadership credibility and their long term commitment to sustained focus on complex interventions that are needed if issues such as the shortage of skills, poor training, collusive behaviour within the business sector, and the inequities within the business environment are going to be resolved. Likewise, within the public sector the cohesive leadership commitment is lacking in order to remove the abuse of public resources, the systemic inefficiencies within the state sector, poor service delivery and the corrosive spread of manifest corruption. Other social structures such as trade unions, the media, academia, religious groupings and similar potential stakeholders suffer from some or other critical leadership fault-lines too. The congregation of such stakeholder leadership within a socio-economic CODESA is likely to create a platform for political grandstanding, opportunistic brinkmanship, and self-serving short-termism- all of which are exactly what South Africa does not need at this point in time. South Africa has achieved a great deal over a short period of time since its dawn of democracy. A careful and objective analysis of these achievements would demonstrate that the successes were the result of inspired leadership and commitment to the long term goals despite their short term pains. This is also the lesson of all successful societies. The remaining challenges that South Africa faces are no different in essence. We need to accept a few foundational truths. First and foremost is that there are no quick fixes. Long and inspired commitment is needed to remove systemic fault-lines. In so...
read moreManufacturing Sector’s Dicey Status
South Africa’s manufacturing sector has been facing uphill for over two decades, if not longer. A lethal cocktail of global, structural, technological, macroeconomic and industrial policy issues has, over time, undermined its growth and undermined its resilience. Whilst in the last decade of apartheid rule, the industrialisation process had reached its natural dead end, ever since 1994, the obstacles to SA’s industrial expansion have become increasingly self-imposed. The upshot has been a de-industrialisation process with deep and wide consequences for the political economy of the country. Nowadays, the contribution of manufacturing to national income is about 15%, nearly 25% less than what it was a decade ago. At the same time the number of jobs in the sector has declined accordingly. In 1990, the sector created over 1.5 million jobs whereas today’s manufacturing employment is hovering around the one million mark- the sector has lost nearly one third of its jobs! Broadly speaking, this is an indictment on the country’s industrial policy paradigm. This is even more so because South Africa’s inherent comparative advantages are robust and potentially conducive to a resilient and expanding manufacturing base. These include the country’s vast mineral base, the existence of scientific and research infrastructure, a competitive capital and financial market sector, and a well-established culture of manufacturing entrepreneurship integrated within the global industrial network. For the past decade, the root causes of the structural obstacles to industrialisation have been widely known, and yet these obstacles remain in place today as binding as ever. The shortage of skills, the crumbling urban infrastructure, the inefficient and increasingly counterproductive municipal management framework, and the unreliable and unsustainable power supply continue to bedevil the development of business in general, and the performance of manufacturing in particular. In addition to these domestic factors, the global economy ever since 2001 has been thrown into a tectonic, structural and turbulent spiral. Consequently, the financial markets have spun out of equilibrium, and have entered a dynamic process of compounding disequilibria, burdened by unsustainable private and public debt the world over. The upshot for the global foreign exchange markets has been disturbing volatility, rising uncertainly and systematic defiance of the old and established models of foreign exchange econometric modelling. The sustained over valuation of the rand, and its well-above-average volatility have been of considerable and adverse impact on the manufacturing sector- indeed the entire exporting industries. The rise of China, with its conversion from communism into a ferocious state capitalist machinery, with a total disregard of human rights issues, labour standards, and world trade requirements, has introduced an additional political economy factor, compounding the manufacturing challenges worldwide. Policy makers in South Africa, as in many other countries, have not risen to the challenges that these developments pose. More often than not, the reactions have been in the form of ad-hoc policy pronouncements, uncoordinated policy action plans, and largely out of sync with the urgency and enormity that the situation demands. Macroeconomic policy makers have interpreted these developments to be of cyclical and transitory nature, hence they have, by and large, shied away from taking appropriate and effective policy stances. And, where policy positions have changed, consistency and coordination have been lacking. With regard to the structural obstacles, whilst policy analysis has been correct, implementation has not followed with commitment and vigour. It...
read moreReligion and Social Progress: Beyond the Clash of Extremes
It is fairly safe to suggest that, over the past century, hardly any issue has been as controversial as the role of religion in public life. It is also a historic fact that over the period, a mix of scientific, technological, and social developments have made socio-economic life far more complex, intellectually exciting, yet systemically unstable and with rising vulnerability to socio-political volatility. It is equally true that in the process our human conducts, both personal and collective, have drifted away from largely spiritual to manifestly functional utilitarian objectives. The rapid pace of globalization has compounded the complexities and accelerated the move towards a utilitarian human and social functioning. Experts may differ as to the root causes of these developments, yet there is little disagreement that the upshot of them all is the prevailing unstable and troublesome socio-political system the world over. Widespread human suffering, abuse of political power, misuse of financial and economic resources, the spread of corruption, the rise of malfunctioning of public administrations, and the scarcity of inspired leadership are the common phenomena in both developing and developed countries, in established and emerging democracies, in democratic and totalitarian states, in traditional tribal settings and in modern unified societies, in poor as well as in resourceful territories. In short, our sophisticated socio-economic system is facing a crisis of sustainability, legitimacy, and integrity. The evolution of social progress, propelled by unprecedented advancements in technology, communication, transportation, and fostering of ideas, has systemically reduced the role of morality and ethics in various spheres of human civilization. Perspectives have shifted away from essential and long term considerations to functional and short term preoccupations. As such, this paper argues, a systemic issue has emerged which needs a systemic solution. Partial measures driven by opportunistic exigencies would at best deal with symptoms, leaving the root causes intact. This paper maintains that the systemic fault-line is largely due to the rise of materialistic secularism in the name of modernity and near neglect of religion and spirituality[1]. The working premise of this paper is that science (as the engine of secularism) and religion (as the propagator of spirituality) are the two forces of social advancement. This is one of the central tenets of the Bahá’í Faith. The challenge facing us is, thus, not to sacrifice one on the alter of the other. To this end, Section I will review the rise of materialistic secularism and its aftermath. Section II will focus on social governance and the notion of development as pervades public policy. This will be followed, in Section III, by a discussion of the spiritual nature of humankind and the need for a paradigm change in unlocking human potential towards social progress. Section Four will offer some concluding remarks. I- The Rise of Secularism and Its Aftermath The general notions of “free thought” have existed throughout history. Whilst the term “secularism” was first coined by the British writer George Holyoake in 1851, early secular ideas involving the separation of philosophy and religion can be traced back to Muslim polymath, Ibn Rushd (1126-1198) and the Averroism school of philosophy. Holyoake’s used the term secularism to describe his views of promoting a social order separate from religion, without actively dismissing or criticizing religious belief. However the term secularism itself has evolved over...
read moreA Perspective From Africa
Africa is caught in the cross fire of the poor governance of the G7 financial markets and the near collapse of the value system within the ‘states’ and ‘markets’ in these societies, particularly within OECD. Although Africa had no role whatsoever in causing the financial and economic crisis, the prevailing economic meltdown has put at risk Africa’s growth and development prospects. In its latest update, the International Monetary Fund predicts that, as a direct consequence of the global economic crisis, Africa’s growth will drop to a low of 3.4 per cent, or less, in 2009. This is contrasted with 6.2 per cent economic growth in 2007, followed by 5.2 per cent in 2008. Africa’s integration into the global economy meant that through trade, FDI, migrant remittances, and ODA, the global financial and economic crisis spread to the continent. Moreover, with worsening growth projections for Africa’s main development partners in 2009, the continent is bound to be saddled with the implications of the fall in foreign direct investment, export earnings, number of tourists, overseas development aid levels, the value of national currencies, and remittances from migrant workers. Already a number of African countries are under severe stress, politically, and socio-economically. Significantly, the deepening economic crisis exacerbated the serious political and socio-economic challenges already being experienced in Africa. The “crisis” before the current crisis involved poverty, underemployment, rising inequality, unfair globalization and difficult social conditions for large segments of Africa’s population. The financial and economic crisis comes at a time when Africa is only beginning to recover from the effects of the food and fuel crises. To ameliorate the adverse consequences and to avoid further damage to the social fabric of the continent, it is vital to recognize that no country or region alone can deal with the consequences of the crisis, hence global, coordinated solutions are called for. More importantly, a profound mindset shift, underpinned by a new set of moral and ethical value system, is required. The hegemonic practices, exploitative objectives, and historic maneuverings have to end. The global response to the crisis must be value-driven, people-centric and pursue the overarching objective of alleviating the burden of the economic downturn on people, especially the vulnerable groups. To this end, the removal of the existing barriers to a fair global trade system is a major first step. The elimination of agriculture subsidies in OECD and currency manipulations by China and others should receive serious and immediate attention. Over the past year, there has emerged a growing implicit protectionism within G8 member countries. Such creeping protectionism is detrimental to global recovery and growth. Together with the so-called fiscal stimuli introduced by the G8 countries and others, the focus thus far has been on narrow national interests. Understandable as it might be, such short-termism and politically driven initiatives have detracted attention from some of the root-causes of the global crisis. From African’s vantage point, the G20 leadership’s focus should be on strengthening and restructuring multilateral institutions, with a view to urgently transforming them on the basis of sound and equitable governance principles. Genuine and coherent economic policies as well as the reform of the global economic governance architecture will have to form an integral part of an effective response to the crisis. De-globalization and segmentation of the global socio-economic system is...
read moreAchievements, Failures and Lessons of SA Macroeconomic Experience
With 14 years of uninterrupted GDP growth, the SA economy during the last decade registered, arguably, its second ‘golden age’ after its acclaimed 1960s boom period. Despite remarkable achievements, the period under review faced some critical policy inadequacies and outright failures. Resultantly, some key structural shortcomings have remained obdurate and potentially a risk to our socio-economic achievements. Unless the root causes of the prevailing shortcomings are identified and remedial actions are taken, the sustainability of economic growth and the attainment of further socio-economic development remain seriously at risk. At present the single most obstinate factor hindering socio-economic development is the prevailing inadequacies of our education and training system. Widespread shortage of skills within the society is but one of its manifestations. It is a fact that the modernization and technological upgrading of the economy during the past decade has increased the economy’s skill intensity sharply. This in turn has accentuated the systemic unemployment problem. Meanwhile, the country’s human capital accumulation has proved wanting. Whilst much has been achieved in promoting access to the public schooling system, little has been achieved with regard to quality improvement of the education offered. Consequently, ‘unemployability’, widespread vacancies and huge skills gap have emerged concurrently. Consequently, the income and wealth inequalities within the society have worsened. Another crucial policy failure has been the absence of a well-defined industrial strategy that is rooted in the country’s comparative advantages and enhanced by an appropriate mix of factor prices and implementation institutions. In particular, some of the country’s sources of comparative advantage are either neglected or markedly eroded. Agriculture and agri-industries have received little, if any, attention. Moreover, a poorly managed land policy has caused much uncertainty in the farming sector. Possibly one of the most damaging failures has been the absence of medium to long term planning for socio-economic infrastructure. This was most poignantly manifested itself in the recent electricity crisis. A number of other areas of infrastructure planning were equally neglected. Critically, the country’s aging urban infrastructure has been largely ignored. Even the key metropolitan centres suffer from basic symptoms of decay in their urban utilities, poor institutional performance and weak financial management capability. Local government institutional infrastructure, generally, has been left to falter. A combination of factors over the period has had the unfortunate consequence of entrenching the rise of mediocrity within the government apparatus. Whilst the general shortage of skills has been a contributing factor, a series of misguided practices in respect of remuneration, tenure of office and recruitment criteria has led to growing inefficiency within the state. Most importantly, the absence of political and executive accountability has been a key contributing factor. For example, it is a fact that very few, if any, of the Ministers or the Heads of Departments are taken to task given the fact that their annual financial audits have been found unsatisfactory year after year. Such blatant condoning of poor performance has had strong systemic and corruptive impact on the operational efficiency of the public sector. These failures have in turn led to the country’s faltering global competitiveness. While South Africa’s competitiveness rose markedly during the first decade of democratization, over the past five years, in a number of areas the country has lost its edge. These factors combined to culminate in a sharp...
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