SA’s Economy: Beware of the Dogma

SA’s Economy: Beware of the Dogma

Reserve Bank governor Gill Marcus’s plea for decisive, co-ordinated action to support the economy is unlikely to yield results if ideological fissures continue and actors in the economy are unable to innovate.

This is the view of Lorenzo Fioramonti, director of the University of Pretoria’s Centre for Governance Innovation, following Marcus’s call for leadership to confront South Africa’s deepening economic crisis. Fioramonti believes that South Africa needs a social contract on the economy that is supported by most sectors of its society.

“Countries that do not have so many differences on the pillars of the political economy are able to take unified steps to support their economies in tough global economic conditions. Here the ideological divisions are so deep that few actions by government are not opposed by some of its major stakeholders,” he says. Earlier this month Marcus said: “There is a clear recognition that South Africa faces significant challenges; what is required is decisive leadership that consistently demonstrates a co-ordinated plan of action to address them. This will go a long way to restoring confidence, credibility and trust.”

Fioramonti says the co-ordinated action called for by Marcus cannot be achieved if there is no agreement on how priorities are to be met. “South Africa needs a clear social contract between its sectors and cannot meet its development goals as long as such a contract does not exist.

“Pulling out of this crisis will require decisive action in early-stage to high school education, human capital development and diversification of the economy,” he continues.

Government’s blueprint, the National Development Plan (NDP), also calls for co-ordinated action. It was thought to have secured the support of key ANC allies after the party conference in Mangaung last year, but its credibility has since been challenged by trade union federation Cosatu and the South Africa Communist Party in successive statements recently. They say it will not save and create jobs.

“The NDP threatens to reverse certain progressive advances made by the ANC and government over the last few years. It either contradicts or fails to take forward key progressive policies including (among others) the need to place the creation of decent work for all at the centre of economic policy and to promote a new growth path — to industrialise our economy,” Cosatu said.

Economist Iraj Abedian says: “South Africa does not have an unemployment problem, it has an employability problem. Our education system continually produces people who are not able to provide the skills that fit the direction in which our economy is evolving.”

Abedian’s view appears to be supported by Census 2011 results and the national household survey of 2012. Though school enrolment stood at 88,2% in 2012, only 4,3% of the population attended higher education institutions (universities and universities of technology), while enrolment at further education & training colleges was only at 1,6%.

Improving both enrolment and success in school and post-school education requires better literacy and numeracy skills across the board. The 2012 annual assessment of literacy and numeracy showed that the majority of school children in grades 1-12 could not read properly even in their home language. More achieved poor results in numeracy.

The poor school performance is of concern to Cosatu too. “Until education has been made a priority by all players, the economy cannot grow in the long term. We cannot sustain and diversify this economy if we cannot produce the skills to do so,” argues general secretary Zwelinzima Vavi.

Fioramonti says while university enrolment and graduates are important, early childhood education is even more pertinent. “Critical to the development of any economy are school leavers who are sufficiently versatile to be trained in many different sectors of the economy. This is only possible if there is focused investment and attention to early childhood development and schooling up to the age of 12. Germany is a very good example of this, and it has the most competitive economy in the world today,” he says.

“South Africa should stop believing that it can mine itself out of trouble and instead fix the fundamental drivers of current and future economic weakness. Relying on the same, struggling sectors to lift the entire economy out of trouble is naive,” he says.

President Jacob Zuma has repeatedly made it clear that success in education is not negotiable. What remains an obstacle is a difficult relationship between teacher union Sadtu and government. Also, weaknesses in communities and in the bureaucracy have led to the near-collapse of the system. In recent times the instability in the economy has been brought into sharp focus by frequent and violent strikes in mining and other industries.

Labour relations have deteriorated over the past 10 years. In 2001, 1,25m man days were lost. Ten years later the figure stood at 2,8m man days, something Abedian says needs to be brought under control. He says the conflict is symptomatic of an “archaic relationship between employers and workers”.

“The economy needs a new labour relations framework. Employers need to share more information with workers about company performance and its underlying drivers on an ongoing basis, not just during wage negotiations.”

Vavi agrees with more expansive information sharing, but strongly disagrees with Abedian’s suggestion to do away with centralised wage bargaining. Abedian says agreements reached this way do not take into account the unique circumstances of every company and subsector.

If there is so much agreement on what is wrong and what needs to be done, why then is there so much disagreement?

Fioramonti says it comes down to differences over ideology. “The business sector in South Africa no longer knows how to innovate to diversify its base.

The unions still believe Marxist ideologies are the future when they have failed elsewhere, while business believes the neoliberal approach is always right. Such dogma is unhelpful when you need to be innovative and build consensus,” he says. Marcus’s problem is not just lack of consensus on what needs to be done by government but her own work too. The Reserve Bank and national treasury have the unenviable task of calming the markets while stimulating local growth.