The Democratic Alliance on Thursday launched the first phase of its 8% growth project in Cape Town.

The party described the phase as “a diagnostic assessment that identifies twelve sets of growth impediments that need to be addressed if South Africa is to achieve a sustainable economic growth rate of 8%”.

The DA said that at that rate of growth, millions of jobs would be created.

“Poverty would halve in five years, just like it has in places such as Brazil.”

DA Federal Chairperson Wilmot James said that in 2010, the South African economy had grown at 2.8% while the Brazilian economy had grown at 7.5%.

“High growth in Brazil over the past decade has created jobs, and increased tax revenues have been used to boost public goods such as a social safety net and improved education systems.

“Furthermore, poverty rates in Brazil declined from 20% of the population in 2004 to 7% in 2009.”

“With smarter policies, and effective implementation, we can match these achievements.”

The DA said it was driving the 8% Growth Project as an alternative to the ANC's state-centric approach that “stifled innovation, enterprise and job creation.”

But before solutions were found, the problems needed to be diagnosed, James added.

He said that firstly, there was a low demand for labour in the country.

“SA's current growth trajectory is skills and capital intensive, featuring low demand for unskilled and low-skilled labour as a result of high costs, a restrictive regulatory environment and antagonistic labour-employer relations.”

SA had the highest unemployment rate amongst emerging markets. Currently the official unemployment figure stood at 35.8%, using the expanded definition of unemployment.

Secondly, there was a skills shortage due to what James called “a failing education system” which meant that school leavers lacked basic literacy and numeracy skills.

Furthermore, the skill shortage placed a constraint on economic growth because it limited the ability of enterprises to expand their operations or venture into new areas.

“It also means that existing economic activities may be carried out to a low standard, without the requisite expertise.”

Thirdly, an infrastructure backlog of R220 billion inhibited economic activity and placed a major constraint on future growth.

“The infrastructure that South Africa depends upon to move people and goods around the country, and to our trading partners abroad, is showing signs of stress.”

“Investment in infrastructure has been inadequate and badly planned, with a backlog estimated to be R220 billion at 2011 rand value and this undermines South Africa's competitiveness.”

Wear and tear on the country's electricity grid and waterworks also had direct negative consequences for the economy.

Fourthly, high costs and a heavy regulatory burden discouraged entrepreneurship and contributed to growing 'informalisation' in the economy.

“According to the World Bank index for starting a business, South Africa ranks 75th in the world because, currently, setting up an enterprise in our country is a complicated, expensive and time-consuming process compared with other parts of the world,” James said.

Fifthly, one of the key barriers limiting the ability of millions of poor South Africans to participate in the formal economy was their lack of access to capital, which made it difficult for poor households to do things like develop enterprises, gain additional skills or make investments in key inputs.

“Creative policies are needed to capitalise the poor so that low-income individuals can participate meaningfully in the formal economy.”

The sixth problem was a lack of competition in the South African economy which inhibited innovation by the private sector and the growth of small business, and contributed to high transaction costs and inflation.

“Enhancing South Africa's competitiveness is crucial if we are to attract investment, increase productivity, drive product innovation and bring down prices for consumers,” James said.

According to the DA, the seventh problem was a lack of innovation in terms of social security.

“While over 15 million people receive a social grant from the state, the social security system itself has not done enough to create incentives that enhance human and social capital.”

Currently, over 15 million people, a quarter of SA's population, received one or more of the government's seven different kinds of social grants.

The number of beneficiaries had increased dramatically over the years, and looked set to increase further.

The eighth problem was what the DA called “insufficient engagement with Africa”.

“BRICS show that a large market is key to success: Africa is South Africa's strategic market, but integration has been hampered by slow and expensive cross-border trade.”

The ninth problem lay in the fact that BEE and EE hadn't worked.

“Current approaches to BBBEE and EE have had only limited success in broadening ownership of the economy and expanding opportunities.”

Genuine Broad-Based Black Economic Empowerment (BBBEE) and Employment Equity (EE) were critical to the achievement of a fairer, more equitable society.

“The success of both sets of policies, however, has been limited.”

The tenth problem was SA's ineffective industrial policy.

“IPAP2 requires extensive intervention by government departments that do not have sufficient capacity, and tends to 'direct' rather than incentivise innovation and self-discovery by the private sector.”

James said the Industrial Policy Action Plan (IPAP2) strategy required extensive intervention across too much of the economy by too many government departments. It was impossible to co-ordinate all of the departments meant to collaborate on the objectives of IPAP2, he added.

The penultimate problem was fiscal unsustainability.

“Budget deficits needed to drive strong growth for long-term stability and current spending did not prioritise growth and contributed to low levels of capital formation, which fell from 23% of GDP in 2008 to 18.9% in the second quarter of 2011.”

The final problem, according to the SA, was the high cost of crime.

“Crime inflicts direct economic and psychological costs, which deters investors and fuels emigration, both of which undermine economic growth.” - I-Net Bridge