‘Cabinet split on incompatible growth plans’

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Johannesburg - Differences in three key economic policy documents made it clear that South Africa did not have an agreed approach to economic growth in the cabinet, the Centre for Development and Enterprise said yesterday.

The think tank said South Africa’s attitude to growth was ambiguous and ambivalent.

In a report, “Growth in a time of uncertainty: Does South Africa have a growth plan?”, the centre says the country has three core economic policy documents, each produced by a different government department: the New Growth Path (NGP), released by the Economic Development Department in 2010; the Industrial Policy Action Plan (Ipap), produced by the Department of Trade and Industry in 2010 and updated in 2012; and the National Planning Commission’s National Development Plan (NDP), released last year.

The report says all three put employment at the centre of South Africa’s economic policy, but each gives a different, sometimes mutually incompatible, diagnosis. It says the three also offer different recommendations on the policies needed to address the challenge.

The report says: “And, while employment growth is the key objective of each document, there are important differences in the absolute size of the targets and timeframes. In addition, there are differences in the subsidiary and complementary objectives in each document.”

The report also notes important differences in how the three documents describe and explain South Africa’s economic trajectory over the past few years.

Ipap and the NGP suggest that the core reason for slow employment growth has been the growth of sectors dedicated to “consumption” at the expense of those focused on “production”. Both documents suggest that the growth of the financial sector is a cause and consequence of this trend, but offer different accounts of what has happened.

The report says the NDP, by contrast, sees the financial sector as one of South Africa’s comparative advantages and offers no analysis compatible with the idea of an imbalance between consumption and production identified in the other documents.

“The NDP suggests that the root of the economy’s challenges is that it has succumbed to a ‘middle-income trap’ (in which South Africa is unable to compete against the low-wage economies of east Asia in light manufacturing because the cost base is too high, but lacks the skills and capacity for innovation to compete in high-value-add sectors),” says the report.

“The NDP also suggests that local industry is overly concentrated, and this stifles growth and innovation. Unlike both Ipap and the NGP, the NDP sees the labour market as being too tightly regulated, with those regulations playing a big role in explaining unemployment.” - Business Report

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