Why SA lags while Chile grows

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IOL  CT_oped sparks houses0 INDEPENDENT NEWSPAPERS One thing that could leverage poor people into the economy more swiftly is to give them the homes they are living in, says the writer.

Zuma blames the fall in SA’s growth rate entirely on the global recession. How, then, does he explain why Chile hasn’t? asks Allister Sparks.

Chile - Strange how often one can see the essential issues of one’s homeland more clearly from a foreign shore. I guess it’s the withdrawal from the daily political chatter that helps highlight what really matters. Plus the opportunity to draw comparisons.

I am writing this from Chile, a country I visit often for personal reasons and which I find fascinating because of some compelling comparisons with South Africa.

The year 1990 was one of historic significance for both – Nelson Mandela’s release for South Africa and the ousting of the murderous dictator Augusto Pinochet for Chile. Thus a year of mutual reincarnation.

Both followed their moments of liberation by instituting commissions of truth and reconciliation to deal with the atrocities of the ugly phases from which they had just emerged. Pinochet’s brutal rule had seen 80 000 people detained, 30 000 tortured, more than 3 000 murdered – as well a countless numbers of disiparecidos – people who simply disappeared.

In the years immediately following their liberation, the two countries recovered, with their economies, both based primarily on mining and agriculture, growing almost in parallel at an average of 4.5 percent a year – until 2009.

In that year, in which President Jacob Zuma came to power, the two began to deviate, with Chile continuing its healthy growth rate while South Africa floundered.

In the five years since then – the full Zuma term – the two have parted quite strikingly. In 2011 Chile hit a peak of 9.8 percent GDP growth, while South Africa fell to 3.9 percent. The following year, Chile grew another 5.6 percent to our 2.1 percent, and last year Chile’s growth was 4.7 percent while South Africa slumped to a pathetic 0.7 percent.

Why the difference?

First, because of constant labour unrest which caused us to miss out on not just one, but two resource booms. Second, I suggest, because Chile is ranked first in Latin America and seventh in the world on the Index of Economic Freedom, while we are ranked 75th in the world.

The World Bank rates Chile among the most competitive countries in the world and one of the easiest with which to do business, while South Africa chokes its competitiveness with red tape and the Zuma administration seems positively hostile to foreign investment.

Chile’s healthy growth rate has reduced its unemployment rate from 8 percent to 5 percent over the past five years, while South Africa’s has continued to balloon from an actual 30 percent to 35 percent, with the world’s third-highest youth (under 25) unemployment of 50 percent. Chile has also managed to reduce its economic inequality, while ours continues to widen.

Yet Zuma seems unaware of – or maybe just insensitive to – all this.

“The last five years,” he blithely said the other day, “have further advanced change and a better life for all, especially the poor and the working class.”

Zuma blames the fall in South Africa’s growth rate entirely on the global recession. We have declined along with the rest of the world, he contends. How, then, does he explain why Chile hasn’t? Nor has its northern neighbour, Peru? Nor Colombia? Nor Vietnam? Nor a number of other emerging countries, especially in Africa.

Now it is election time in South Africa and voters must decide which party really offers the best policy for delivering a better life for all.

The DA presented its 10-point economic policy last week, which I thought went some way to putting South Africa on a Chilean course by advocating job creation through faster growth, but which Business Day chastised for being too wordy. It failed “the 30-second elevator test”, the paper said.

Zuma responded soon after, and passed the test with flying colours. For he said nothing. The elevator didn’t have to move at all. He said he would reveal a new ANC economic policy after the election.

I have heard many political con tricks in my six decades as a journalist, but never anything to equal this. It’s the ultimate blank cheque, even more outrageous than those signed for Nkandla.

As for the DA policy statement, I thought it quite concise. Just 10 crisp sentences on 10 key aspects of the economy. I know my friend Peter Bruce is keen on snappy headlines and TV sound bites, but I don’t know of any economist who believes there is a snappy silver bullet to solve South Africa’s complex problems.

Perhaps DA leader Helen Zille came closest when she said the core problem was that “too many people are left out of the economy”.

Getting them in is the hard part. Particularly those who have already exited our wretched education system and face a lifetime as unskilled unemployables.

Which makes it a pity she didn’t include the one thing that could leverage these outsiders into the economy more swiftly than anything else I can think of – which is simply to give them the homes they are living in, both in the former bantustans and, more particularly, the urban townships and informal settlements.

Give them the houses and shacks, together with the land on which they stand, and, most important of all, the title deeds which certify their legal ownership of those properties.

Do that and you give each family an asset. An asset they can use any way they please, to live in, rent, sell or use as collateral to raise a loan and maybe start a small business. That would give millions of our poorest outsiders their first step into the economy.

I have been advocating this for years, but nobody seems to be listening. It’s not a silver bullet, but it would be a start on the road to a more inclusive economy.

Another point on which I must disagree with Business Day in its criticism of the DA policy statement is its contention that there is a contradiction between advocating a free market economy and calling for restraint on executive pay cheques.

The expanding gap between the earnings of the lowest employee and the top executives in big companies is rapidly becoming a global issue.

It erupted in Switzerland, a country not known for its hostility to money-making, when the Social Democratic Party Youth League there raised enough support to enforce a national referendum last November on a proposal that no chief executive should earn more than a 12th of his company’s lowest-paid employee. In other words, no boss should earn more in a month than his lowliest worker does in a year.

The issue arose when Daniel Vasella, chairman of the pharmaceutical giant Novartis, allocated himself an exit package of 72 million Swiss francs (R887m). Public outrage forced him to cut it to 5 million francs.

The young campaigners lost their referendum, but more than a third of Swiss voters supported it – enough to spark a movement across Europe, where the idea of setting a ceiling on earnings ratios has been adopted as official policy by the Spanish Social Democratic Party and is a hot topic in Germany and France.

We really must start thinking out of the box to find ways to rectify the damage, psychological as well as economic, that generations of racial oppression and exploitation have inflicted on our society.

* Allister Sparks is a veteran journalist and political commentator.

** The views expressed here are not necessarily those of Independent Newspapers.

Cape Times


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