When former President Nelson Mandela stood in front of the Union Buildings in Pretoria 23 years ago to be sworn in as South Africa's first democratically elected president, he embodied the hopes of a nation. Apartheid was then vanquished and by the time this happened, the country's economy had spent years being battered by sanctions as the years of economic isolation was taking its toll. Madiba’s decision- making following his release from prison and during his one term as president was based on inheriting an essentially bankrupt and arguably criminalised state.
One of his most important economical decisions was the shift from a Reconstruction and Development Programme (RDP) policy which was aimed at addressing and redressing the inherited gross inequalities of apartheid, socially, economically and spatially to the Growth, Employment and Redistribution (GEAR) policy.
The RDP policy was successful in some areas such as social security in which government established a very extensive welfare system. It appears that this system catered for the aged, disabled, children in need as well as foster parents and several others that were too poor to meet their basic social requirements.
Although the RDP was seen as the cornerstone of government development policy, it did not deliver as thought it would particularly in terms of economic growth which impacted negatively on the policy itself.
The RDP was however, faced with challenges as it ignored the gathering of new taxes and rather focusing far too narrowly on fiscal prudence and the reallocation of existing revenues. In addition to this the government suffered from a lack of sufficiently skilled managers and this while policy co-ordination and implementation methods used were not proven successful.
In a long anticipated move, the former Minister of Finance, Trevor Manuel announced the government's macroeconomic strategy, called Growth, Employment and Redistribution (GEAR) in 1996, which committed the government to tighter fiscal policy and the steady liberalisation of foreign exchange controls. Manuel emphasised that the government was aiming at creating 400 000 jobs by the year 2000. In order to meet the government's goals, he pledged to reduce the budget deficit from 4.5 percent of gross domestic product (GDP) to 4.0 percent GDP in the fiscal year 1997 to 1998.
Manuel did not anticipate a minimum wage across the economy, but a series of minimums set according to appropriate standards by sector and area. The policy document received a cautious response from trade unions and local and international business. The Congress of South African Trade Unions (COSATU) welcomed the commitment to investment and the restructuring of the tax base, but expressed serious reservations over conservative fiscal policies.
According to SA History “Under GEAR policy, fiscal deficit, inflation and government consumption targets were all slightly met, reporting figures of 2.2%, 5.4% and 18% respectively by the end of 2000, bringing about greater macroeconomic stability, better reporting and increased accountability.”
The management of public finances improved drastically under GEAR and the only success seen with regard to GDP was that the negative growth rate of the early nineties was reversed. The tightening of the monetary policy, restructuring all government levels led to a reduction in government expenditure and this policy was largely criticised especially by the Congress of South Africa’s Trade Unions (COSATU) for its neo-liberal approach.
However, despite these achievements, indicators were disappointing for private investment, job creation and GDP growth. Low levels of economic growth and private investment were insufficient to contribute to the reduction in unemployment and while the GEAR strategy was sufficient for the achievement of macroeconomic objectives, it fell short with regard to the social challenges of the country in mostly poverty reduction and employment creation.
GEAR was then replaced in 2005 by the Accelerated and Shared Growth Initiative for South Africa (ASGISA) as a further development on the first two developmental strategies followed post 1994. ASGISA then envisioned reducing poverty by 2010 and halving unemployment by 2014 from the 28 percent in 2004 to 14 percent by 2012 and recognized that the policies implemented to address these issues needed to be at the forefront of economic policy decision making.
They build on the foundations of the RDP goals of building a united, democratic, non-sexist and non-racial society, and a single integrated economy.
In early 2013, government introduced the National Development Plan (NDP)-2030 as South Africa’s long-term socio economic development roadmap. This is viewed as a policy blueprint for eliminating poverty and reducing inequality in South Africa by 2030.