'Inclusive Growth' based economic recovery should not be a slogan
JOHANNESBURG – Was it a coincidence that the ANC’s and B4SA economic recovery documents were published almost simultaneously on the 10th of July 2020, and also have very interesting shared aims that have been lauded by commentators? They are both based on the appreciation of the remote and recent history of our economic events; and the dearth of infrastructure and its potential to stimulate growth. They also acknowledge corruption and inequalities.
Yet they differ fundamentally on ideological implementation underpinnings for inclusive growth. The differences may seem small as it is covered in illuminated language of inclusivity, yet in practice inclusive growth requires radical shift closer to the one ANC proposes with strong capable state intervention. The focus on inclusive growth or economy as an overarching outcome of the recovery programme can no longer be a slogan.
The ANC, unexpectedly, is still consistent on the radical approach to transformation and developmental role of the state, and transformation of the financial markets for an example. While the B4SA seems more underlyingly on small government and big role for the markets. A new compact will not unlock the economy significantly and fast enough if it’s a neutral soft laisse-faire that places confidence in the “business as usual” nature of government and markets.
The “inclusive growth” language in the global economy policy platform has had its strong appearance in the Group of 20 (G20) platform effectively from 2010 in the Seoul (South Korea) Summit’s development outcome. This marked a significant achievement for developing countries. The strong lobbying by developing countries and some multi-national institutions emanated from the 2008 global financial crises. Also, the hope for global growth lies in stimulating demand through implementation of inclusive growth policies. It took intense negotiations to have the language accepted.
South Africa was instrumental to crafting of the language in various global policy platforms based on its experience of the “job-less” growth that happened during commodities super cycle between 2000 -2007. The growth experienced post-1994 was clearly and commonly understood to be not inclusive. It retained the racist structure of the economy, world’s highest unemployment, and inequality.
Winning the battle for “inclusive growth” language in policy documents was not enough. In 2014 for example, in 2014, the G20 leaders committed to reducing the gender gap in participation by 25% by 2025, which would bring more than 100 million women into the labour force, yet progress has been slim and thus innovative implementation solutions are needed. South Africa is critical in show-casing the urgency of implementing workable inclusive growth policy given its past.
Tackling lack of growth in the South African economy requires a genuine resolution of key underlying transformation deadlocks. Breaking of monopolies or SOEs reforms cannot be one-sided public sector imperative, where they still exist in different sectors. A genuine commitment by government, business, and labour to opening competition in sectors where the markets can be efficient and in those that are stifled by corrupt dominant players should be a reality and must be achieved in a fair and balanced way that take into account inclusive growth imperatives.
Markets have not been known to be able to correct themselves or to correct development failures. The core-business of business is to grow profits, whilst being relevant and considerate to environmental, social, and governance factors. Hence, we must appreciate the organized business attempt to meet the government half-way by coming out with recovery proposals largely aligned with challenges facing South Africa.
On the other hand, the business of government is to create an environment that support development and growth stimulating access and participation of the majority of the population especially Africans, women, and the youth.
From the vantage point of excluded black Africans and women who are unemployed, and 55% of South Africans who are in poverty, the radical approach to transformation for inclusive growth is no longer a negotiable.
Majority of black people who have gained experience through public sector opportunities, will never understand breaking down of public sector monopolies, and reduction of the public sector wage bill in whatever shape or form. Only when an honest compact that seeks to deal with corruption and malpractices holistically and deal with all unhealthy monopolies and oligopolies, will they understand a conversation and decisions that inform SOEs reforms and threaten their jobs such as at SAA and ESKOM.
Business has used its muscle to position itself as clean and a better brother for growth. That is absolutely not possible given the structure of the economy, where dominant players abuse their status to maintain their dominance. Private monopolies are known to practice discriminatory and exclusive appointments that have seen talented blacks, women, youth, and people with disabilities languishing on the streets. Moreover, we know that even the corruption and governance failures in SOEs, the big companies had a large role to play.
All reports on inclusive legislation that sought to transform the economy has shown that there is resistance and disregard of these policies, and some with their efficacy questionable. This has been evidenced by all manner of numbers from procurements, shareholding, board, management, and levels of big companies reports.
We have seen outrageous price and currency fixing practices that have left our economy and the plight of the majority of the population in unemployment, poverty and extreme inequality. Many of these monopolies will survive the Covid-19 pandemic and probably engage on acquisition sprees that will enhance their dominance in markets.
We cannot at this stage of development failures minimize the role of the state. Government should be empowered by all sectors of society to build its capacity and be able to perform its duties of developing and implementing good policies that stimulate inclusive growth. This should underpin a new compact that President Ramaphosa has called for.
The ANC and Business must agree on clear targeted policies that will stimulate inclusive growth. A good recovery plan premised on inclusive growth outcomes and attendant public private sector cooperation. The policy and financing must have clear and stringent targets and timelines on among others:
- social and economic infrastructure that provide for large-scale access of the majority of the population to the mainstream economy;
- financial sector reforms;
- land reform programme;
- address key policies and regulations challenges that open up competition and access for SMMEs and disadvantaged population groups;
- public and private sector governance to have more consequence measures; and
- public and private sector procurement reforms.
Also, critically, the support areas for state capacity must be outlined and the modalities put in place.
Dr Bheki Mfeka, is the Economic Advisor and Strategist at SE Advisory; and former Economic Advisor to the Presidency. | Twitter: @bhekimfeka | Website: www.seadvisory.co.za | Email: [email protected]