South Africa Inc. – 10 years on
13 January 2004
The South African government has had mixed success over the last decade in strengthening and developing the country's economy. This is according to a discussion document reviewing the impact of its policies over the first 10 years of democratic rule.
In Towards a Ten Year Review, released late last year, the government says it has been successful in ensuring macro-economic stability, improving trade and taking advantage of South Africa's natural resources and financial and physical infrastructure.
However, it believes more work is needed in the areas of investment and the provision of low-cost services. It also believes it should better use the available opportunities to add more value to the processing and manufacturing sectors and reduce the country’s risk rating through better marketing.
The study was prompted by a need to measure progress in confronting the key challenges the government faced in 1994. It is based on research conducted within and outside the government.
As well as attempting to evaluate the extent to which the government has achieved its objectives in the past decade, it also sets out to explore possible policy changes for the next 10 years.
The key economic objectives of the government when it came to power were job creation, the elimination of poverty, reducing inequalities and the overall wealth of the country.
Various measures were used to attain these aims, including macro-economic stability, steady trade reform, encouraging exports, policies to improve competition and reverse white control of the economy and empowerment.
Macro-economic stability
According to the study, South Africa has achieved a levels of economic stability "not seen in the country for 40 years", which lay the foundation for increased investment and growth.
For example, the budget deficit has come down from 9,5% of gross domestic product (including the deficits of the Bantustans) in 1993 to fractionally over 1% in 2002/03.
Investment
Investment in South Africa is currently at its lowest levels. The investment performance of all three investor groups – the private sector, government and parastatals – has, according to the study, been "lower than required".
Government investment was kept in check by the tight fiscal policy while parastatal investment was constrained by the restructuring of state-owned enterprises. According to the study, the low levels of investment from the private sector stem from "general concerns about the direction of government policy … mediocre growth expectations, perceived costs of crime, elements of labour legislation and high interest rates".
Foreign investments have been positive since 1994, mostly in the motor industry, the chemicals sector, mining and dairy products. However, there has been little by way of investment into major new projects or plants.
Growth
Since 1994
the economy has entered positive territory, growing at an average rate of 2,8% per annum. Real per capita growth has been a little over 1% per year since the beginning of 1994, which means that on average South Africans grew wealthier at a rate slightly faster than 1% per year since 1994.
Employment
While many unskilled workers are unemployed, there is a shortage of suitably skilled workers which hinders expansion, the study notes. Between 1995 and 2002 the number of employed people grew from 9 557 185 to 11 157 818, representing 1 600 633 new jobs. However, during the same period, the number of unemployed people grew from 1 909 468 to 4 271 302, an increase of 2 361 834.
Trade reform
The last 10 years have seen an improved balance of trade and a shift from primary exports to higher value-added secondary and tertiary sector exports. Key trade initiatives include the Southern African Customs Union (SACU), the SADC free trade agreement, the bilateral
trade and aid agreement with the European Union and the unilateral African Growth and Opportunity Act.
Small business development
This sector has made a significant contribution to the gross domestic product. According to the study, small and medium enterprises contribute about half of total employment and more than 30% of total GDP. One of five units exported is produced in the small and medium sector.
Empowerment
Empowerment in the workplace continues, but it’s moving slowly, the study notes. The proportion of top managers who are black grew from 12% to 13% between 2000 and 2001, while the number of senior managers grew from 15 to 16%.
In terms of black ownership progress has been slow, with a recent estimate of black equity in public companies indicating 9,4% in 2002, compared with 3,9% in 1994, from being virtually non-existent before 1994.
Just 13% of top managers in 2001 were women, only 1% better than 200. Women in senior management grew a little faster by 1,7% to 17,7%.
According to the study, the proportion of black managers and professionals has increased relative to their white counterparts although the rate of change is still very slow. The proportion of black managers, senior officials and legislators has risen from 42,5% in 1996 to 44,3% in 2001.
Blacks comprised 61,4% of professionals, associated professionals and technicians in 2001, up from 57,6% in 1996.
Economic competitiveness
The study notes that by international standards the competitiveness of the South African economy has improved since the early 1990s. The exports have improved and diversified and there have been significant gains made in labour productivity.
However, the availability of skilled labour and the cost of transport and telecommunications are still a source of concern.
SouthAfrica.info reporter
