International and SA Financial Markets ReviewMarch 28, 2023
Business and South Africa’s International RelationsApril 11, 2023
An article written by Ian Kilbride and published on IOL
It is difficult to prove a negative, but all current social and economic indicators point to a failure of successive macro-economic plans to deliver the required growth, economic and developmental patterns needed in our country. Though well-intentioned, President Ramaphosa’s repeated call for the crafting of a social compact to address the country’s economic and social ills is equally miscast.
While a case can be made for the limited success of the 1994 Reconstruction and Development Programme, with 1.1 million houses constructed in the first five years of democracy, the provision of clean water to almost five million citizens previously un-serviced and 1,75 million more homes connected to the electricity grid during the same period, subsequent ‘grand designs’ have largely failed to achieve their objectives. Promising a reduction in poverty and inequality, while boosting economic growth, the Growth, Employment and Redistribution (GEAR) strategy saw childhood poverty increase, inequality remain stubbornly high and GDP growth never achieving its 6% target. Moreover, GEAR failed to deliver socio-economic cohesion, was opposed by COSATU and was a factor in the decline in President Thabo Mbeki’s political fortunes.
GEAR was replaced in 2005 by the Accelerated and Shared Growth Initiative for South Africa (ASGISA). Its core objectives were to reduce poverty by 2010 and halve unemployment from 28% to 14% by 2012. Despite a growing economy, poverty declined by a mere 1,5% to 61% in 2010 and unemployment remained persistently high at 22% by 2012. Disappearing along with Mbeki’s Presidency, GEAR was itself replaced by Jacob Zuma’s New Growth Path. Its key pillars were to bring down unemployment to 15% and the creation of five million jobs by 2020. While Zuma’s political fortunes followed those of his predecessor and was thus unable to see the NGP to conclusion, by 2019 (pre-Covid) the official rate of unemployment hovered above 24% and the number of unemployed grew from 4,4 million in 2009 to 6,7 million in 2019.
Finally, amidst much fanfare and great expectation, 2013 saw the launch of the definitive long-term National Development Plan – 2030. The NDP establishes ambitious goals for economic growth, job creation, transformation and poverty reduction. The plan’s four key pillars are: achieve inclusive, sustainable and equitable economic growth; build capable and healthy human resources; ensure a sustainable environment and enhance resilience; and promote good governance through effective institutions. Ten years into the NDP and with just seven to go, an examination of the plan’s economic and employment objectives is sobering.
The NDP aims to reduce unemployment from 24,9% in 2012, to 14% in 2020 and to 6% in 2030. Today, unemployment hovers around 32-34%, the highest globally. The plan sees GDP growing by 2,7 times in real terms by 2030, requiring average annual GDP growth of 5,4,% over the period 2013-2030. Excluding the catastrophic economic impact of Covid, which saw the South African economy shrink by -6,65%, the country has averaged less than 2% annual GDP growth from 2013. The NDP targets the proportion of national income earned by the bottom 40% to rise from 6% to 10%. Today the figure is just 7%. Indeed, ten years into the NDP, South Africa is still the world’s most economically unequal society. Finally, on the topical issue of electricity generation, the NDP sees the need for an additional 29,000MW of electricity by 2030. Taking into account the retirement of end-of-life power stations, the need for a new build capacity of 40,000MW is identified, of which 20,000MW should come from renewables. In 2013, South Africa’s electricity generation peaked at 23,000MW, yet in 2022, electricity production peaked at under 21,000MW. Far from the 20,000MW targeted from renewables, just 4,500MW is currently generated from renewables, representing 8,8% of total capacity.
Evidentially, successive iterations of national socio-economic development plans have not delivered. Why then, should the formation of a social compact produce a different and better outcome? The answer is we don’t know because we’ve never tried it. But while not writing off its potential merits, sober and serious consideration has to be given to the conceptualisation of social compacts, particularly before they are peremptorily announced as a fait accompli during a state of the nation address.
The first is the identification of a shared and common future for all stakeholders. Currently, as a nation, we lack a common vision and sense of collective purpose. This is not surprising given our conflicted history and diversity, but without forging a common sense of nationhood, we cannot sustain ourselves. Secondly, key stakeholders are in urgent need of a new, credible, authentic and legitimate forum for national dialogue in order to place critical issues on the national agenda. This, in turn, will assist in rebuilding national trust – a quality in particularly short supply according to all national surveys. Thirdly, and relatedly, we need to reboot the relationship between government and business and to do so in a spirit of mutual respect, recognition and humility rather than suspicion, prejudice and hubris.
Grand national development plans, no matter how elegantly crafted and appealing, have not produced the intended results, yet the tattered fabric of our society is in urgent need of repair. For a social compact to hold any prospect of success requires us to take a step back, reflect honestly and then come together as national stakeholders, agree on joint national priorities and to forge a new and pragmatic path of sustainable development through which to achieve them.
Ian Kilbride is the Chairman and CEO of The Spirit Group and an Honorary Professor at Stellenbosch Business School