Cape Town - South Africa's strong economic growth of the past decade masks a series of "major structural weaknesses" needing urgent attention if this is to continue, warned Democratic Alliance (DA) leader Tony Leon.
"If we scratch below the surface, our economic well-being is far more fragile than at first appears," he said in his weekly newsletter, published on his party's SA Today website on Thursday.
Even though growth in the past year was better than expected - with the economy accelerating strongly in the fourth quarter of 2006, keeping expansion at 5% - this was a consumer-led rather than an export-led production boom.
He said: "[It is] all too reliant on a favourable interest-rate environment and a relatively strong currency. Expansion has been in the financial and retail, rather than manufacturing sectors.
"Such growth is neither sustainable nor desirable in the longer term, and makes us vulnerable to outside pressures.
"A series of major structural weaknesses urgently need redress if we are to put the country on an assured and unequivocal growth plane."
Current account deficit
These weaknesses included that South Africa was running a current account deficit in order to finance massive imports, a situation made manageable through strong inflows of foreign capital.
"The international surge of capital is now tapering off; in time, unless corrected, our over-reliance on these inflows will come to haunt us.
"A projected slowdown in the American economy later this year will likely bring this weakness into sharp relief and ensure that our currency comes under renewed pressure."
Further, rising oil prices were increasing inflationary pressures.
The situation was exacerbated by South Africa's skills crisis, "borne of our poorly-managed education system, which in its turn fuels the state's deepening inability to spend [Finance] Minister [Trevor] Manuel's buoyant tax revenue, as well as retards the expansion of the private sector".
Education 'woefully inadequate'
Leon said education and training in South Africa were "woefully inadequate" to the needs of an emerging economy.
"Due to mismanagement, as well as wrong-headed and confusing policy changes, nearly two million economically active South Africans have had no schooling, and over seven million are functionally illiterate."
A "radical reassessment" of the educational system was needed to place good teachers, best practices and the pursuit of excellence at the forefront of policy.
"Overall, only the systematic, relentless and soundly-managed pursuit of growth will enable South Africa to mop up joblessness, eradicate poverty and widen the circle of stakeholders," Leon said.
Compared to other emerging markets such as India and Brazil, South Africa's growth rate was woefully behind its development needs.
"Our predicted growth rate of 5-6% is far below East Asia's average (8%) over five decades, and well below the current average of 7% for all developing countries.
"A well-managed developing country should double average living standards in 13 years; this has certainly not occurred in South Africa," he said.