What is Asgisa?
Fin24

What is Asgisa?

2006-07-09 19:17

Johannesburg - There is a new term doing the rounds in South Africa.

The next phase of the country's economic policy is to be driven by the "Accelerated and Shared Growth Initiative' (Asgi). The acronym has become a primary reference point in government statements.

But the problem is that, at this point, it's not entirely clear what Asgi is.

There is no single Asgi document which could be picked up and read by any members of the public who might be interested in debating the South African economy's next phase.

Indeed, all that is currently in the public arena is a statement by deputy president Phumzile, Mlambo-Ncguka, released after a parliamentary press briefing in February.

List of "binding constraints"

It is notable mostly for a list of South Africa's six supposedly most important 'binding constraints' on growth and for six proposed areas of interventions.

But this has to be seen as only a vague plan for there is no attempt to match the interventions to the identified constraints.

It is notable that none of the interventions directly affect two of the binding constraints: Currency issues and the problem of "limits to competition and limited investment opportunities'.

But the result is that Asgi is little more than what South African editor, Hilary Joffe, calls "a banner - or rallying cry'.

Not a policy

Policy analyst, Steven Friedman, suggests that Asgi is in fact not a policy at all - at least at this point - but rather a list of projects and programmes. Indeed, Mlambo-Ncguka did give such a list in the briefing.

The problem is that reducing Asgi to its most tangible element - a list of projects - might be regarded as disappointing reading in a situation where economic leadership is both needed and expected.

However, an alternative interpretation is possible. Certainly the basic contours of policy can be discerned in a multiplicity of other areas - industrial policy, small business development and infrastructure investment, to name three most directly related to Asgi.

Asgi, suggests Friedman, provides a useful entry point into the policy debates in these areas. It may well be that the approach has been deliberately uncontentious.

No real objections

Friedman notes that no particular interest group - especially not the organised private sector or the trade unions - has any real objection to any of the projects listed. This may turn out to be a way of finessing policy development.

South Africans may wake up in a year or two and realise that Asgi is being implemented and that everyone understands what it is. After all, something similar happened with the Gear (Growth, Employment and Redistribution) policy of macro-economic stabilisation and restraint.

While the possible comparison with the design and implementation of Gear is crude, that mid-1990s policy thrust is the appropriate reference point for understanding Asgi.

For what seems to have been conceded is that Gear was a necessary, but not sufficient policy for achieving sustainable growth.

It is tenable to claim that "Gear worked'.

South Africa is into the third year of growth levels unmatched over the previous 25 years.

Cheap money, low inflation

The economy has grown at over 4% for the past two years and economists forecast a similar figure for 2006. The drivers of this growth have been cheap money, low inflation and a strong currency, in tandem with the buying power of an emerging black middle class sometimes estimated to be 2 million strong.

A number of issues are relevant to Asgi.

Crucially, there is the matter of sustaining the current growth spurt. Its consumer orientation cannot be expected to be a major driver for too much longer - certainly not beyond the end of 2007, suggest local economists - and quite likely less, as household debt begins to pile up.

The economic driver that is expected to take the economy beyond its present consumerist surge is infrastructure investment. This was already understood and budgeted for in the Medium Term Expenditure Framework (MTEF).

Intends investing

Government intends investing R370bn (about $52mn) over the next three years, most of it on infrastructure. This development thrust was understood before the deputy president's February briefing threw the term Asgi into the spotlight, having been announced by finance minister, Trevor Manuel, in October last year.

But the lack of detail in Asgi statements raises confusion even in regard to this seemingly clear initiative. Commentators have suggested that the planned infrastructure spend may actually represent a major shift in policy.

A leaked PowerPoint presentation suggests that the deputy president anticipates the bulk of this expenditure to be via government and parastatal budgets (90%).

A mere 5% (R18.5bn), it suggests, will be through the mechanism of public-private partnerships (PPPs).

Suggest disillusionment

But PPPs have been the officially endorsed policy preference for nearly a decade. Mlambo-Ncguka's statement may suggest disillusionment with the concept.

PPPs have certainly not delivered the municipal infrastructure anticipated, although where blame lies is not a simple matter. A further complication has been trade union's opposition to the concept - especially regarding basic municipal services - ever since the first initiatives, in water and sanitation, in the Nelspruit and Dolphin Coast municipalities (1996/7).

The deputy president's statement - reinforced by President Mbeki's State of The Nation address - suggests that Asgi is required to go beyond sustaining the consumer boom and actually raise the level of growth to over 6%.

Magical figure

This is an almost magical figure, quoted in South African policy debates for nearly two decades as the growth level required to make inroads into the country's high level of unemployment.

The IMF suggested last year that such a growth rate, while "bold and ambitious', is achievable. But this opinion, which pleased the South African government and came at the same time in October that cabinet was considering Mlambo-Ncguka's initial proposal, has a sting in the tail.

The IMF suggests achieving 6% requires measures to improve public enterprises, implement trade liberalisation and, most contentiously, bring about greater efficiency in the labour market.

The last is precisely the debate government wishes to avoid.

At the ANC's National Council meeting in June/July last year, a document of the concept of a "developmental state' was rejected.

"Too conservative"

Friedman argues that this was precisely because its position on labour market reform was 'too conservative'. It certainly generated criticism from Cosatu and the SA Communist Party.

A further sustainability consideration - the shortage of suitably skilled labour - is also both salient and thrown into turmoil by the lack of transparency around Asgi. On one level, it is not controversial.

In general terms the private sector, trade unions and government agree that the South African economy has faced a massive skills constraint for many years.

The most tangible Agsi output so far was the formation of the Joint Initiative on Priority Skills Acquisition (Jipsa) in March. The body has senior representation from government, business and labour and appears to be project focused.

But in some ways the primary skills challenges involve policy.

Importing scarce skills

Two areas are especially pertinent. First, there is the possibility of importing scarce skills. While the ANC government has never officially opposed the idea, a new emphasis on importing skills has been discernable in recent months.

President Mbeki has, somewhat controversially, called for the re-employment of elderly, but skilled white municipal managers and engineers.

In February, government published a list of job categories - including math and science teachers, and engineers - in which work permit applications from foreigners would be 'welcome'.

But the biggest problem in importing foreign skills has for some time been levels of red-tape and policy incoherence in the department of home affairs, which is responsible for processing applications.

Ill-functioning

This has been the most notoriously ill-functioning of all government departments. The current initiative seems to avoid the hard task of reforming that department while fast-tracking qualified applicants.

Anyone who has experienced the scale of bureaucratic delay - not to mention inefficiency and corruption - in applying for renewal of a work permit or permanent residence visa has reason to doubt that simply fast-tracking the initial application will make a substantial difference to the efficiency of the system.

In April another consideration was thrown into the skills debate when trade and industry minister, Mandisi Mpahlwa, made a public call for the reintroduction of the old apprenticeship programmes that were replaced in the late 1990s by the Sectoral Education Training Authorities (Setas).

Certainly the performance of the 25 Setas has been patchy, at best, with critics - who now appear to include Mpahlwa - arguing that their resources have been spent on such "soft' options as basic literacy and that they have signally failed to deliver the skills needed by the economy.

Radical surgery

The system may require radical surgery, but where this is going and how much top-level commitment there is, is unclear. A Agsi initiative, with the support of both the president and deputy president, has a much better chance than a solo initiative by the minister of trade and industry.

Agsi's philosophical roots lie in the concept of a dual economy, introduced into the current debate by President Mbeki two years ago.

The mandate handed to Mlambo-Ncguka - and inherited from former deputy president, Jacob Zuma, who had been pointman on the issue before his disgrace, was to find ways to bridge the gap between the 'productive' first economy and the 'dependant' second economy.

Agsi's significance is thus derived from its mandate to boost both capitalist development and redistribution. It is tied to South Africa's commitment to the UN's Millennium Development Goals which seek to halve poverty by 2014.

Hodgepodge of different ideas

But as an overall vision, what has been presented thus far is something of a hodgepodge of different ideas. Even the projects raise uncertainty because of the threat to implement directly, thus undermining PPPs.

The specific targeting of certain sectors - tourism and business process outsourcing - as "high priorities' is not insignificant but it is also not new.

There is little indication of exactly what is to be done and, more importantly, what principles are to guide action.

Two very different possibilities - business climate (especially regulatory) reform and public provision of finance - are not, in principle, incompatible.

The question is where will political will be focused?

A "wish list"?

In so far as Agsi is relevant to policy (rather than public projects) it resembles less Gear than the ANC's first post-1990 venture into comprehensive policy design - the Reconstruction and Development Programme (RDP).

The same overarching criticism probably applies - it is a "wish list', without adequate policy prioritisation. But there is also a difference.

RDP implementation was the responsibility of a junior minister who was also something of an outsider in the ANC political context of the time.

Mlambo-Ncguka is both deputy president and, it seems, possibly Mbeki's preferred successor.

Whatever its current limitations, Asgi is not likely to fade away in the manner of the RDP.

This article was first published in Business in Africa Magazine, June 2006. To subscribe click here