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Governance deficit hobbling SA economy

Renowned global economist Jeffrey Sachs says South Africa is battling to grow its economy because it isn’t spending enough on education, health and infrastructure, and the problem is being compounded by a worsening governance deficit.

Sachs, the director of Columbia University’s Earth Institute and author of The End of Poverty, said South Africa scored badly on governance indicators, partly because of increasing corruption in public institutions and the inability of government to get the most out of its investments.

“South Africa lags well behind where it should be in education, especially on quality,” Sachs told City Press this week in Johannesburg when he attended the annual Old Mutual Wisdom Forum, where he was the keynote speaker.

“I think many people think the money is misdirected, that there is not a lot of confidence that the right money is being collected or that it’s being used effectively.”

Most economists are forecasting very little South African economic growth this year after a year of political battles between the presidency and Finance Minister Pravin Gordhan, lower prices for key commodities such as gold and platinum, and the country’s worst drought since records began.

While government spends 16% of its expenditure on education – the biggest item on the budget and one of the highest rates of education spend in the world – the country’s education system ranks badly globally because of concerns about its quality.

Captains of industry complain that graduates are often ill-suited for the work environment.

Sachs said this deterred investment because investors would be looking for an education system that produced a quality workforce that was able to compete among the best in the world.

“Investors domestically and internationally ask: ‘Is this country going to be competitive in three years, in five years? Am I confident that there is going to be a skilled workforce for new sectors of the economy? Will this be a cutting edge, competitive economy?’

“When there is concern about that, of course potential investors here decide to hold back their funds or put them somewhere else, and foreign investors decide not to put as much money in,” Sachs said.

Corruption was also dogging the country’s best efforts to attract investment, he said, indirectly referring to allegations of corruption swirling around the Gupta family and President Jacob Zuma.

Former Public Protector Thuli Madonsela’s last investigation – on state capture – recommended a judicial inquiry into the allegations.

“There should be zero tolerance for corruption. It should be the responsibility of our leaders to have no corruption, to be properly managing accounts and to be ensuring that the public’s money is properly used,” he said.

“This is not only about South Africa, but it is a feeling and when you look at the scores that South Africa gets on governance, they are not very high – they are just not high enough. This country can do better, I am sure of it.”

To reinvigorate flagging African growth, governments should be spending more money on health, education and infrastructure, and must leverage growing ties with emerging economies such as China, Japan and South Korea, said Sachs, who has worked with the UN on boosting African growth. He is also a special adviser to the UN’s sustainable development goals.

He added that African countries should also be stepping up efforts to boost tax collection.

“Many countries don’t collect as much tax as they should. In many countries, there is too much cheating going on. In many countries, money that should come in doesn’t. We know that. To fill the gap, you have to close those loopholes, stop the capital flight, and stop the corruption and criminality of those flows.”

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