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Cape Town - Social welfare economies are not sustainable because one must not remove the incentive to create wealth, cautioned emerging markets expert Dr Martyn Davies, managing director of Frontier Advisory Deloitte, at an investment summit hosted by Momentum Investments on Thursday.
"Now we can see which countries have been 'swimming without their trunks' during the period of fantasy economics for the decade up to 2008 due to the artificial commodities situation," he explained, and pointed out that South Africa is currently basically a stationary state.
"If you are not growing, you are regressing. If you are not growing there is something wrong with you. Is mediocre the new normal? What would drive economic growth in SA to 3%, 5% or even 7%?" asked Davies. "No country has succeeded without industrialisation."
READ: SA's biggest cities in better financial shape - report
A study shows that unemployment in Organisation for Economic Cooperation and Development countries is the highest in Spain (53%), followed by Greece (52.4%) and then South Africa (51.3%).
"The question is whether this is structural of cyclical. Structural is often used as a euphemism for something that is politically difficult to do, whereas, if it is cyclical, one can ride it out," said Davies.
"The question is what must it take to break a structural hurdle. We are now in a decelerating world where the global economy is moving at multiple speeds."
READ: Impact of SA's economy bigger than estimated
As for Africa's outlook, he said there really are only four countries on the continent that matter to investors. These four account for 80% of the continent's gross domestic product with a bit of "spillover" to some of the other more than 40 countries.
Africa is integrating, but not in the way people usually think, in his view. He sees the "new Africa" trade focus block as the existing and growing integration between East Africa, Arabia and Asia.
"Exports are a good measure of success and success will ultimately be driven by diversification. There is no evidence that resources drive development. Countries need to work to grow and so do business. The political economy of growth is now more important than ever," he concluded.
