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Johannesburg – Policymakers will have to make bold moves, supported by social partners, to achieve inclusive growth of the South African economy, said a researcher.
According to the Organisation for Economic Co-operation and Development (OECD) economic survey for South Africa, released on Monday, South Africa’s slow economic growth has worsened the unemployment rate and inequality.
With little room for monetary and fiscal policy stimulus, it suggested structural reforms as a solution for macroeconomic stability, an improved business environment and regional integration to achieve inclusive growth and job creation.
OECD secretary general Angel Gurría, who was speaking at the launch of the report in Pretoria, said: “South Africa has accomplished many great things in the past two decades, but building stronger and more inclusive growth will require bold action from policymakers.”
He explained that the reforms suggested may be difficult but they will be worth it. They include increased access to higher education, a stronger and fair labour market, greater participation in regional markets and an environment for entrepreneurs and small businesses to thrive.
Other suggestions by the survey include more competition in sectors such as telecommunications, energy, transport and services.
The survey indicated the implementation of the national minimum wage will reduce in-work poverty and inequality. It suggested the development of apprenticeship and internship programmes for youth. “Establishing a universal student loan scheme contingent on future earnings, with the participation of banks and backed by government guarantees, is a feasible solution,” the survey proposed.
Finance Minister Malusi Gigaba, who was also at the briefing, noted that the new 14-point action plan would help address challenges to growth. “In some way, the Action Plan makes a genuine attempt to respond to some of the challenges raised in the OECD Economic Survey.”
READ: Gigaba unveils 14-point action plan to revive economy
Gigaba said that government agreed with the findings of the economic survey that boosting entrepreneurship, which is low compared to other emerging economies, and small businesses would create needed jobs.
“Steps have been taken to ease starting a business and the Department of Small Business Development is currently addressing the red tape associated with starting a small business through simplification of procedures,” he said.
Government is also finalising a complementary fund to finance small businesses in the start-up phase. “We further agree with the observation that the quality of the education system and lack of work experience contribute to gaps in entrepreneurial skills and, in that regard, government policies will provide more support for entrepreneurs and small businesses.” This is in response to a finding of the survey that the quality of the education system and lack of work experience is contributing to gaps of entrepreneurial skills.
The OECD also suggested government policies provide more financial and non-financial support for entrepreneurs and small businesses.
Gigaba said that state-owned companies (SOCs) would also play a bigger role in supporting small businesses. “We believe that further reforms in the telecommunications sector would be supportive of entrepreneurs and small businesses through reduction of costs to do business.”
The OECD also found that regional integration would be beneficial for South Africa and neighbouring countries. “Intra-regional trade in the Southern African Development Community (SADC) is only 10% of total trade, compared to about 25% in the ASEAN region or 40% in the European Union,” the OECD highlighted.
There should be better implementation of existing SADC protocols and agreements to advance integration and promote trade and create jobs, the survey found. Other proposals include reducing trade costs by reducing non-tariff barriers and improved customs procedures. “More ambitious and effective infrastructure and investment policies are also needed to improve the inter-connectivity of systems across the region.”
Gigaba acknowledged that South Africa’s sustainable economic growth is linked to the growth of the SADC region. “Reducing non-tariff barriers by improving customs procedures and simplifying rules of origin would strengthen intra- regional trade in SADC,” he said.
“Intra-trade in the SADC region remains constrained by the infrastructure bottlenecks… We are working with the Multilateral Development Banks for co-financing of the cross-border infrastructure,” he said.
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