SA must drive own mar­kets

Trade and in­dus­try di­rec­tor-gen­eral Lionel Oc­to­ber says a larger black middle class can save the econ­omy

CityPress - - Business - SETUMO STONE setumo.stone@city­

Agrow­ing middle class would take South Africa on a new growth path of do­mes­tic de­mand and res­cue the econ­omy from the “min­eral re­sources and low wages trap”, ac­cord­ing to trade and in­dus­try di­rec­tor-gen­eral Lionel Oc­to­ber. It is crunch time for the coun­try to come up with solid pro­pos­als for eco­nomic growth and job cre­ation, or face a deep­en­ing cri­sis.

In an in­ter­view with City Press, Oc­to­ber said the an­swer lay in ac­cel­er­at­ing BEE to grow the black middle class. He said it was im­por­tant to se­ri­ously con­sider rais­ing the in­comes of low­erearn­ing groups.

“Once you stim­u­late them, you no longer rely on [out­side coun­tries buy­ing from us], but we are in­stead driven by our own mar­kets,” said Oc­to­ber, with a sen­ti­ment that could be read as sup­port for the na­tional min­i­mum wage.

“The prob­lem is that we have a lot of de­bates about so­lu­tions, and the blame game is very strong in South Africa. Some claim busi­ness is un­pa­tri­otic, govern­ment is cor­rupt and the unions are stok­ing labour un­rest. We must have a com­mon anal­y­sis of our core prob­lem.

“I think we are stuck in a re­source and lowwage trap. We have been re­ly­ing on min­eral re­sources for ex­ports and low wages. Those two things have led to in­equal­ity in South Africa and the lack of a big black middle class.”

Oc­to­ber said de­vel­oped coun­tries that had re­lied on re­sources – such as the US, UK, Aus­tralia and Canada – had raised the wage lev­els of work­ers and cre­ated a middle class.

“Once their re­source booms were over, their economies were driven by do­mes­tic de­mand and a ris­ing middle class. They no longer re­lied on ex­ter­nal de­mand.”

He said this ex­plained why the US was grow­ing so strongly – it was “driven by do­mes­tic de­mand and con­sump­tion, as well as middle class spend­ing. Aus­tralia and Canada can con­tinue to grow be­cause con­sumers are spend­ing.”

How­ever, South Africa had built and stayed in a trap, in which it re­lied on min­eral ex­ports and low wages.

“Thus, in­equal­ity is high. We do not have higher in­comes to drive growth. No­body buys the out­put from man­u­fac­tur­ing be­cause the de­mand is low,” he said.

Oc­to­ber, how­ever, also said South Africa was still the big­gest re­cip­i­ent of for­eign di­rect in­vest­ment (FDI) on the con­ti­nent.

“Sure, there is hot money flow­ing out, like bonds and eq­ui­ties, and it is a global phe­nom­e­non,” said Oc­to­ber.

But he said, our FDI pic­ture was pos­i­tive over­all. As an ex­am­ple, he cited new in­vest­ments by com­pa­nies such as John­son & John­son and Unilever.

“But the prob­lem is, be­cause of the lens through which we look at South Africa, we refuse to ac­knowl­edge our own suc­cess and what peo­ple call black ex­cel­lence. Be­cause it is com­ing from us, it can­not be true,” he said.

He said there was an ex­pec­ta­tion that South Africa should be fail­ing, and there­fore FDI could not be in­creas­ing.

“We have to break that nar­ra­tive of neg­a­tiv­ity. There is a pos­i­tive story to tell. It is not made up. Our long-term po­ten­tial is great.”

At the end of last year, the au­to­mo­tive in­dus­try raked in up to R20 bil­lion, adding to its to­tal con­tri­bu­tion of R100 bil­lion in ex­ports a year.

“It is only go­ing to be grow­ing mas­sively,” Oc­to­ber said, adding that the in­dus­try was an “ab­so­lute South African suc­cess story”.

Govern­ment had also turned around and sta­bilised the cloth­ing, tex­tile and leather in­dus­try – fol­low­ing years of job losses as a re­sult of cheap im­ports. The in­dus­try had cre­ated more than 6 000 jobs last year and 23 new leather fac­to­ries had opened their doors.

Oc­to­ber said the achieve­ment was “a ma­jor suc­cess story in the most dif­fi­cult in­dus­try”.

“If you can turn around cloth­ing and tex­tiles, then you can turn around any in­dus­try,” he said, at­tribut­ing the im­prove­ment to the work of Trade and In­dus­try Min­is­ter Rob Davies.

South Africa’s film in­dus­try was also record­ing higher num­bers, said Oc­to­ber.

“We have be­come the Mecca for film mak­ing, from al­most noth­ing 10 years ago. You go to Cape Town ev­ery day, or Jo­han­nes­burg, and some­body is mak­ing a movie. We have built a film in­dus­try.”

In terms of the ser­vices sec­tor, Oc­to­ber said the coun­try had seen call cen­tres for ma­jor com­pa­nies com­ing to the coun­try, in­clud­ing for Ama­zon, Face­book and Bar­clays.

“Ev­ery­body has set up mas­sive call cen­tres, em­ploy­ing be­tween 3 000 and 5 000 peo­ple.”

He said the prospects of South Africa’s econ­omy looked pos­i­tive be­cause “we are the most so­phis­ti­cated econ­omy on the con­ti­nent, and we are more di­ver­si­fied”.

Lionel Oc­to­ber

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