Gover­nance deficit hob­bling SA econ­omy

CityPress - - Business - GOD­FREY MUTIZWA busi­ness@city­

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 ill­suited 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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