Structural growth will help economy

THE National Development Plan (NDP) may be a dream deferred without structural growth in the economy, the World Bank says.

The lender, based in Washington DC, expects SA’s growth to accelerate to 1.4% in 2018 from a previous estimate of 1.1%, but it does not expect economic growth to rise beyond 2% in the mediumterm.

To achieve the goals set out in the plan SA would need 8% growth, it said last week.

The NDP is a detailed blueprint of SA’s plans to eliminate poverty and reduce inequality by 2030. It has been gathering dust since 2012, but President Cyril Ramaphosa has said it will be resurrected.

“The NDP GDP target would need to be 8% now, which is impossible,” World Bank programme leader for SA Sebastien Dessus said.

The plan calls for 5.4% growth and a 6% decrease in unemployment by 2030. But Dessus said even 5% growth was unrealistic in the near term.

“Long-term, we don’t see growth going to 5%. You need higher investment, higher innovation and broader participation,” he said.

In fact, Dessus said the periods in which SA reached 4% to 5% growth in the early 2000s had been cyclical.

“There’s improved confidence and a political transition but we’re still dealing with low growth,” he said.

“We’re still far from the goals set out in the NDP.”

The Treasury estimates that just an improvement in confidence, which SA has experienced in recent months due to political developments, could add 0.5 percentage points to the GDP figure.

Marek Hanusch, a senior World Bank economist, has however said that the economy does not work on confidence; it requires investment.

According to the Absa purchasing managers index (PMI), businesses are confident about future prospects but sales orders remain below the neutral 50 mark, which divides expansion from contraction, indicating that businesses are not yet acting on the improved mood.