SA hit by host of administrative and political decisions intrinsically hostile to private business
THE CLEAR SLOWDOWN in underlying economic growth in South Africa is partly a reflection of Government policy errors. The other critical reason is the much weaker performance from 2006 in the global economy. Table A shows the declining trend in rises in real gross domestic product in all the major developed nations. The figures for each of the seven countries indicate the percentage rate of positive change in GDP for each quarter from April to June 2006 compared with the same period one year earlier.
That deceleration in growth in the leading industrial economies would have taken an adverse toll on SA even if its overall macroeconomic management had been better. But SA has also been hit by a host of administrative and political decisions intrinsically hostile to private business and thus inimical to optimum GDP growth. The uncertain political climate has also taken its toll.
The relatively dismal performance of SA’s mining industry in a period of extraordinary boom in commodity prices is a particular example. Two appalling blunders by the State were crucially responsible.
First, the Eskom debacle. The fall-out from that catastrophe continues to be heavily felt. For example, Marius Kloppers, CEO of international metals and minerals giant BHP Billiton, stressed last week that major concerns about the supply and cost of electrical power meant his group had no interest at this stage in new aluminium smelters in SA.
Second, Government ministers – and their senior officials, especially – have made the mantra of “transformation” a formidable obstacle to much-needed massive new fixed investment in mining.
There’s also enormous uncertainty about how the SA economy and all linked issues will be run from 2009 in the postMbeki era. It’s still widely assumed, though nobody can possibly have any authoritative knowledge, that Jacob Zuma will be SA’s next president.
But whether that will finally happen with all the as-yet-unanswered legal questions hanging over it, is necessarily unknown. So, too, is any genuine insight into just what economic and financial policies Zuma might pursue if he were SA’s political supremo.
Vitally, both domestic and foreign business interests have no remotely definite picture of what role the hard left leaders of the SA Communist Party and the Cosatu trade union bloc will play in a “Zuma SA” – or, indeed, in any regime that follows Mbeki’s.
There’s naturally great concern about the growth prospects for SA. Anxiety about the outlook for almost all emerging market and developing economies is also called for.
But worries about the world’s traditional rich, developed economies – those are numerically quite a lot more than the “big seven” listed in the table above, but it’s large industrial economies that necessarily have the greatest importance for the poorer nations – need to be seen in proper perspective.
Look at what’s happened to the OECD nations overall in the past 50 to 60 years. • Average living standards in the United States are now three times higher than they were in 1950. Considering how exceptionally wealthy the US was reasonably seen to be in the post-1945 era, it would seem astonishing to those who can still remember that era that the US is supposed to currently have “crises” if its economy has a brief pause, even a short-lived technical recession. France and Britain are both about four times better off than they were in 1950. Japan’s per capita wealth has grown 10 times in that period, while South Korea – poorer than either Zambia or Ghana in the early Sixties – has enjoyed a 16fold rise in real incomes. Of course, that surge in average living standards hasn’t followed a similar pattern worldwide. Africa has broadly done well over the past 10 to 15 years but much of the continent went backwards or barely better than sideways between 1965 and 1995. Self-inflicted causes were central to that, as SA in its own way demonstrates.
The SA Reserve Bank says average real disposable incomes were lower in SA in 1999 than they were in 1975. There’s been a healthy improvement from 2000 – but SA is among the many countries that still urgently need strong and sustained rises in economic growth.
HOWARD PREECE firstname.lastname@example.org
Major concerns about electrical power. Marius Kloppers