SA needs to build on advantages

The country could more than halve number of its poor by 2030 if it takes steps to address corruption.

SA could more than halve number of its poor by 2030 if it addresses corruption.

The SA economy expanded 1% in 2017. The World Bank sees it growing 1.4% this year. That’s higher than the 1.1% it estimated in January. The lender revealed this in an economic update on SA released yesterday.

SA “needs to build on its comparative advantages – that of an industrial skilled economy – to develop new domestic and international markets through higher productivity and innovation,” the lender said.

That will help the nation reduce its high dependency on commodity price movements.

“Raising SA’s economic potential will require breaking away from the equilibrium of low growth and high inequality in which the country has been trapped for decades.

“Inequality fuels the contestation of resources through taxation, expropriation, corruption and crime, which discourages the investment needed to accelerate job creation and reduce inequality.”

The government raised the value-added tax rate by one percentage point to 15% – the first increase since 1993 – a move that’s seen as hitting the poor hardest.

That was part of plans announced in the budget in February to raise more revenue needed to stabilise debt and prevent a third junk credit rating.

About 17 million people receive various forms of social grants, which cost the government more than R150 billion annually, in what is the single biggest programme instituted by the post-apartheid government to alleviate poverty.

“Fiscal redistribution through social assistance, while sizeable and effectively targeted, has been unable to redress the rise in inequality since 1994, and is increasingly constrained by narrowing fiscal space,” the bank said.

SA could more than halve its number of poor people to 4 million by 2030 if it addresses corruption, gets free higher education right and reduces policy uncertainty in its mining industry, the bank said. “Slow private investment growth and weak integration into global value chains prevent the country from reaping the new economic opportunities emerging around the globe, and from catching up with living standards in peer economies.”

When measuring the distribution of wealth using the Gini coefficient, SA ranks as the world’s most unequal among countries for which comparable data exists, the bank said.

Progress in access to education since white minority rule ended in 1994 means people living on $1.90 (R22.93) or less per day should drop to 8.3 million by 2030 from 10.5 million last year, it said.

While SA has Africa’s most industrialised economy, expansion has failed to exceed 2% annually since 2013 as widespread graft allegations, political turmoil, policy uncertainty and the worst recorded drought in more than a century undermined output in the world’s largest platinum producer. – Bloomberg