New deal can help SA’s woes

3-PRONGED APPROACH: CITIZENRY AT ITS BEST

SA can’t get out of its present predicament if everyone shifts responsibility and blame.

President Cyril Ramaphosa has impressed many since taking over SA’s reigns. But unless citizens become convinced that the core challenge of constructing a more inclusive economy is being addressed effectively, the gains will prove short-lived.

SA has made significant progress over the last 20 years in reducing extreme poverty. But it has struggled to address inequality. Relative to other middle-income countries, SA’s economy is extraordinarily dualistic – its citizens are either affluent or poor, with little in-between.

I believe a credible new deal based on three factors would offer a fresh, hopeful way forward.

1. Ladders of opportunity

To improve the prospects of upward mobility, SA will need to improve support for early childhood development, basic education and opportunities for vocational training. Troubling new evidence suggests SA’s per child spending for schooling has declined sharply in recent years.

It also needs to expand citizens’ earnings opportunities, with accelerated economic growth and private sector job creation.

Programmes to support entrepreneurship sound appealing, but have a mixed track record. Public works programmes and an employment tax incentive targeted at younger workers, have shown some success. Both should be scaled up.

SA will need to overcome the skewed access to urban land and housing. For poor South Africans living at the edge of cities, transport costs to-and-from work add up to 40% of their earnings.

Health is a critical aspect of development. Some ambitious initiatives like the universal healthcare initiative have been set in motion to expand access to health care – but scaling up barely has begun.

2. Providing requisite fiscal resources

Building effective ladders of opportunity won’t come cheap. SA will have to find additional money to fund opening up opportunities for citizens.

There’s room for manoeuvre in tax collection. At 28%, SA’s 2014 revenue collection as a percentage of GDP was in the midrange among middle income countries, and the high-income US, Australia and Germany. SA’s wealth taxes are relatively low.

SA continues to have ample room to finance the costs of building a more inclusive society by increasing taxes (perhaps especially wealth taxes) if governance of these efforts can be improved.

3. Active citizenship

A successful ‘new deal’ will require renewed commitment from all citizens.

In his State of the Nation address, Ramaphosa invited South Africans to play their part in addressing SA’s challenges.

Experience from other countries shows that focusing narrowly on the management of public bureaucracies is insufficient to turn around weak public performance. Studies suggest concrete ways in which an active citizenry can contribute to broader development. These include using parents’ and communities’ energy to strengthen educational outcomes.

Partnering with the private sector to strengthen work-related skills development could yield great results. Opportunities include support for technical colleges, apprenticeships, and sectoral training authorities.

SA should also try to harness non-governmental organisations’ energy.

Brian Levy is academic director in the Graduate School of Development Policy and Practice at UCT.

This was published on and has been edited. The Conversation