Forget Davos, Cyril hype

THIS IS WHAT SA MUST DO Business, government can create programmes that address economic growth, wage inequality and unemployment.

For a moment, the gathering in Davos and the hype around it had suspended the reality SA currently faces. At present, changes in the global economy have put considerable strain on the already ailing national economy and are contributing to SA’s expanding social dislocations.

It cannot be denied the benefits of free trade and open markets hasn’t favoured us. Globalisation has had its winners and losers. For SA, wage stagnation and slowing growth post the global financial crisis, coupled with our own ineffective policy agenda, has made us the losers.

Like spilt ink, gross inequality has quickly spread and stained almost every aspect of the working class, the poor and unemployed and the periphery of the economic cake. To me, the failure lies in policymakers and their business partners’ inability to unite behind a common vision.

After the cameras and spotlight of the world media has stopped shining on our business and government leaders, what must SA do to build on enthusiasm shown from the key investors who attended the World Economic Forum gathering?

I’ll only focus on two areas not related to the obvious tasks of rooting out corruption or asserting dominance. I believe there are several ways where – through common vision – business and government can create programmes that can simultaneously address economic growth, wage inequality and unemployment.

Inequality is usually measured by comparing incomes across households in a country. I contend there’s also a different kind of inequality wrought on my people migrating from the rural to urban areas in search of better life and jobs. The impact of this form of inequality is no less worrying: high levels of unemployment trigger social breakdown that has often led to crime.

– Government, supported by the business sector, must ensure it provides affordable housing programmes in urban areas. This is particularly important for the inner city, where it’s becoming inherently unaffordable to those with medium- or low income.

– There must be clear, implementable policies on rural regeneration and poverty reduction. Policy makers can look to India who, in the 1990s, deliberately implemented anti-poverty programmes such as Green Revolution instead of trade liberalisation. Indonesia too – through its version of the Green Revolution, macroeconomic policies, stabilisation of rice prices and massive investment in rural infrastructure – played a substantial role in the large reduction of rural poverty.

Conversely, opening the economy to trade and attracting long-term capital flows need not make the poor worse off, if appropriate domestic policies and institutions are in place, particularly to help shift production to more marketable goods and help workers enter new jobs.

Simplistic populist rhetoric won’t solve the rising poverty and crisis level unemployment we’re facing. Not when the country has the pressure of its young demographics. No aspect of SA’s economy is more vulnerable than its inability to integrate its economy and young population to the economic globalisation.

Mamokgethi Molopyane is a mining and labour analyst.