Navigating slow demand with radical restructuring
IN HIS RECENT press conference updating the nation about progress since the State of the Nation address, President Jacob Zuma highlighted that our growth rate was below the estimated level of 3 percent. This was mainly because of slow global recovery, especially in the euro zone, who are our largest trading partner.
He also noted that our energy problems robbed us of a 1.5 percent growth figure; problems to which decisive turnaround interventions have been announced, including such new sources as nuclear power. Thus the main constraints to growth are slow global growth recovery and the electricity shortages we have been experiencing.
This is despite the tendency by some sections of the political divide to posit these growth challenges as some weakness on the part of the government. Answering a question from a journalist about this growth situation Zuma replied that the whole globe was in crisis, but that everyone was trying to fend their way out of this as individual countries and collectively through multilateral efforts.
Cynical twist
Reflecting on the president’s press conference, former DA leader Tony Leon concedes that “the after-waves of the global financial crisis of 2008 are still very much with us, especially in the low-growth euro zone, Japan and now in the once-favoured ‘emerging markets’ in which distressed economic neighbourhood we are bracketed”. In a cynical twist, which is the thrust of his intervention, Leon turns to say: “But if the president is right, then, on his observation, we are either hapless bystanders in a world we don’t control, or objects of a history of perpetual victimisation. Or perhaps both.”
The president is indeed correct. But not on account of the reasons stated by Leon. South Africa is not a hapless bystander in the world, although we don’t control it, and indeed we are subjects trying to remake an inherited world whose architecture could very well be termed a structural victimisation of the global south; not just South Africa.
The issue is the historic position of the South African economy in the global production network. It was integrated into the global production value chain as, like most colonial economies, a supplier of raw minerals without domestic beneficiation.
This meant that our growth derived from fetching increasing market prices for our minerals. As soon as the global economy drifted towards a financial collapse in the US and Europe, demand for these minerals took a dip and thus began a process of growth and jobs haemorrhaging locally. It is this structural integration of the South African economy that defines our ‘victimisation’ by the global markets.
In so far as the charge that we are idling without initiative to change this structural constraint, there is demonstrable evidence to the contrary.
In its 53rd National Conference in 2012, the ANC emerged with a theme that insisted on a radical socio-economic transformation agenda that must underlie its engagement in governance policy work.
This theme was appended on a recognition that some decisive restructuring had to take place in our economic infrastructure if we were to succeed in eroding the rising levels of unemployment.
This restructuring is also crucial if we are to forge a growth strategy that will decisively overcome the historical fissure of apartheid development planning and its sociological dividends.
Thirdly, the ANC understood then that South Africa’s engagement with the global economy would have to be re-imagined. This was largely spawned by the shock-effects of the 2008 global financial crisis on our domestic economy.
Stagnate
Our export-dependent economic growth, especially in mineral exports, began to stagnate and eventually fell since the advent of the 2008 global financial collapse. The result of this was a loss of employment in the mining and manufacturing sector and thus a ripple effect was felt in the other sectors like retail with falling consumer demand.
This led to a fall in employment figures, which in turn affected the capacity of domestic consumption, especially because this consumption-driven growth factor was fuelled by credit extensions that could no longer be sustained.
In this regard, the strategic thrust of economic policy would have to be the creation of depth in the economy and engagement in the global markets with diversified output. It is for this reason that the fifth administration has consistently stated and worked on policy mechanisms that are geared towards promoting manufacturing broadly and the restructuring of our mining value chain to include local beneficiation.
The twin outcomes of this reorientation are the creation of a broad asset base for manufacturing and to build growth on a
This theme was appended on a recognition that some decisive restructuring had to take place in our economic infrastructure.
wide asset basket to avoid dependence only on mining.
Already our Industrial Policy Action Plan articulates the creation of a robust manufacturing base that ties itself to industrial input generating sectors like mining. Thus the minerals beneficiation strategy that the government is consolidating fits into the strategic thrust of our industrial policy framework that pursues higher exports through local manufacturing as opposed to trading purely in raw minerals. The government has registered the intention to ramp up agricultural production, both in primary production and in the agro-processing value chain.
All of these things are systematic interventions within the broad narrative of radically restructuring our economic life away from its dependency on raw minerals exports; deepening its productivity by boosting manufacturing through localisation and developing the capabilities of under-developed sectors.
Thus, these radical efforts are a deliberate effort to turn the tide in our favour in a volatile post-2008 global environment.