Proposals will help to build a dynamic economy in SA

THIS past weekend, the Democratic Alliance (DA) kicked off a nationwide campaign to take our ideas for how to accelerate growth and create jobs to every South African. Our new Plan for Growth and Jobs sets out a revised policy agenda for economic change that will open job opportunities to millions of South Africans. It shows how we will work to change our economy from one that grows by 3% a year to one that can grow by 8%.

Economist Robert Lucas said: “Once you start thinking about economic growth it’s hard to think about anything else.” Taking his lead, we began our policy review by looking at the economic performance of other middleincome economies and found that economies such as Peru, Ghana and Vietnam have all recently achieved peak annual growth of 8% or more, and their average growth rates have exceeded 6% over the past decade. This has allowed them to tackle social ills such as poverty, unemployment and inequality.

SA, on the other hand, has averaged only 3.6% growth in gross domestic product (GDP) over the past decade. This has not been sufficient to significantly roll back unemployment, or provide opportunities for people to lift themselves out of poverty.

Our country has enormous growth potential that we do not live up to. So, when the global economy is weak, as it is now, we do especially badly. This year, Chile has been growing by 5.6%, Malaysia by 4.7% and Peru by 6%. But we are only growing by 2.5%

Over time, the difference in these growth rates has a huge effect on the money that ends up in people’s pockets and the number of jobs we can create.

There are many constraints to growth in SA, but underpinning them all is the fact that too many South Africans are left out of the economy and are unable to make a contribution to driving growth because they can’t find work; they can’t attain skills; they can’t start businesses; and they lack access to capital assets.

In short, too few people in SA actively participate in the country’s economy. SA remains a country of insiders and outsiders, with Big Government, Big Unions and those in Big Business that abuse their market power on the one side, and the majority of South Africans on the other. But it’s not just that we’re not utilising our labour potential. We are also underachieving in product markets that remain uncompetitive and dominated by large private and, sometimes, public sector players. Only 9.1% of the eligible population is engaged in entrepreneurial activity. This is less than half the proportion in comparable middle-income developing countries such as Argentina, Thailand and Chile.

The DA’s solution is to make markets work for the many, not just the few. The state has a responsibility to intervene when markets fail, but also when powerful public and private sector players abuse their market power at the expense of others.

This is central to our vision of a state that provides an enabling environment for economic growth by ensuring access to markets, credit and skills; limiting negative external factors; attracting trade and investment; and ensuring the economy has the infrastructure it needs in order to grow.

Our new policy proposals are divided into five sets of reforms, each with numerous policy proposals, with only a small number mentioned here:

The first set will help to ensure the growth we get is labour intensive. We table an extensive and specific relaxation of labour laws, especially as they apply to small businesses. We would also introduce demandand supply-side measures to tackle structural rigidities. On the demand side, we push hard for the youth wage subsidy to help give some of the 3.2-million young job-seekers their first step onto the ladder. On the supply side, we include numerous proposals to fix education and training, propose the re-establishment of a national apprenticeship scheme and the extension of the new expanded government internship programme recently introduced in Cape Town. Also on the supply side, we propose opportunity vouchers of R2,000 a year for school-leavers, who can use them to subsidise education, as seed capital to start a small business, or to guarantee a loan.

The second set of reforms will help to roll back inequality. Here we propose reform of black economic empowerment to make it truly broad-based and introduce incentives for firms to adopt employee share-ownership as well as a national expansion of the Western Cape’s farm equity scheme.

We would also like to see targeted listings of several state-owned enterprises, especially to the estimated 2.5-million stokvels and burial societies. Brazil has recently sold a 51% stake in its main airport in Sao Paulo to investors for the equivalent of R70bn — a quarter of the total amount our government will spend on infrastructure in SA this year. Now the government plans to sell controlling stakes in 66 airports around the country. This is a model we should emulate.

We also set out to tackle the issue of aligning executive pay to company performance by boosting transparency in corporate reporting, enhancing shareholder activism and improving the functioning of the market for highly skilled managers.

Third, we table proposals to boost competition across the economy. We would like to see more resources and power for the competition authorities to give small businesses space to compete in product markets. Under a DA government, regulatory impact assessments would be strictly applied and existing laws would also be subject to review to minimise regulatory compliance costs. We table a set of proposals to assist small business development that include “one stop shops” for business registration, a cash-flow assistance mechanism for businesses with a turnover of less than R5m, and a business voucher support programme that will assist owners of small businesses with business skills development.

Our fourth set of proposals would work to promote trade and investment. Here we would introduce one-stop border posts to boost trade with the rest of the continent and help to rebalance our trade towards to the high-growth economies to our north.

We would eliminate exchange controls and work to moderate increases in the publicsector wage bill and administered prices to prevent fiscal policy from negatively affecting monetary policy.

Other proposals would work to increase state spending on infrastructure to about 10% of GDP.

Finally, we table proposals to ensure the growth we get is sustainable. To help ensure resource constraints do not limit economic growth, we table reforms to water and electricity management. We also introduce plans to align the development of green technologies with our growth objectives through a national building-retrofit plan and assistance for local solar water-heater manufacturers. We would take concrete steps towards introducing natural capital accounting at national level to ensure that resource consumption is fully integrated into our system of budgeting.

Taken together, these proposals will help to break down the barriers that maintain the insider-outsider economy and prevent people from getting a job, from having a real stake in the economy, and from enjoying a better standard of living. They will help to build a dynamic economy that opens and expands economic opportunities to all.

This is an edited version of a speech delivered by DA MP Harris to the Cape Town Press Club on Monday.