R70bn can go long way to implement much-needed economic structural reforms

APPROVAL of South Africa’s R70 billion International Monetary Fund (IMF) Covid-19 support package is an invaluable opportunity for South Africans to demand accountability from the government on delivering on four key objectives: attracting investment, growing jobs, maintaining and expanding infrastructure, and achieving real economic empowerment.

Of vital importance in the IMF’s approving financial support to South Africa is its almost unprecedented advice to the SACP-ANC government on the “pressing need” for “growth-enhancing structural reforms”. Putting pressure on the government to pursue pro-growth economic policies was central to the IRR’s international engagement campaign over the past two months, in correspondence with diplomatic, political and other representatives of IMF donor nations.

Now is the moment for South Africans to advocate for policies capable of delivering the real growth, economic empowerment and upliftment the country desperately needs.

This can be achieved by:

1. Attracting direct investment to boost economic growth

2. Maintaining and expanding infrastructure

3. Creating a nationwide focus on and climate for job creation

4. Achieving real economic empowerment

South Africa’s black economic empowerment (BEE) and employment equity policies are by far the most ambitious and far-reaching affirmative action programmes in the world, but they fail to help the disadvantaged, as the IRR’s field surveys show. Worse still, they deter investment, limit growth, and add to the unemployment crisis. That means they are hurting, rather than helping, the victims of past racial discrimination. These policies are nevertheless being steadily ratcheted up, at great cost to the economy. Present empowerment rules are thus sufficient in themselves to prevent any sustainable growth recovery. This is the single biggest hurdle to real transformation.

South Africa is in an economic crisis with glaring weaknesses exposed by the Covid-19 pandemic.

However, the incentive of IMF support at this time creates the necessary impetus for implementing long-overdue, growth-enhancing structural reforms. HERMANN PRETORIUS | IRR Deputy Head of Policy Research