SA falls short in high-growth test
Thématique :
sud afrique
By Ethel Hazelhurst - June 12, 2008
A study of the dynamics of 13 high-growth countries reveals that economic policies are not the only factors in a nation's prolonged success.
Good governance, as well as healthcare and education, are among the crucial issues that contribute to sustained growth, according to Michael Spence, the chairman of the World Bank's commission on growth and development.
Spence did not refer to South Africa specifically when he spoke at the Gordon Institute of Business Science yesterday, but his presentation highlighted South Africa's failure to conform to the template for high growth that emerged from research into 13 economies that experienced annual growth of at least 7 percent for 25 years or longer after World War 2.
Spence said governments had to act in the interests of all their citizens, not their own interests or those of subgroups.
He underscored the importance of investment in human capital. "Early childhood malnutrition produces a near permanent reduction in children's ability to acquire cognitive and non-cognitive skills. If malnutrition is widespread, it puts limits on growth."
He also spoke of the need for quality in education.
According to Pieter Laubscher, the chief economist at Stellenbosch University's Bureau for Economic Research, South Africa's skills shortage is a major constraint on the local manufacturing sector, even in the current slowing economy.
Spence described the private sector as the immediate driver of growth, but said leadership and effective government set the scene for a stable and functional investment environment.
"Governments must have a coherent growth strategy and the ability to communicate their vision in a way that explains the benefits of short-term sacrifices and builds consensus among stakeholders."
Engagement with the global economy was necessary to enhance knowledge and allow developing countries to catch up and increase their potential output, he said. It provided foreign direct investment and the opportunity to benefit from "very large global demand".
He outlined responses to structural transformation and the increased competition that comes with globalisation. One response was to protect jobs, firms and sectors, but this would "put brakes on competition, productivity and growth", he said.
An alternative was to help people through retraining and access to basic services like education, healthcare and housing.
He described the prior approach as static and the latter as creating "dynamic efficiency".
Spence stressed, however, that reforms had to be sequenced so that job creation matched job destruction.
The commission's report is the result of two years' work by "19 experienced policy makers" and two Nobel prize-winning economists, Spence and Robert Solow. It is aimed at political and policy leaders in developing countries.
The common characteristics of high-growth economies include the presence of strong demand - a market for goods and services - and knowledge, macroeconomic stability, a high level of savings, market incentives and public and private investment.
Spence warned that the process was a long one. "Persistence and a determined focus on the objective is critical. Major crises will slow the growth rate or worse. Bottlenecks are the norm in high-growth environments and rapid responses are an important dimension of policy and effective government."
While he made no reference to South Africa, it is clear the country lacks several vital ingredients of sustained growth. The education system's failure to consistently produce graduates who can fill the jobs the economy needs is one example.
The angry reaction of communities around the country to delivery failures is one measure of the government's inability to make the grade. And the emergence of a capacity crisis at Eskom is testimony to its inability to respond to bottlenecks.
A study of the dynamics of 13 high-growth countries reveals that economic policies are not the only factors in a nation's prolonged success.
Good governance, as well as healthcare and education, are among the crucial issues that contribute to sustained growth, according to Michael Spence, the chairman of the World Bank's commission on growth and development.
Spence did not refer to South Africa specifically when he spoke at the Gordon Institute of Business Science yesterday, but his presentation highlighted South Africa's failure to conform to the template for high growth that emerged from research into 13 economies that experienced annual growth of at least 7 percent for 25 years or longer after World War 2.
Spence said governments had to act in the interests of all their citizens, not their own interests or those of subgroups.
He underscored the importance of investment in human capital. "Early childhood malnutrition produces a near permanent reduction in children's ability to acquire cognitive and non-cognitive skills. If malnutrition is widespread, it puts limits on growth."
He also spoke of the need for quality in education.
According to Pieter Laubscher, the chief economist at Stellenbosch University's Bureau for Economic Research, South Africa's skills shortage is a major constraint on the local manufacturing sector, even in the current slowing economy.
Spence described the private sector as the immediate driver of growth, but said leadership and effective government set the scene for a stable and functional investment environment.
"Governments must have a coherent growth strategy and the ability to communicate their vision in a way that explains the benefits of short-term sacrifices and builds consensus among stakeholders."
Engagement with the global economy was necessary to enhance knowledge and allow developing countries to catch up and increase their potential output, he said. It provided foreign direct investment and the opportunity to benefit from "very large global demand".
He outlined responses to structural transformation and the increased competition that comes with globalisation. One response was to protect jobs, firms and sectors, but this would "put brakes on competition, productivity and growth", he said.
An alternative was to help people through retraining and access to basic services like education, healthcare and housing.
He described the prior approach as static and the latter as creating "dynamic efficiency".
Spence stressed, however, that reforms had to be sequenced so that job creation matched job destruction.
The commission's report is the result of two years' work by "19 experienced policy makers" and two Nobel prize-winning economists, Spence and Robert Solow. It is aimed at political and policy leaders in developing countries.
The common characteristics of high-growth economies include the presence of strong demand - a market for goods and services - and knowledge, macroeconomic stability, a high level of savings, market incentives and public and private investment.
Spence warned that the process was a long one. "Persistence and a determined focus on the objective is critical. Major crises will slow the growth rate or worse. Bottlenecks are the norm in high-growth environments and rapid responses are an important dimension of policy and effective government."
While he made no reference to South Africa, it is clear the country lacks several vital ingredients of sustained growth. The education system's failure to consistently produce graduates who can fill the jobs the economy needs is one example.
The angry reaction of communities around the country to delivery failures is one measure of the government's inability to make the grade. And the emergence of a capacity crisis at Eskom is testimony to its inability to respond to bottlenecks.
