By Raymond Parsons

Overall Business Convenor at the National Economic Development Labour Council (NEDLAC)
Cape Town



I would like to thank the Portfolio Committee on Labour for the opportunity of offering a business perspective on the Growth and Development Summit (GDS) after three years. In doing so – and you will also see it reflected in the Nedlac submission to some extent – it is also becoming increasingly necessary to view the GDS and the Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) as moving in tandem. ASGI-SA takes several aspects of the GDS to the next level by incorporating the continued implementation of the GDS. Hence the GDS and ASGI-SA and their outcomes require to be increasingly assessed in a joint context.


From a business perspective, the points of departure for evaluating where the South African economy now stands, whether seen through the eyes of the GDS or other assessment, are threefold:-


·         South Africa is now reaping the rewards of a decade of difficult economic adjustment and disciplined monetary and fiscal policy


·         Growth may well have moved to a sustainably higher level


·         But even faster growth is required if substantial progress is to be made in reducing unemployment, poverty and inequality.


The main thrust of ASGI-SA therefore is now to ensure the alignment and acceleration of key initiatives aimed at achieving by the year 2014:-


1.         A 6% growth rate

2.         Halving unemployment and poverty by then

3.         Creating a sustainably productive and broadly based economy over this period.


What have we achieved so far? ASGI-SA is building on an economy which has already made considerable progress in recent years, including with assistance from the GDS. South Africa recorded a real growth rate of almost 5% in 2005 – the strongest since 1984. However, whereas the growth spurt in 1984 was short-lived – being straddled by years of contraction on either side – the economic expansion in 2005 formed part of a sustained robust upswing which to date has been the longest in South African business cycle history. The seasonably adjusted annualised growth rate was 4% in the first quarter of 1006 and 4.9% in the second quarter of this year – with a full-year outcome of just above 4% likely by the end of 2006.


Another positive feature of South Africa’s recent economic performance has been that, despite considerable increases in energy prices and commodity prices, inflation in this country has remained benign and within the inflation target range. And while South Africa still faces a serious unemployment problem with its associated social evils, overall employment gained momentum from 2004. Narrower indicators of employment also point to the creation of more jobs in the recent past. But there is still a long way to go for the sectoral improvements on job creation to make a big difference to the overall unemployment figures.


An important indicator of confidence in the economy is investment. A gratifying trend over the past eighteen months has been the growth in fixed investment by both the public and private sectors. This investment growth has been widely dispersed, with both the public corporations and private businesses raising their investment across a range of sectors and activities, as the GDS report to some extent reflects. Significantly, this strong performance raised the ratio of gross fixed investment from 15% in 2003 to 17% in 2005 – and probably a little higher this year. Yet we know that, if we want to reach a 6% growth by 2014, it will need to be supported by an investment ratio of close to 25%. Total fixed investment needs to rise by about 10% per annum between now and 2014.


Yet there is an acceptance that South Africa’s economic development and performance to date has been unbalanced in several key ways, and that the GDS/ASGI-SA processes need to address:-


·         the growth profile

·         maximising the number of jobs created at any given growth rate

·         alleviating the widespread poverty that still exists.


ASGI-SA therefore now offers a sharp focus on the main constraints that are currently seen to still inhibit economic growth and the better distribution of its benefits to the population at large in the years ahead. Together with the commitments in the GDS, ASGI-SA identifies a number of major constraints which, if removed, would have a considerable effect on accelerating and sharing growth in the short to medium term. A range of projects are being implemented to address specific barriers to job creation and poverty alleviation. We have raised expectations of future economic performance.


Both the GDS, and now ASGI-SA, are therefore not new economic policies but implementation of initiatives to sustain higher and shared growth in the light of the socio-economic goals set for 2014. The key innovations of ASGI-SA are to focus on these initiatives by providing strong coordinating and monitoring structures, including reinforcement and alignment of the GDS thrust. These become essential building blocks to shared prosperity and to help bridge the gap between the first and second economies.


And how do we assess the role of the GDS in all this? We must recall that the GDS originally started in 2003 from an economy that was already moving, not one that had to be set in motion. Because the emphasis from the outset was on the ‘doable’ and practical, it was inevitable that there may have been a tendency to underestimate the intangible contribution that the GDS processes and outcomes have nonetheless made to the overall economic scene, even if it has not always been quantifiable. There was a dynamic dimension to the GDS commitments which itself was a confidence-building process.


While South Africa’s recent economic performance has, of course, largely been a result of various real economic forces – like the global economy, lower interest rates, tax policy and related factors – programmes like the GDS play a vital supportive and implementational role. The GDS (and now ASGI-SA) are indispensable mechanisms for helping to foster a more favourable economic climate and a better mood within which more things become possible. In this way the GDS helps to create a more buoyant climate for tackling the challenges of unemployment and poverty, as well as mobilising the participation of the social partners in specific ways.


When the GDS was finalised in 2003 it seemed generally agreed that the agreements it embodied reflected processes that would unfold over time, rather than be an immediate package of results. As far as possible the commitments made by the various stakeholders were specific and clear. Yet at the same time, as events moved on and implementation occurred, some GDS agreements have inevitably over time been absorbed into the broader stream of public and private policies in South Africa.


In conclusion, therefore, what are some of the lessons that have emerged from both the GDS and ASGI-SA processes? In the time available, allow me to mention four only:-


·         Firstly, the past year years have demonstrated that the South African economy is capable of improving its performance and becoming more inclusive and competitive over time. Over the past two years our average economic growth rate has risen to 4.7%, from 3.2% over the previous five years. Provided we play our cards well, that should keep South Africa on track to get closer to the 6% growth rate by 2014, if not sooner. If this can be attained, then by 2014 South Africa would be in a position to double the size of its economy every decade thereafter.


·         Secondly, there is still much ‘unfinished business’ on the national agenda in terms of job creation and poverty alleviation. We have set ourselves the targets of halving poverty and unemployment by 2014 based on the joint approach of both the GDS and ASGI-SA to bring macro-economic performance and micro-results into better juxtaposition. This is especially so in respect of infrastructural development, which enjoys strong emphasis in ASGI-SA. The problems experienced with electricity, roads, railways, ports, etc – these are all evidence of stronger growth without the necessary infrastructure to support it. We need more balanced development here to unlock growth potential.


·         Thirdly, it is widely recognised that the emphasis must now be on delivery – especially at local government level – in ways which will make a real difference to the lives of may South Africans as possible. Where appropriate, greater use should be made of public-private sector partnerships to unblock bottlenecks to delivery in various parts of the country. We need to find innovative ways to strengthen capacity and delivery, particularly in the rolling out of infrastructural spending. One area of investigation could be to see whether streamlining provincial and local government – backed by enhancement and redeployment of skills – would facilitate effective delivery.


·         Finally, the GDS has strengthened the cooperation and involvement of the social partners in the development process embodied in the GDS and related programmes. As you will see from the GDS report, there are several examples of where the role of the social partners has been able to add value to the outcomes to the GDS. The GDS was indeed able to maximise the contribution which the various stakeholders could make to sustainable growth and development in South Africa – and which they must continue to do if we are to reach the ambitious goals for 2014.



Cape Town

29 August 2006