Sunday, 20 November 2011

Colloquium on the National Development Plan

On the 11th of November the National Planning Commission (NPC) published the National Development Plan (NDP). After months of planning and consultation, the NPC Jam and numerous presentations across the country, they put forward a vision for South Africa in 2030.
Last week the School of Economics at NWU hosted the first Peet Strydom colloquium and the topic of discussion was perspectives on the NDP. The panel included Prof Strydom (an extraordinary Professor in the School) as well as Proff Philippe Burger, Raymond Parsons, Theo Venter and the discussion was moderated by Cees Bruggemans. The discussants presented macro, micro and political economy views on the NDP. Academic economists from the NWU, UJ, UP, UNISA and Monash South Africa were in attendance along with participants from the Reserve Bank, Planning Commission and the private sector.

The panel agreed that the NDP is centrist document on how to make a mixed economy work better and liked the absence of ideology and spirit of endowment, rather than entitlement. The challenges outlined by the NPC are the familiar ones of reducing unemployment, poverty and inequality and first and foremost this requires economic growth. Prof Strydom stressed that increasing economic growth rates from 3% to 5% per annum and more, requires that policymakers, business and labour do many different things right. The different elements of the plan that were discussed included export-led growth, education and training, infrastructure, the role of small business and the relationship between business and labour.

Prof Burger noted that although export-led growth will have to be part of the solution it is no panacea. The markets that we export to are not doing well and South Africa cannot compete as a low-cost manufacturer. Average hourly wages in South Africa are up to five times higher than in India and three times higher than in Mexico and Malaysia. There is a need to increase the productivity of low-skilled labour and this raises issues of education, training and innovation. It also links up with the need for infrastructure investment. Prof Strydom argued that South Africa has experienced the destruction of infrastructure capital and there is a clear need to improve the quality of railways infrastructure, electricity provision and water management. He was not, however, in favour of the wide spread use of user charges and argued that government needs to supply the infrastructure at growth points. Linked to the cost competitiveness of business the panellists spoke about a need for a re-think of the centralised bargaining model. In was noted that the NDP has interesting proposals on short-term employment contracts, rules regarding dismissals and foreign skills. The fact that the NDP makes no mention of the informal sector or second economy was also discussed. It was argued that the informal sector can be a job creator, but the challenge lies in turning survivalist activities into for-profit SMMEs. There is, however, limited South African research available on the barriers to entry, need for skills development and the roles of regulation and competition.

On the political economy-side of the panel Prof Parsons emphasised along with “doing many different things right”, a vision for 2030 implies a decades-long process involving some pain: forgoing consumption now for a better life later, businesses will have to prepare for more competition and labourers for wage moderation. For this to succeed, requires a credible vision, a strategy for getting there and policymakers that are trusted. Such criteria raises questions about the political sustainability of the NDP: Can minister Manual survive politically to see it through, is there institutional capacity, what can be the roles of the private sector, labour and civil society?
At the end of the colloquium the discussion centred around the issue of political will. The NDP is another in a long line of plans and strategies: the RDP, GEAR, the Jobs Summit, the Growth and Development summit, ASGISA, the work of the Harvard group an and the growth commission, but there may not be time left for another summit or plan. A lack of coherence or coordination of policies and ambivalent signals from government (think mining nationalisation and the Wallmart court case) can be particularly detrimental. We now require a reconciliation of the New Growth Path and the National Development Plan and the building of a social compact to face our challenges head-on.

All this being said, the NDP is a discussion document that will be talked about much more in months to come!

1 comment:

  1. Who should one befriend to get invited to such interesting debates?

    I'm still undecided about the NPC-plan. I'm impressed to see some micro-elements put forward. As mentioned in your post 'Analysis needed', government needs to start focusing on the what, where and hows. Micro-plans like "build hospital in Limpopo" are easier to implement than macro-plans such as "improve public transport". Success- criteria is easier to define and responsibility is easier to delegate. Micro-plans fit in nicely with Governments outcome-based management style. Nationally defined micro-plans are especially important in a government where skills and resources are "top-heavy".

    It is easy to identify healthcare, education, infrastructure etcetera as prerequisites for economic prosperity. However, these illusive goals will never be reached if government does not define reasonable, implementable and measurable plans to achieve these goals. RDP, GEAR, ASGISA and New Growth are fundamentally all the same (RDP to a lesser extent). Why aren't we seeing results? Because economic ideals are not translated to workable plans. "Lower the cost of doing business and costs for households", how Mr Manual?

    Furthermore, South Africa does not have a culture of austerity and solidarity. South Africans are simply not about to sacrifice some of there own for the common good. Like you wrote, whether political leaders will be willing or able to risk the political capital to make the necessary but hard decisions are, regrettably, improbable.

    Finally, and I know I keep hammering on this, but the issue of labour market inflexibility is yet to be emphasized - a pink elephant in the South African economy. Whether we are talking about manufacturing competitiveness, export-led growth, productivity, skills mismatched, unemployment or poverty we are in effect talking labour market issues.

    In 1970's the unions become a liability in Britain. Unions have now become a liability in South Africa also. Dame Thatcher had enough guts to fight the unions and address labour market inflexibility ensuring 20 years of British prosperity. Who will have the guts in South Africa to ensure true sustainable prosperity? Our labour market is just not in line with our developmental status.