Concerned by the staggering economic state of the country, the Institute of Race Relations (IRR) launched a new economic recovery plan for South Africa called the National Growth Strategy or NGS. The IRR’s new plan is expected to clean up the SA economic mess.
The IRR’s new plan (NGS) drafted by the institution’s policy team aims , is aimed to be implemented within the period 2016 to 2019 as the basis for achieving 7% GDP growth levels of the nation’s economy.
South Africa economy has in recent years, faced one of its most challenging period with the 2016 growth expected to be under 1% and experts predict it could worsen in years to come.
On this note, the IRR who has engaged itself in many years of research and analysis, said it has developed a new strategy that would help turn the nation’s economy around. “Unlike other plans, this strategy is simple and workable,” it said.
“South Africa is in considerable economic trouble,” as it pointed the unemployment rate which is now above 50% and jobs are being lost, rather than created.
“The economy is hovering on the brink of recession, while gross domestic product (GDP) per capita has shrunk for the past two years. The most optimistic forecasts for the next three years put economic growth at less than 2% of GDP.” it noted.
IRR’s new plan has four steps, each of which builds on those already taken – and all of which can be initiated by the government within months. it is also designed to be implemented from 2016 to 2018 with its first task aimed at putting to a halt, the current economic descent. Thereafter, it would bring about an economic turnaround on which the country can build following the 2019 election.
The strategy can be better understood to look out for:
- To improve capital inflows and foreign direct investment (FDI) into South
Africa, so as to start raising the growth rate;
- Build and maintain essential economic and social infrastructure to stimulate growth and provide a solid foundation for further economic expansion;
- Translate increased growth into increased employment; and
- Help the disadvantaged climb the economic ladder to increased prosperity, while sustaining current social protection.
“If the growth rate could be raised to 7% of GDP a year, the economy would double in size within ten years and average GDP per head would soar,” the team reported, adding that the IRR’s new plan would bring the unemployment rate down from roughly 35% to less than 10%.
The IRR noted that over the past 22 years, the country has generated only about 300,000 net new jobs per annum. Most of these jobs were created in the years when economic growth rates averaged around 3% of GDP.
“If South Africa is to start generating around 1 million net new jobs a year, it will need an annual economic growth rate of between 6% and 8% of GDP.”
More to this, the IRR said the SA government need to ensure that property rights are properly protected if it cares to draw capital into the country.
“To increase growth and help generate a million jobs a year, we must encourage businesses of all shapes and sizes, from micro businesses run by individuals and families to multi-million rand corporations run by professional managers,” the report said in it explanation of how capital investment affects SMEs.
However, as the economy grows, infrastructural expansion need to follow suite and RR said the government’s role would be to reform regulations and contract with private sector providers to do the work.
“It should also increase public service efficiency by appointing on merit, using all available skills, and holding managers and bureaucrats to account. In addition, it should privatize many of its 700 state-owned enterprises to help generate revenue for infrastructure and bring private sector inefficiencies to bear.
“Greater private sector involvement in the provision, maintenance, and management of economic and social infrastructure would provide a major boost to capital investment.”
The institution therefore called for the reformation of labour markets so it could convert investment into the generation of a million new jobs a year.
It said if the labour market is not reformed in this way, too many people will still be left out of the economy and social instability will persist.