Infrastructure Investment Catalyses Social Accord

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Photo: Hannelie Coetzee, MediaClubSouthAfrica.com

Towards an infrastructure investment social accord

In the last session of the second annual Economic Development Programme conference hosted by the Economic Development Department, a series of remarkable commitments emerged from business and labour leaders, on government’s Infrastructure Investment Plan.
The session chair and convener of the Economic Development Conference, Minister Ebrahim Patel posed a series of questions to the panelists focused around commitment to the plan and the commitments sectors were willing to make . The panel consisted of:

  •  Bobby Godsell, President, Business Leadership South Africa
  • Zwelinvima Vavi, General Secretary, Congress of South African Trade Unions,
  • Ndaba Ntsele, President, Black Business Council

Bobby Godsell representing Business Leadership South Africa argued that the long term nature of the infrastructure investment framework provided the space for business to think about the next twenty years as opposed to the next quarter. In turn, he argued that the private sector should “seek a realistic and sensible” rate of return. The rate of return he ventured would be a real return, but would be in single digits.

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BRICS – Total Entrepreneurial Activity

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Brics - Entrepreneurial activity bubble map

The Global Entrepreneurship Monitor (GEM) provides a basis for comparing entrepreneurial activity, aspirations and intentions globally. The chart below shows the Total early-stage Entrepreneurial Activity (TEA). TEA is defined as

TEA = Percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business

The data shows that there is a gap between South Africa which is has moderate economic growth, and Brazil, India and China which have significantly higher economic growth rates in terms of Total Entrepreneurial Activity. (Curiously, Russia has high growth rates but low TEA rate). The data however suggests that South Africa may be catching up, with these high growth countries.

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Brazil becomes less equal, South Africa gets more unequal

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Inequality can be reduced

, via Wikimedia Commons “]Brazil has a remarkable achievement, as it has reduced inequality over the last decade, as shown in the chart below. The exact reasons for the reduction in inequality is hotly debates in Brazil, as are the methods of calculating inequality. There are sceptics on this outcome, and those praising this achievement. Just so that we are clear – Brazil remains a very unequal society. South Africa has however become more unequal, and this fact is not disputed with official development indicators broadly agreeing with this finding. The chart below shows data from The World Bank for the Gini Coefficient. We have selected the BRICS countries to represent here, but the focus is Brazil and South Africa. It suggests that over a short period of time, inequality can be reduced, in an environment which reduces poverty and increases jobs. (I have added a note to the editorial calendar for Zapreneur, as it would be informative to better understand the reasons behind the outcomes.)

Lulismo

One debate that is emerging on explaining Brazil’s outcomes is occurring under the moniker “Lulismo”. The word derives from the name of President Lula, and seeks to explain the choices that were made by Brazil during that period. It however also suggests that there might be doubts of future leaders being able to replicate the gains capable under a leader, like President Lula. The debate however is largely conducted in Portuguese, which means that the textures and nuances of the debate cannot be fully comprehended by someone that does not speak Portuguese.
The features of the debate that we could glean ask a couple of demanding questions:

  1. Is the reduction of inequality a small victory for moving a leftist programme to the centre? The suggestion being that a more egalitarian outcome could have been achievable.
  2. Are the results simply derived from a commodity boom and will prove short-lived in an economic downturn?
  3. Are Brazil outcomes rather the product of a longer run reform programme, which included neo-liberal restructuring under previous administrations?
  4. Are the Brazilian outcomes the result of a developmental state, which saw the Workers Party (PT) introduce social and economic measures that are the cornerstone of the success?

The debate seems furious and polarised. The underlying question is one that South Africa would love to have -Why has our society become more equal, and can we sustain it over the longer term?
 

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Brics – Human Development Index Comparisons

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Recent discussions in the media has focussed on whether South Africa belongs in the exclusive BRICS (Brazil, Russia, India, China and South Africa) group of countries. Over the last year I have increasingly been looking to Brazil and India as examples of what might be possible. The improvements in the Human Development Index (HDI) of these countries suggests we can learn a great deal from them. Of course, in Brazil and India there are disputes on the numbers, however the take home is this – South Africa’s HDI has fallen primarily due to poor health outcomes, which are associated with the impact of HIV/Aids. Our educational performance has also been weak. The silver lining is that current initiatives by government in the health and education sectors have better prospects for success, than our first policy choices after 1994.

The table below has been updated with data till 2018.

Human Development Index – Brazil, South Africa, China, Russia and India

The chart shows the Human Development Index (HDI) for the BRICS countries (i.e. Brazil, Russia, India and South Africa) from 1980 to 2018. The data shows that Russia, India and Brazil have improved their HDI, whilst South Africa has seen a decline in its HDI since the mid-1990s. It underscores the point, that we must be learning more from the experiences in Russia, but especially from Brazil and India.

At first glance South Africa’s performance looks exceptionally weak. To better understand the outcomes, it is important to look at the components that make up the HDI.


This page may take a few seconds to load as it extracts the charts from Public Data Explorer
The HDI is a composite index measuring average achievement in three basic dimensions of human development—

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Educational Failures – Are Trade Unions Too Blame?

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Andile Lungisa’s – Chairperson of the National Youth Development Agency and  ANCYL leader – call for the de-unionisation of teaching has sparked a furore. The arguments focus on the constitutional right for workers to belong to organisation, and that focus must be placed on the real problems facing education. I however argue that the problems in labour relations in the education lies not only with the trade unions, but with government, who have not fulfilled their responsibility as an employer.
Improving education in South Africa is the most important priority in South Africa. When I look at our results on the international benchmark examinations, I am angry with us as a society. We have literally failed a generation of children in South Africa. To put it bluntly, we perform very poorly on the international examinations, with some assessments of the results placing last in the world for performance on the Mathematics examinations. We are facing a crisis in education, and we must act.
Instead of acting to resolve the situation, there is this constant repetition that the trade unions are too blame. Here are a couple of refrains I have heard over the last few weeks:

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Outliers –The Story of Success by Malcolm Gladwell

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Outliers, A book with many versions!

I ploughed through a couple of magazines, and stumbled across an article by Malcolm Gladwell called “How David beats Goliath: When underdogs break the rules” while waiting in a government office. The article has a rare tactical nous offering us little guys with a set of guidelines to take on bigger gorillas. The possibility of dramatic change from the least expected places provided an intriguing insight – it was not just pulling oneself up by the bootstraps,   rather one needed to be consistently thinking about the context that one operates in to design effective strategy.
I mentioned the article to a couple of friends, and the gushing praise for Malcolm Gladwell left me gobsmacked. I was really missing out on an exceptional thinker I thought. Therefore, the next business trip, I bought a copy of Outliers: The Story of Success.  My expectations were thus sky high, expecting an exceptional and unique understanding of how we understand success, and why it happens. Had I written this review immediately after reading it, I would have joined the gushing brigade and praised the book. Gladwell writes exceptionally well, and is a master at story telling. It was an easy, provocative and entertaining read.  The second reading – in preparing this review – was a different experience entirely with the argument not being convincing, even though the writing remains exceptional.
This review combines insights from my first and second reading of this book, but before that is it important to understand the intent of the book.

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South Africa Lags Behind On Economic Growth

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Does the MTBPS have the right toolkit?

The chart and table below shows that South Africa is likely to lag behind it’s peers in emerging markets and developing countries in terms of economic growth. There are many reasons for this, with Minister Gordhan arguing in the Medium Term Budget Policy Statement with reference to meeting the challenges that we face:

For us as a nation to achieve this ambition requires deep-rooted transformation of our economy that removes the many barriers to growth and development

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MTBPS – Adjustments and allocations, but who benefits?

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The MTBPS primary aim is to state the policy direction that government has taken. However, as part of the MTBPS there are adjustments made to budgets which provide us with an indication of how government uses these adjustments to support its objectives.  Here is the run down of the major adjustments to the 2011/12 budget.

Government will spend about 9 billion less than anticipated

The National Treasury notes that

Taking into account funding set aside in the contingency reserve at the time of the 2011 Budget, projected underspending, savings declared by departments and the adjusted state debt cost estimate, the revised estimate of total expenditure in 2011/12 is R888.0 billion. In February 2011 at the tabling of the budget, provision was made for expenditure of R888.9 billion for 2011/12. (Page 34, MTBPS, 2012)

Under spending by government departments has largely come under control, but with local government’s still struggling to spend funds on infrastructure and other projects. Spending performance by government has however improved over the years, but this remains an area that needs to be urgently tackled. In an environment of low economic growth, there could have been a range of ways to spend all or part of the R 9 billion budgeted. For instance, additional funding could have been provided to the Jobs Creation Trust or to a number of other programmes.

 

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