SA must integrate with global economic system, says Gordhan
South Africa is not an island, Finance Minister Pravin Gordhan said on Wednesday, and economic growth and development depends on the extent to which the country is integrated with the dominant global economic system.
In a speech to mark 20 years of democracy in South Africa, Mr Gordhan – fresh from a recent trip to Washington in the US – told a round table discussion at the University of Johannesburg that poverty, inequality and jobs were becoming big issues around the world.
Two decades since democracy in 1994, the extent to which South Africa has addressed the triple challenges of poverty, inequality and unemployment has become a standard measure of the progress the country has made in improving the lives of its citizens.
In his state of the nation address in February, President Jacob Zuma described these challenges as “a central focus of all democratic administrations”. The World Economic Forum’s latest Global Risk Report identifies severe income inequality as one of the 10 global risks of highest concern in 2014.
Mr Gordhan said on Wednesday that unemployment levels in developed countries were beginning to match those of developing countries.
Political analyst Steven Friedman agreed, saying the world today appeared to be looking at countries such as South Africa, Brazil and India for solutions to poverty and inequality as developed countries were no longer able to provide answers.
Mr Gordhan said South Africa had to bring more entrepreneurs and small businesses into the economy in the next 20 years. He said the current structure of the economy showed some lasting apartheid legacies, including monopolies in some sectors.
He said there was not enough black ownership and participation in the economy despite government interventions through black economic empowerment. The country needed an inclusive growth model, not one that would entrench inequality.
Mr Gordhan also said the pdf National Development Plan (18.58 MB) , the government blueprint for development until 2030, would help “focus on the things we can actually deliver, while we continue to debate those that need to be debated”. However, he warned, perpetual debate may also lead to paralysis.
He said the question of better delivery for poor people depended on the nature of the state, and building state capacity was critical to enable development.
South Africa’s integration with the global economic system is critical to exploit new spaces created by geopolitical and economic shifts. Another unique feature of the global economic system is that “sentiments shift very easily”.
“One day South Africa is a good investment destination, the next day it is not,” he said, adding that he disagreed with an extreme negative narrative of the country.
Prof Friedman said South Africa could be proud of its important achievements over the past 20 years. “There is a great deal that we need to acknowledge and I think we tend to forget where we were 20 years ago,” he said.
Mr Gordhan also commended the growth of South African companies on the continent. He said the emergence of Nigeria as Africa’s biggest economy, overtaking South Africa, showed that the economy in Africa was on the right path.
This meant South Africa would have to “work harder in order to demonstrate that our economy is still important in the African continent”.