http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.14Change: 0.02
R/$ = 11.76Change: 0.02
Au 1204.40 $/ozChange: 0.75
Pt 1187.00 $/ozChange: -2.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Nov 05, 2010

Forget 7% yearly growth; just support the right kind of growth

Back
Africa|Industrial|Sustainable|Africa|Building
Africa|Industrial|Sustainable|Africa|Building
africa-company|industrial|sustainable|africa|building
© Reuse this



There is an idea from government that the South African economy should grow at 7% a year. There seems to be a belief that growing that fast will help solve our unemployment problems.

The link between economic growth and employment crea- tion seems obvious, but we have to remember that we recently experienced a few years of economic growth of 5% with very poor employment growth. Further, we lost productive capacity during that period of 5% yearly economic growth. We then proceeded to lose close to a million jobs during the global economic crisis. Therefore, there is very little reason to believe that eco- nomic growth of 7% a year will help reduce unemployment significantly.

The big question we have to ask is: How do we achieve the correct kind of growth that will help us create the right kind of employment in a sustainable manner? We do not need 7% yearly growth, but we do have to get the correct kind of steady industry-led growth, investment and job creation.

The US and many other countries, including South Africa, have had the wrong kind of economic growth. There was economic growth but a decline in productive capacity. There was very little employment growth during this period and many countries had declining employ- ment in industry during those years. Economic growth in those countries occurred because their financial sectors grew. Further, the level of indebtedness in those countries grew tremendously. The growth experienced in those countries were a result of rapid growth in debt-driven consumption and financial speculation. As their productive sectors stagnated or declined, these countries increased their imports. In order to sustain this type of economic growth, households in these countries took on ever higher levels of debt.

Therefore, while policy- makers may be uncritical of economic growth, it is important to examine the nature of economic growth. Economic growth driven by financial speculation and increased levels of household debt and characterised by neglect of the productive sector is the wrong kind of economic growth. It is just not sustainable. It is the kind of growth that destroys the possibility of future growth because it destroys productive capacity and leaves the people with production skills idle and deskilled over time. Those economies would be better off if they did not have debt-driven consumption and speculation-led economic growth. In fact, we may have been saved the pain of a global financial crisis had the US not become involved in the business of promoting financial speculation at the expense of building produc- tive capacity.

Our Finance Minister, Pravin Gordhan, told us in his Medium-Term Budget Policy Statement that the State should not take on too much debt and create a burden for future generations. But he did not announce any significant changes to the macroeconomic frame- work. Therefore, in spite of discussions about a new economic growth path, we are in a position where our macro- economic policies favour the wrong kind of growth, which does not support industrial policy and industrial develop- ment. We face further destruction of our productive sectors and we will continue to be a specu- lators’ paradise. Government had a chance to protect our economy from the damage of uncontrolled speculation by foreigners, but chose not to do so. Instead, government made it easier for South Africans to become part of the global specu- lative game by further relaxing exchange controls. It is exacerbating a bad situation, where industrial investment is not supported and capital that should go for investment can reap higher rewards in global financial speculative activities. Unfortunately, government has learnt little from the global financial crisis and is still allowing the needs of a profligate financial sector to decide on our country’s economic framework.

South Africa and other countries can continue to squeeze out a few years of economic growth on the cur- rent finance-led growth path, but, in so doing, we dig ourselves into a deeper hole. We will continue to lose productive capacity and skills. The real problem is not a government debt. Continuing on this current unsustainable finance-led economic growth path will create a burden for future generations.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Seeraj Mohamed News
The Corporate Strategy and Industrial Development Research Programme (CSID) - the University of the Witwatersrand's (Wits') economics policy research unit of which I am director – hosted a launch of the Department of Trade and Industry’s (DTI's) capacity building...
We enter 2011 with much global economic uncertainty. South Africans should consider the country's economic policies and activities within the context of an uncertain and volatile global economy.
Article contains comments
Article contains comments
More
 
 
Latest News
Updated 7 hours ago Transport equipment manufacturer GE Transportation has appointed Thomas Konditi as the head of its sub-Saharan Africa division. Konditi, who would be based in Johannesburg, was most recently COO of GE Africa, in Nairobi. His responsibilities included the oversight of...
Trade union Solidarity has criticised the Nuclear Energy Corporation of South Africa (Necsa) for continuing with a restructuring process, which the union claims results in employees being demoted, without consulting with Solidarity about the process. Solidarity...
FMCSA president and CEO Jeff Nemeth
South Africa’s Automotive Production and Development Programme (APDP) had boosted Ford Motor Company of Southern Africa’s (FMCSA’s) manufacturing competiveness, the vehicle manufacturer said on Tuesday. The Department of Trade and Industry (DTI) had introduced the...
More
 
 
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
 
 
 
 
 
This Week's Magazine
Walter Hill
Updated 7 hours ago Eqstra Holdings was going to reduce its exposure to contract mining, but it was not yet ready to sell the troubled business, said CEO Walter Hill on Tuesday. He said Eqstra would not sell its contract mining business in a “depressed market”. He said it would be...
Subscribe to Engineering News and Mining Weekly for two years, but only pay for the first year.  The weekly editions of Engineering News and Mining Weekly will be posted to your preferred postal address and also gain access to:
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
Worldwide, the main thrust in the ports industry over the past decade or more has been to increase efficiency. Traditionally, ports have been run by engineers and mariners and, in the past, increasing a port’s capacity was achieved by expanding the harbour. “That has...
What do you do when an elephant has a toothache? You call Dr Gerhard Steenkamp from the University of Pretoria’s (UP’s) faculty of veterinary science, Onderstepoort, one of only two elephant ‘dentists’ in the world.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96