R/€ = 15.15Change: 0.10
R/$ = 13.45Change: 0.10
Au 1151.95 $/ozChange: 5.50
Pt 944.00 $/ozChange: 9.50
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

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 About Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Nov 05, 2010

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

© 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
Creamer Media Senior Deputy Editor
© 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
Latest News
The Worldwide Fund for Nature (WWF) has called on governments to introduce legislation that puts a stop to the construction of new coal plants, stating that coal consumption needed to be phased out completely by 2050, or earlier. The international nongovernmental...
The International Monetary Fund (IMF) has again lowered its growth outlook for South Africa for 2015, projecting in its October World Economic Outlook (WEO) that the economy would expand by only 1.4% this year and 1.3% in 2016. The forecasts represent a 0.6 and a 0.8...
Minister Thulas Nxesi
There are still many opportunities for South Africa’s black high school learners to find jobs in future, both in the public and private sectors, provided that the learners apply discipline and commitment to study, Public Works Minister Thulas Nxesi said on Tuesday....
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 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 infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Sphere Holdings CEO Itumeleng Kgaboesele
Black-owned investment holding company Sphere Holdings plans to raise a further R1-billion in the coming months in support of its strategy to become a leading black industrial enterprise, which could ultimately seek a listing on the JSE.
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme.   LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...
Alert Close
Embed Code Close
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
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