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Asgi-SA: Accelerated
Growth for All
The South African
Government's Accelerated and Shared Growth Initiative for SA
(Asgi-SA), launched by President Thabo Mbeki in July 2005 and headed
by new Deputy President Phumzile Mlambo-Ngcuka, aims to guide and
improve on the country's remarkable economic recovery since the
removal of the crippling policies of apartheid.
Its primary aim is to
halve unemployment and poverty by 2014 - 10 years after the policy
was first set out in 2004, and 20 years after South Africa's first
democratic elections in 1994.
"We believe that we
have built the basis for a national program of shared economic
growth," Mlambo-Ngcuka said in presenting the Asgi-SA strategy in
February.
"With this program we
can achieve our social objectives, and we can more than meet the
Millennium Development Goals."
South Africa's
economic growth has been impressive, rising from 3% in the first
decade of freedom to around 5% in 2005. The boom has been based on
high commodity prices, large capital inflows and strong domestic
consumer demand, and rooted in anti-poverty measures, growing
employment and rising asset prices.
But to have the
desired impact on poverty and unemployment, the government has
determined that growth must be boosted to at least 6% - if not
higher.
The
unbalancing effects of growth
An important principle of Asgi-SA is
that economic growth cannot be at any cost: it must be sustainable,
and it must be shared among all South Africans. This comes from a
recognition that recent growth, while welcome, has been unbalanced
in two important ways.
First, the combined effect of all the
drivers of South Africa's growth has been to strengthen the
country's currency, making it difficult for exporters outside the
commodity sector or those who compete with imports to stay
competitive. That led to a trade deficit of nearly 4.5% of gross
domestic product in 2005, well financed by capital inflows, but
demonstrating South Africa difficulties in competing in more than
raw commodities.
There is therefore a risk of
"hollowing out" - losing capacity and jobs in more specialized
sectors such as manufacturing - or, at least, an unbalanced economy.
This risk is compounded by uncertainties in future commodity prices,
capital flows and domestic consumption.
Another risk of rapid growth is a
widening of the gap between rich and poor. While the social grants
program has made radical inroads into reducing poverty and
redistributing income, a full third of South Africa's people are yet
to benefit from the country's new prosperity.
There is more to this than social
injustice. As long as a significant proportion of the population is
excluded from the mainstream economy, South Africa's potential for
future growth will be seriously obstructed. While the policy of
broad-based black economic empowerment aims to address this
economy-stifling imbalance, Asgi-SA seeks to take it further.
Six
constraints, six responses
In developing Asgi-SA policy, the
government consulted widely with experts in its departments, in
business, industry and labor, and with international specialists.
The conclusion was that interventions to accelerate growth in a
shared manner must surgically target weaknesses unique to South
Africa's economy and government.
This approach contrasts with that of
the Washington Consensus approach, popular in the 1980s and 1990s,
which set out a long list of "virtuous" actions held to solve any
country’s economic problems.
Six binding constraints have been
identified - a list short and focused enough to allow consistent and
coherent responses:
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The overvaluation and volatility of
South Africa's currency.
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An inadequate national
infrastructure.
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A shortage of skilled labor.
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Barriers to entry, limits to
competition and limited new investment opportunities
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A cumbersome regulatory environment.
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Deficiencies in state organization,
capacity and leadership.
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To counter these six constraints,
Asgi-SA initiatives fall into six broad categories:
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A massive investment in
infrastructure.
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Targeting economic sectors with good
growth potential.
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Developing the skills of South
Africans, and harnessing the skills already there.
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Building up small businesses to
bridge the gap between the formal and informal economies.
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Beefing up public administration.
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Creating a macroeconomic environment
more conducive to economic growth.
Asgi-SA initiatives must still be
adjusted and fine tuned, and consultations continue. The government
plans to regularly review progress in its implementation, and the
program will also be reviewed by a team of economists and social
scientists based at Harvard and other universities.
"Our second decade of freedom will be
the decade in which we radically reduce inequality, and virtually
eliminate poverty," Mlambo-Ngcuka said.
"We know now that we can do it,
working together around an initiative which has the support of the
nation."
SouthAfrica.info reporter
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