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 programme of shared economic growth," Mlambo-Ngcuka said in presenting the Asgi-SA strategy in February.
"With this programme 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 specialised 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 programme 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 labour, 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:
- The overvaluation and volatility of South Africa's currency.
- An inadequate national infrastructure.
- A shortage of skilled labour.
- Barriers to entry, limits to competition and limited new investment opportunities
- A cumbersome regulatory environment.
- Deficiencies in state organisation, capacity and leadership.
- A massive investment in infrastructure.
- Targeting economic sectors with good growth potential.
- Developing the skills of South Africans, and harnessing the skills already there.
- Building up small businesses to bridge the gap between the formal and informal economies.
- Beefing up public administration.
- 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 programme 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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