Professor Ricardo Hausmann, Chairman of the International Panel on the Accelerated and Shared Growth Initiative that advised the South African government between 2004 and 2008, said that contracting export sectors, stagnant manufacturing, and low levels of labour participation, prevent South Africa from ‘raising its economic ‘speed limit’’.
The unemployment crisis is the biggest policy challenge that South Africa confronts. If South Africa had a labour force employment ratio similar to Latin America, employment in South Africa would be higher by 66%.
The country’s tendency to think that wage agreements have to be ’progressive’, but not realistic has put the country in a weak fiscal position, meaning there is not enough left for public investment, resulting in major challenges for Eskom, Telkom and other state-owned enterprises.
South Africa also needs skills, and it needs a clear strategy, co-ordinated across many sectors of the state and the economy, to change the structure of the economy. Only then will the country grow and create the jobs that will reduce inequality, eradicate poverty.
Hausmann called for a number of critical reforms in government’s approach to unemployed young people, black economic empowerment (BEE) and a unified national narrative.