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CHRISTIAN
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CHRISTIAN
NEWS |
Cheers to the South African economy
Economist Mike Schussler blames South Africans' persistent negativism on lack of marketing of the country's economic and social achievementsBy Mike Schussler
Why is it that South Africans always see things in a negative light? Is it possible that we are just to hard on ourselves, or have we allowed the criminals, prophets of doom and other merchandisers of junk to win our minds?
On the face of it, the economy is doing rather well, at least in relative terms when compared to the current worldwide economic slowdown. Our inflation rate has declined, interest rates are the lowest in years, while growth is still going to be 2% or more by the most pessimist forecasts this year.
Yes , we have lost enough formal jobs over the last seven years to make anyone negative - enough, in most countries, to make people vote for a new government.
But take a look over the last few years and the blessings really are there for everyone to see. What's more, we are doing it our way.
Our country is undergoing a transformation, not only from white to black - which is how the word is most commonly used in South Africa - but also from uncompetitive to world competitor.
Our exports as a percentage of gross domestic product (GDP) are rising, and not just on the back of commodity sales but on the back of manufacturing products. Manufacturing products made up only 10% of exports back in 1987, but after 1995 started rising dramatically as a percentage of exports and now make up 30% of total exports.
This tripling of exports as a percentage of total export came as total exports themselves rose, from 18% of GDP to 26% of GDP, or a rise of around 50%. Also, the quality of the manufacturing exports moved away from basic manufacturing like canned foodstuffs to motor vehicles, mining machinery, high-quality chemicals and high value-added food and beverages such as wine.
Underpinning this success on the export side is the tremendous increase in labour productivity, which increased by 4.9% a year since 1995, or about twice the rate of the great American labour productivity miracle over the same period.
The American Federal Reserve Bank promotes this miracle at every opportunity, but here in South Africa we mourn our new labour laws.
Horrible as it may sound, South Africa had surplus labour and therefore, when we came into contact with reality, we had to shed much of the labour force in order to become competitive.
We have now done most of the upgrading of our competitiveness, at great cost, indicating that the jobless growth we have seen in the last decade may now in fact turn to job-creating growth. All we need is a little faith.
Government came to the party too by reducing the debt burden and the deficit, while also privatising and keeping spending in check. That resulted in an under supply of new debt issues for the financial markets and drove down the price (interest rate) that South Africa had to pay for issuing debt.
This process is making more capital available for the private sector at cheaper rates, which must also be good for longer-term growth potential.
Tax rates have declined both for firms and for individuals, making more money available for investment and spending, which in itself is a great thing for the private sector.
The chances of tax rates going down some more on the individual side of things are certainly good, and must also add to the growth potential of the country.
At the same time, our inflation rate has declined from around 10% eight years ago to around 6% today. We have had oil shocks, food supply shocks and quite a few currency shocks, to put it mildly, and yet our inflation rate has remained under 10% for eight years. Not a bad achievement by any standards!
Our bigger firms, who were kept in the country by foreign exchange control, have started moving offshore, and while many see this as negative, the fact is we are seeing South African firms at last competing on the same playing fields as their overseas counterparts.
Partly it is wrong that they have to get cheaper capital in other areas of the world, but if one accepts that, one should look forward to further expansion back home later too.
Our big conglomerates have unbundled too, making them leaner and more focussed and competitive. While this economic transformation was going on, we also started a social transformation, where South Africa built over a million new homes, connected more than two million new electricity points, and transformed the education system by pulling in thousands of new pupils.
Yes, not everything is perfect, and millions of people still want a new house or land, but the process has actually started, and millions of people have benefited.
Even when these social transformations are compared with many places in the rest of the world, I can't think of any country that has done quite as much as South Africa while keeping spending in check from a government point of view. The private sector too has helped with basic adult education, Aids awareness, legal and medical contributions, and sometimes even trains.
Virtually every company has a social component in its annual report where achievements like the sponsoring of new schools, sports fields, clinics, etc are proudly displayed. School children are often entertained by the bigger corporates to show them what to expect when they are called upon to do their bit in the world of work.
Yes, we have crime, grime, a brain drain and fears of an Aids epidemic, but have we not got a culture of addressing these problems?
South Africa is one of the few countries in the world where the minority gave up its political power, and most stay in the country and help it grow. That alone should be a good indication of the potential of our country.
Then why is it that many are still so negative in this country, negative about its prospects while always pointing to other countries as successful?
I believe the problem is that we have one big failure, and that is the successful marketing of our economic achievements - and that, Sir, is the number one problem facing future growth.
If we do not believe in ourselves, how can we expect others to do the same? How do we convince foreigners to invest here when we have no faith? That means we have only got negative headlines in our heads, and not too many see the positive side of things. This is not only wrong but also absolutely unbelievable, the way negativity has taken hold in our collective mind set.
It's time to cheer our transformation and count the blessings we have, saying "Charles!", and not cry in our beer.
27-07-2001
(Article submitted by Claude Warner .. email)
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