Economy tells of our progress in 20 years

15 April 2014

Phumla WilliamsThe building of a more inclusive economy is not an easy task and is far from being achieved.  Equally so, the task of building a non-racial, non-sexist and  prosperous South Africa requires a deliberate effort that results in all  benefiting from the wealth of the country. The economy is now stretched to benefit all.

 It is today nearly double the size it was when we embarked on our democratic journey. It is the result of 20 years of hard work and tough decisions.

The economy inherited at the end of apartheid was technically bankrupt with only enough foreign currency reserves for one month. The economic woes stemmed from the effects of apartheid’s distorted policies.

Minister of Economic Development, Ebrahim Patel, described the economy in 1994 as technically broken, characterised by low growth and weak job creation.  “More fundamentally, it was structured to serve the needs of some rather than all; it focused on the needs of corporations rather than people.”

Chronic high inflation had driven up costs and the living standards of blacks remained dangerously low, while those of many whites had also begun to decline.  

Economic growth was dependent on the gold price and as the price fluctuated, especially in the 1980s, our exchange rate and ability to import goods suffered.  The apartheid economy recorded a gaping budget deficit of 9.3 percent and public sector debt amounted to 64 percent of gross domestic product (GDP).

Speaking at last year’s conference on the Role of Parliaments in Economic Transformation and Development, Minister of the National Planning Commission in The Presidency, Trevor Manuel said: “Democracy could not countenance this and if the trajectory of that deficit of 9.3 per cent had continued, then our debt to GDP ratio today would have been much higher than Greece and debt service costs already at 25 percent in 1994 would have been between 40 percent and 50 percent.”

The democratic government began a process to structurally adjust the economy through the Growth, Employment and Redistribution programme. At the same time the Reconstruction and Development Programme was introduced to address the massive socio economic challenges.

Minister Manuel added: “The intervention in macro-economic policy in 1996 was occasioned by a statement by the then-President Nelson Mandela that debt service costs could not be higher than what we were spending on education because debt service costs were of the past and education of the future.”

This prudent economic stance has since given rise to a high level of macro-economic stability, reduction in taxes and the provision of social services and infrastructure development.

As we celebrate 20 Years of Freedom we do so knowing that we have created a more inclusive economy that seeks to address the needs of all 51 million South Africans.

Launching the Twenty Year Review recently President Jacob Zuma said: “Workers have 20 years of enjoying rights including trade union workplace organising, collective bargaining, equal pay for equal work, health and safety, affirmative action, skills development, minimum wages for workers in vulnerable sectors, the right to strike and the right to peaceful protest.”

 Our gains include an 83 per cent expansion of the economy and per capita income increase   of 40 per cent since 1994.

International investment banker Goldman Sachs noted that on almost all accounts,  we were better off than we were  in 1994. Its report “Two Decades of Freedom” highlighted that GDP had almost tripled from $136 billion to $385 billion

The prospects continue to look good as we benefit from the rapid growth taking place on the continent.  The rebasing of the Nigerian economy as the largest economy in Africa is proof of Africa’s fast economic growth.

However, unemployment and inequality remains a challenge. Government is confident it will turn the situation around. This year’s Budget reaffirms our strong commitment to job creation by funding 6 million job opportunities over the next five years.

One of the most fundamental shifts in the economy has been the rapid expansion of the black middle class. According to the University of Cape Town’s Unilever Institute of Strategic Marketing the black middle class rose from 1.7 million people in 2004 to 4.2 million in 2012.  

These changes are notable as efforts to transform, though still at an infancy in our journey to reverse 350 years of discrimination and injustice. Our comfort is in the fact that the National Development Plan (NDP) provides a solid roadmap.

It is our assertion as government that we have managed to build an all inclusive economy where the broader society benefits.

Phumla Williams is acting CEO of the Government Communication and Information System (GCIS)