Director-General, Mr Tshediso Matona, Research to support a Critical Growth
Path
18 October 2006
Colleagues, distinguished guests, fellow members of the Trade and Industry
Policy Strategies (TIPS) Board, it gives me great pleasure to address you in a
forum that has over time become an important landmark in the South African
economic research calendar. The Development Policy Research Unit (DPRU) / TIPS
Forum has been running for 10 years now and judging by the calibre of the
speakers and the papers being presented it will no doubt run for many years to
come. It is an invaluable input into the discourse around economic policy in
this country.
More so than ever this year the topic for the forum is pertinent, practical
and timely. A detailed investigation into "the concept of accelerated and
shared growth and specifically how the poor are to be engaged in development"
comes at a critical juncture in our country's transformation history.
Thankfully a good foundation has been laid, macroeconomic stability has been
achieved and significant growth momentum established. However, we are all too
aware of the risks and imbalances associated with the nature of the recent
growth episode. Strong consumption with high import content, high household
debt levels, a large and growing current account deficit, an ailing productive
sector all beg questions of the sustainability of our current growth trajectory
especially its effectiveness regarding unemployment and poverty.
Since 2000, we have witnessed job creation but the Department of Trade and
Industry (dti) and government at large, are under no illusions. Unemployment
remains unacceptably high at approximately 25 percent or 40 percent (depending
on the definition you use), labour supply continues to grow strongly in
relation to labour demand and the skills mismatch persists. Then there are
various key questions, "What impact do the jobs created have on poverty? Are
those jobs sustainable given the concerns raised around the nature and
composition of the current growth episode? What is happening to income
inequality?" I will leave it to you to answer these questions over the next
three days.
In the simplest terms the burning reality that we all face is that our
current and historic levels of economic growth are insufficient to meet the
needs of South African citizens. For too many the dignity of work and the
entitlement of a minimum standard of living remain a vague and distant ideal,
disconnected from their actual existence. Government at the highest levels is
fully cognisant of this reality. The fact that in 2005 the President
established the Accelerated and Shared Growth Initiative for South Africa
(AsgiSA) and located it high up in the executive arm of government is testimony
to a deep understanding of the urgent need to grow the economy and expand
economic participation.
The average annual growth target of six percent by 2014 is ambitious. The
specific nature of the target which is derived from the goal of halving
unemployment and poverty has forced us to focus our minds. What are we to do to
accelerate growth and employment? The AsgiSA document begins to flesh out the
various strategies and an intervention designed to deliver six percent average
annual growth and forms the "how?" of the strategy.
We are continually strengthening the link between the "what?" and the "how?"
In this regard government is developing a 'critical growth path'. The function
of the Critical Growth Path is to map out the chronological sequence of events
and government interventions that will lead to the attainment of AsgiSA
targets.
Strengthening the link between the means and the end will assist the State
to play a more assertive role in ensuring structural change in the economy. In
other words the Critical Growth Path will highlight key interventions and key
decisions required en route to 2014. It will also play a vital role in working
through the timing, sequencing and resourcing of interventions.
It goes without saying that a Critical Growth Path would need to be
supported by extensive empirical evidence. The dti, via the Economic Cluster of
departments is working with a range of researchers such as those from the
Industrial Development Corporation (IDC) to model a growth path. That exercise
locates the macro growth target as well as various assumptions around the
global economic environment and seeks to uncover the sectoral sources of that
growth.
Further to the work of the IDC, in fact in symbiosis with that work, is the
ongoing "employment scenarios" work stream currently being run by the Human
Sciences Research Council (HSRC).
The effort to support decision making with empirical evidence is not limited
to the Critical Growth Path. On the contrary there is within the Economic
Cluster a renewed appetite for bolstering all policy-making with quantitative
and qualitative evidence. For instance one area of cluster work that lends
itself to evidenced-based policy making is industrial policy. Of course it is
anticipated that the National Industrial Policy Framework (NIPF) will feature
prominently in the Critical Growth Path. However, the NIPF has relevance
outside of the Critical Growth Path as well. The NIPF is designed to be dynamic
and shift with changes in the economic environment. It is obvious how important
high quality research will be to ensuring that Industrial Policy is responding
to the changing reality in the economy and that the iterative relationship
between policy and reality happens with minimum cost and time lag.
With a view to supporting the development of the Critical Growth Path in the
short term and developing the economic cluster's in-house capacity for
evidence-based policy making in the medium to long term, the dti recently
convened a meeting of all cluster modelling experts. The idea is to apply an
integrated approach to the Critical Growth Path that makes full use of all
available capacity and to adopt the same approach in the future for all cluster
work. What emerged from that meeting is that current economic modelling
capacity is somewhat stretched and fragile (it normally resides in one or two
people per department). Thus a capacity building exercise in evidenced-based
policy making and modelling in particular is of the utmost importance and the
economic cluster will be developing a proposal in this regard. In going about
it we hope to draw heavily on the expertise in this room.
This brings me to the role of the DPRU/TIPS forum in supporting research for
the Critical Growth Path towards 2014 and beyond. Taking a medium term view,
the institutions represented here will hopefully play a key role in
supplementing existing efforts to build evidence-based policy making capacity,
such as the bursary scheme now offered by the dti to postgraduate economics
students.
Finally, the DPRU/TIPS forum organisers will need to be vigilant in ensuring
that the feedback loop between research, policy and economic reality is
constantly shortened and strengthened. This will require closely guarding the
relevance of the forum's agenda and the calibre of the forum's participants to
maintain the current high standard.
I thank you!
Issued by: Department of Trade and Industry
18 October 2006
