Strikes deal death blow to hopes of elevating economic growth

ALAN PEAT AS SA battles to build up its economic growth, structural problems could inhibit the country’s growth ambitions, according to Dr Cees Bruggemans, chief economist of First National Bank. He compared these SA efforts to those of India, which has an average growth rate of 6%, and which in turn is dreaming of catching up with the booming 9% growth of the economy in China. “SA looks like a 4% growth economy now,” said Bruggemans, “but we don’t know the contribution of the global windfall. When that windfall finally falls away we will discover our real innate ability. “Just as India dreams of doing a China, so SA’s ambition is to achieve India’s performance. But both step-ups may be prevented by similar structural problems.” The Indians haven’t been shy to put a name to these problems, he added, with a previous Reserve Bank of India governor, Bimal Jalan, identifying the shortcoming as ‘reform paralysis’. What didn’t India do? “This is where the paralysis bit features,” Bruggemans said. “Absent were reforms concerning privatisation, disinvestment from public sector undertakings (thereby keeping fiscal deficits very high – still 10% of GDP), reform of the power sector, rigid labour laws, and a multi-layered administrative system (causing corruption and delay) leading to inefficient use of resources.” Here, SA shouldn’t have difficulty in identifying some of its own shortcomings, he added. “The strike weapon remains powerful, disrupting economic life even when facing intensified global competition - a kind of collective death wish? “In India, the political consensus to achieve the economic objectives through reform isn’t in sight - something we should have no trouble recognising in our own backyard.”