ASGISA : a study of the background to and challenges facing the new economic framework of the South African government

Wildenboer, Roux (2008-12)

Thesis (MBA)--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: The improvement of economic growth and development is a strategic priority for the South African government. It is important in all developing economies, but more so in South Africa due to the abnormally high levels of poverty, unemployment and income inequality. Substantive failure in addressing these circumstances may lead to social unrest in a democracy that is still in many respects in its infancy. AsgiSA is an initiative that was launched in 2006 as a further development on the first two developmental strategies followed post 1994, namely the Reconstruction and Development Programme and the Growth, Employment and Redistribution strategy. This research study sets out to examine the background to AsgiSA, its binding constraints and challenges facing the initiative. In doing so, the report draws comparisons with two other successful developing economies, namely Chile and Malaysia. These countries were chosen because of the social, economic and political similarities they share with South Africa. The report examines the concept of binding constraints as espoused by AsgiSA and focuses specifically on the volatility and level of the rand, the skills constraint and the regulatory environment. The research shows that there is no compelling evidence that a particular level of the rand should be targeted. The volatility of the rand is however a constraint to economic growth as represented by export growth. The shortage of suitable skills in the labour force is found to be a significant constraint to economic growth and development. The origin of this skills constraint is found in a combination of the economic and political history. South Africa's economic and political development path did not promote a diversified and skilled labour force which is well placed to capitalise on the opportunities of global trade. The lack of educational advances after 1994 has not improved this dilemma, and in recent years immigration has exacerbated the problem. Together with the skills constraint, the current regulatory environment acts as a significant constraint to economic growth. The regulatory burden is increasing and it was found that the burden is disproportionately carried by medium and small enterprises. A comparison with the successes of Chile and Malaysia shows that government has a very important role in facilitating economic growth in developing countries. Market oriented policies aimed at regulatory reforn, liberalisation and integration with the world economy lead to superior economic growth and development. The ability to change and even abandon strategies which prove to be unsuccessful and laden with ideology is required. AsgiSA is found to be a sound approach to economic growth and development in South Africa. With the exception of the level of the rand, the constraints identified all have significant negative influences on the economy. The document has however not been followed up with enough concrete and practical plans to give effect to its objectives. To ensure AsgiSA reaches its objectives it will be necessary for the government to act with political will and administrative competence in implementing the reforms that address the binding constraints. It is doubtful if the current government possesses the will and competence to give effect to the measures that will make a success of Asgisa.

AFRIKAANSE OPSOMMING: Die bevordering van ekonomiese groei en ontwikkeling is 'n strategiese prioriteit van die Suid-Afrikaanse regering. Belangrik vir alle ontwikkelende ekonomiee, is dit veral die geval in Suid-Afrika weens die hoe vlakke van werkloosheid, amnoede en inkomste ongelykhede. Wesenlike mislukking om hierdie probleme aan te spreek kan lei tot sosiale onrus in 'n demokrasie wat in vele opsigte in sy kinderskoene staan. AsgiSA is geloods in 2006 en is 'n uitbreiding van die eerste twee ekonomiese strategiee wat gevolg is na 1994, naamlik die Heropbou-en Ontwikkelingsprogram en die Groei-, Indiensneming- en Herverdelingstrategie. Hierdie studie het ten doel 'n ondersoek na die agtergrond van AsgiSA, die geidentifiseerde beperkings en die uitdagings van die inisiatief. Die studie tref vergelykings met twee suksesvolle ontwikkelende ekonomiee, naamlik Chile en Maleisie. Hierdie lande is gekies weens sosiale, ekonomiese en politieke ooreenkomste met Suid-Afrika. Die studie ondersoek die beginsel van bindende beperkings soos verval in AsgiSA en fokus op die vlak en wisselvalligheid van die rand, die gebrek aan vaardighede en die regulatoriese omgewing. Daar word bevind dat daar geen sterk bewyse is dat die vlak van die rand 'n langtermyn beperking op ekonomiese groei het nie. Die wisselvalligheid van die rand dien egter as 'n beperking op ekonorniese groei soos veral verteenwoordig deur groei in uitvoere. Die tekort aan geskikte vaardighede in die arbeidsmark is 'n wesenlike beperking tot ekonomiese groei en ontwikkeling. Die ontstaan van hierdie beperking is te wyte aan die ekonomiese en politieke ontwikkelingsgeskiedenis van Suid-Afrika. Hierdie ontwikkelingsgeskiedenis het nie gelei tot 'n gediversifiseerde en vaardige arbeidsmark wat die geleenthede van internasionale handel kan benut nie. Die gebrek aan vordering in die kwaliteit van opvoedkunde na 1994 en die huidige tendens van geskoolde immigrasie vererger die probleem. Tesame met die vaardigheidstekort dien die huidige regulatoriese raamwerk as 'n wesenlike beperking op ekonomiese groei. Die regulatoriese raamwerk dien as 'n las wat veral op klein en medium besighede ernstige beperkings plaas. 'n Vergelyking met die sukses van Chile en Maleisie toon dat regerings in ontwikkelende ekonomiee 'n belangrike rol speel in ekonomiese ontwikkeling. Markgerigte beleid gemik op regulatoriese hervorming, liberalisering en integrasie met die wereldekonomie lei tot hoer ekonomiese groei en ontwikkeling. Daar is ook getoon dat die vermoe om ideologiese beleid wat nie suksesvol is nie aan te pas of te laat vaar noodsaaklik vir sukses is. Die gevolgtrekking word gemaak dat AsgiSA 'n goeie vertrekpunt tot ekonomiese groei en ontwikkeling is. Met die uitsondering van die vlak van die rand het die geidentifiseerde beperkings 'n wesenlike negatiewe invloed op die ekonomie. AsgiSA word egter nie opgevolg met voldoende praktiese en konkrete planne om die doelwitte te behaal nie. Om te verseker dat die AsgiSA doelwitte behaal word is dit nodig dat die regering met politieke en administratiewe bedrewenheid hervormings deurvoer wat die beperkings aanspreek. Dit is te betwyfel of die huidige regering oor die politieke wil en bevoegdheid beskik om die nodige maatreels aan te gaan wat AsgiSA se sukses sal verseker.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/14907
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