Corospondent - October 2019

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National Imperatives - October 2019

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Marie Antelme

Marie Antelme

Marie joined Coronation in 2014 as an economist in the Fixed Interest investment unit. She has 21 years' experience as a market economist.

Transformative policy paper needs strong implementation

The Quick Take

  • The emphasis must be on growth-promoting policy and improving employment
  • Public-private partnerships are key to unlocking growth and addressing social reform
  • Not enough attention was paid to supporting small to medium enterprises
  • We need political will to come to the fore for any hope of recovery 

In August, the National Treasury released a policy document for public comment. The document prioritises reforms that are expected to have maximum impact on growth, acknowledging that the lethal cocktail of low growth and rising unemployment is rendering South Africa’s economic trajectory unsustainable.

The paper also advocates reforms that will improve economic transformation, increase employment, boost competitiveness and support the expansion of export-oriented sectors of the economy. In addition, it highlights that “any attempt to raise South Africa’s potential growth rate must include progress on the fundamental building blocks of long-run sustainable growth”.

Some of the preconditions to success listed, such as a stable macroeconomic framework, are already in place. However, others, including improved basic education; relaxed immigration require­ments to address skills constraints; and a new social compact between government, the private sector and other social partners are not, and may pose significant political challenges to delivery. Additionally, the reforms themselves will take time to implement.


Positively, the document addresses several critical issues:

  • The most important feature of the document is its focus on growth. Without growth, South Africa will not have the resources with which to tackle social challenges, or an increasingly unsustainable fiscus.
  • It strongly advocates greater engagement with and inclusion of the private sector, broadly through a social compact and specifi­cally through several direct interventions.
  • It prioritises improving the competitiveness of domestic companies through cutting red tape; reducing the cost and increasing the efficiency of business and transport services; and a commitment to identifying and addressing issues that hamper the ease of doing business in South Africa.

While most of the content is not new, synthesising existing policy documents within the National Treasury as well as independently produced research by both local and international specialists over a significant period, the paper brings a wealth of insight into key issues that South Africa has so far failed to adequately address.


There are several shortcomings and omissions. For a start, the paper does not directly address labour market reform, despite this being highlighted as a considerable constraint to growth and improved employment.

It does make indirect references to the need to reduce the regulatory burden on small and medium enterprises, but they are arguably not enough. Ideas include exempting them from automatic inclusion in sectoral wage agreements and offering incentives to employ young people.

Also, while macroeconomic stability is an absolute precondition for microeconomic inter­ventions to succeed, the paper does not address fiscal sustainability in the short term, which is not only a practical constraint to growth, but is also essential to restoring confidence.


The publication carries with it a sense of urgency, not least of which is the way in which it was published by the National Treasury. Kickstarting economic growth is paramount, not only to stabilise the fiscus, but also to provide the economic resources with which to address South Africa’s crippling triad of poverty, inequality and a failed transformation agenda.

That said, it appears that this sense of urgency has not landed, and it is unclear how much political backing the recommendations will attract. If the ongoing delays in the provision of clear policy direction, notably for the failing state-owned enterprises that threaten both fiscal and growth outlooks, continue to undermine household and business confidence, the success of any new policy will be limited, and growth is likely to remain lacklustre.

We need broad consensus for this potentially trans­formative policy document to gain critical traction and then the momentum required for it to yield any success. Importantly, factional, ideological and perhaps even personal differences simply cannot be allowed to prevail at the expense of economic recovery.