Implementing the National Development Plan 2030 is essential for future stability
Structural unemployment and inequality in South Africa are a toxic mix that could undo progress in Africa's largest economy.
The South African Reserve Bank has slashed the country’s short-term growth forecast for this year from an initial 2,8% to 2% – a figure similar to the International Monetary Fund’s latest predictions. Brought on largely by labour unrest, predicted electricity shortages and a less favourable global environment, this revision is not good news and should serve as a wake-up call for South Africa.
The National Development Plan 2030 (NDP), the blueprint on how to achieve a more equal and prosperous South Africa, sets an average economic growth target of 5,4% up to 2030 – more than double the 2012 growth figure. A new African Futures Project paper (by Jakkie Cilliers and Hanna Camp) argues that a number of the education and infrastructure targets in the NDP are achievable even with lower growth rates than those demanded by the plan.
The analysis used an integrated modelling approach – the International Futures (IFs) global forecasting system – to examine South Africa’s possible futures both on its current path (the Base Case) and in a high-growth scenario.
The Base Case forecast in IFs paints a pretty optimistic picture at first glance. In summary, it expects that South Africa could grow at an average of 3,4% a year for the next two decades – globally quite a robust figure, if substantially lower than much of the rest of sub-Saharan Africa. At that growth level, IFs finds that throughput rates for primary, lower secondary and upper secondary education all increase, with an overall rate of 88% by 2030. Access to grid electricity among the general population is estimated to reach 91% in 2030, just over the plan’s target of 90%, while access to safe water reaches 95%, just below the target of 100%. These results are driven by historical relationships between gross domestic product (GDP) and demand for education and infrastructure, as well as South Africa’s own circumstances and governance patterns (a detailed discussion of the methodology can be found here).
However, South Africa cannot afford to trundle along at this relatively steady if unspectacular pace into the future. The implementation of the NDP is crucial. Without narrowing the huge gap between rich and poor, South Africa’s stability will be at risk as structural unemployment and inequality, already among the highest in the world, become a toxic mixture that could undo progress in Africa’s largest economy.
Proper implementation of the NDP would restructure the economy and could put the country onto a sustained higher growth path. This would break the ‘middle-income trap’; the term economists often use to label South Africa’s current predicament.
South Africans need to step back and take a hard look at where the country is in its development trajectory, and at the NDP, and consider the implications of the current development path. The NDP is ambitious and rightly so. However, it has now become controversial among labour and potentially big business. In the case of the former it calls for relaxing stringent labour regulations, while in the case of business South Africa needs to change a structure that favours big capital above small business.
The NDP’s goals cannot be achieved unless there is a move away from a capital-intensive economy, with more flexibility in the labour market, and unless delivery and efficiency in education is sorted out and the country transforms from an incapable to a capable state.
The quality of South Africa’s future growth is thus very important. It is also clear that the National Planning Commission (NPC), which drafted the NDP, believes that faster economic growth is a prerequisite for reducing unemployment and alleviating poverty. It says: ‘The best way to generate resources to implement the plan is to grow the economy faster. If the economy grows by more than five per cent a year, government revenue and the profits of private firms will more than double over the next 20 years.’
I would agree with with this analysis, and the paper emphasises the associated challenges. At the time the NDP was drafted, in 2011/2012, it was clear it would be extremely difficult to achieve such ambitious growth rates. No-one should underestimate the difficult choices that lie ahead.
This article is based on a recently published ISS paper: Highway or byway? The National Development Plan 2030. The paper will be launched at the ISS’s Pretoria office on 14 August 2013.
Jakkie Cilliers, Executive Director, ISS. Edited by Liesl Louw, ISS consultant.
