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OUR UNIQUE CHALLENGE Effective transformation requires our economy to grow South Africa achieved a miraculous political transformation in 1994. Our challenge now is to repeat the miracle with a similar feat of economic transformation. Transformation of our economy is critical and real progress is being made. Our Government has created a much more stable macroeconomic environment. The economy has grown by 3.1% per annum since 1999. Real GDP per capita has grown by at least 1.3% over the period, (1) reversing a long-standing negative trend. Government is also making progress in driving the process of transformation. We now have a Strategy for Broad-Based Black Economic Empowerment, supported by industry specific charters (e.g. Mining). Already a company’s transformation credentials are being used as a key criterion for awarding Government contracts. However, our economy’s growth rate must increase if we are to achieve the target set at the recent Growth and Development Summit to halve unemployment from 30% to 15% by 2014. This will require economic growth of 5% per annum, (2) bringing South Africa up to the level of prosperity of the Czech Republic today, by 2014. (3) page 11
Successful transformation requires growth. In the absence of growth, true grassroots delivery is difficult, if not impossible, to achieve. Eastern Europe, which also had to effect a major shift in economic ownership, provides a case in point. After the “fall of communism”, countries took diverse approaches to liberalising the economy, resulting in different rates of growth. The rate of growth, and its relationship to a country’s ability to sustain its level of social equality, is shown in Figure 1. Social equality is measured by the Gini coefficient, a measure of how evenly income is distributed across a population. Countries that achieved the highest growth rates, such as Poland, were better able to distribute the benefits on a more equitable basis. Fig. 1. Transformation without growth constrains grassroots delivery (4) ABILITY TO SUSTAIN SOCIAL EQUALITY (CHANGE IN GINI COEFFICIENT) LIMITED DELIVERY • Growth stunted - Limited liberalisation - Limited restructuring through privatisation - Fall in productivity • Created no fiscal capacity to offset social costs of transformation 0.0 POLAND ROMANIA SLOVENIA HUNGARY 0.1 LITHUANIA CZECH REPUBLIC BULGARIA RUSSIA 0.2 UKRAINE -15 -10 -5 0 5 10% AVERAGE GDP GROWTH (1991 -1998) GRASSROOTS DELIVERY • Growth stimulated by: - Liberalisation - Privatisation on commercial basis - Aggressive FDI incentives • Created fiscal capacity to offset social cost of transformation page 12
Page 1 and 2: BRENTHURST DISCUSSION PAPER 8/2007
Page 3 and 4: INTRODUCTION By NICKY OPPENHEIMER E
Page 5 and 6: South Africa’s economic advanceme
Page 7 and 8: to transformation, could become an
Page 12 and 13: And this is the nub of the challeng
Page 14 and 15: Fig. 2. Perceptions of risk constra
Page 16 and 17: Investors were reacting to what the
Page 18 and 19: measures aim to ensure that our app
Page 20 and 21: standards for transformation, appli
Page 22 and 23: China, for example, has used a mix
Page 24 and 25: Africans no longer see value in mak
Page 26 and 27: Fig. 5. Sizing the BEE funding requ
Page 28 and 29: • Establishing incentives to crea
Page 30 and 31: What is certain is that inaction is
Page 32: Acknowledgement We would like to th

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