No good future for SA without growth – IRR

Comprehensive policy solutions that chart a viable path to economic growth in South Africa are contained in the first paper of the IRR’s updated Blueprint for Growth series, published today. 

The paper, Arming SA’s Pro-growth Forces, sets out the case for growth and the overarching policy solutions package that the Blueprint for Growth series promotes. 

In a webinar on the paper, its author, IRR CEO Dr John Endres, says: “Growth is really central to South Africa’s future. If we think about what SA can be, we can’t really think of a good future for South Africa without a growing economy.” 

Getting the economy growing, he argues, must begin with recognising the importance of one key indicator: Gross Fixed Capital Formation (GFCF). 

In South Africa’s case, the “low rate of GFCF is an expression of low trust in the investment environment”. 

“South Africa’s GFCF number has been going down over time,” Endres points out, adding that while SA’s post-1994 GFCF peak was in 2008, when it reached almost 22%, “currently we’re sitting at 14.9%”. 

To establish an investment-friendly climate, “the first and most essential (requirement) is to remove threats to property rights”, and thereafter overcome the “scourge of escalating crime” to ensure that property is safe. Combined, these steps would effectively improve the investment climate and “go a long way” towards getting the country growing. 

Moreover, by adopting policies geared to attracting investors, stimulating – and reducing threats to – business, growing demand for jobs, and creating an entrepreneur-friendly economic climate, it would be possible to lift the growth rate to 7%. 

Though this may seem “ambitious”, Endres says, “we think it does make sense to set a target, and that target should be a stretch target”; if achieved, it would enable South Africa to double the size of its economy in 10 years. At the present growth rate, it would take 54 years to double the economy, “and we would fall even further behind”. 

With the right policies in place to get the economy growing, South Africa stands to “really transform the country in a way that matters”, Endres concludes. 

The report can be accessed here.