Strides towards becoming a developmental state
Let us have a look at the strides towards becoming a developmental state that South Africa needs to go through. Developmental states use the various resources at the disposal of a nation, to meet the needs of citizens through economic growth and social development. Certain prerequisites must be met for a nation to become a developmental state. It must have the strategic, organizational and technical capacity to implement its goals and objectives, through alliances with all its stakeholders.
It is very critical that government must actively involve all social partners (labour, industry, communities etc), in the creation of shared goals and values. South Africa aims to use this model of a developmental state, to realize the exponential economic and social development growth that has been achieved by countries like China, Japan and India through the use of this model.
South Africa, because of an abundance of certain resources and some advanced sectors in the economy, has the potential to reach those heights and beyond. However, there are also several structural and institutional inefficiencies that sabotage the attainment of this goal.
Before recommendations can be made on how government, in coordination with all stakeholders, could guide the nation into becoming a fully-fledged developmental state, it would be prudent to first assess some of the challenges that the country faces that could hinder this plan from coming to fruition. Besides the fiscal problems faced by important trading partners like Europe, South Africa has been experiencing a wave of labour market turmoil, causing labour productivity to continually plummet.
The education system is also not supplying enough skilled labour, not at a rate that is conducive for economic growth to take place more efficiently. In the midst of these disturbing developments the state is attempting to tackle the problem of high unemployment, which stands at 25%, through concentrating on the creation of more labour intensive jobs, which if recent history is anything to go by are very susceptible to the various forms of industrial action.
Between 2010-2011 the agricultural sector’s contribution towards the GDP shrunk by 0.4% and last year(2012) mining giants Amplats recorded an unprecedented R6.3 billion loss for 2012. Countries like China and India have a competitive advantage because they have a much larger labour forces and their regulations and labour laws are more flexible, so their governments can afford to improve economic performance through formulating policies which focus on labour intensive sectors.
Another stumbling block in the nation’s ambitions is the prevalent public officials’ corruption which sometimes manifests itself in low service delivery, diversion of state funds for personal use by the bureaucracy and most importantly, loss of confidence in the system from the society. As mentioned before stakeholders and social partners are the cornerstones of achieving this developmental state aspiration.
Historical data from countries which became successful developmental states shows that the society understood that they would have to sacrifice instant gratification and were actually making an investment that could possibly only be enjoyed by future generations. The people trusted their government to guide them to this shared vision honestly and diligently.
This unfortunately is not the case in South Africa where the society has grown more and more impatient with a government that seems to have overzealous economic plans and projections, plus is prone to making some unsustainable promises. If South Africa is to achieve her goals of constant substantial economic advancement then the state must guide the nation into this growth through focusing on the sectors that the country excels in.
The drop in the production levels of the agricultural and mining sectors cannot only be attributed to labour market problems exclusively. This drop is also an indication of how much the economy has advanced. Secondary and tertiary sectors have become prominent. This is where South Africa is making great strides and should shift resource allocation to.
If the developmental state is ever to materialize then the manufacturing, financial and services sectors will play the most prominent roles as these are currently the biggest contributors towards the GDP. In 2011 the services sector contributed 65.9% towards the GDP, industrial sector contributed 31.3% (of which manufacturing made the largest contribution) and the agricultural sector contributed a modest 2.5%.
The manufacturing industry is not only well established but also very capable of competing in global markets. Most importantly it stimulates growth in other sectors through improvement in efficiency by providing the latest cutting edge technologies. It can also substantially enhance economic growth and development as it absorbs a large amount of labour. In 2008 it was the second highest sector in terms of GDP contribution. The efficiency of this sector has attracted several internationally renowned corporations.
The financial sector is a pillar of the South African economy. It has made the largest contribution toward the GDP for over 10 years now. It is at par with the financial sectors of developed economies and exhibits high levels of transparency and accountability.
This sector is well regulated by different bodies which ensure it is run prudently. Despite low confidence in global markets, South Africa is ranked in the top 3 in terms of financial market development and accountability. The Johannesburg stock exchange is ranked 18th worldwide and the South African banking sector is held in high regard because of the resilience it shows and prudent running which ensures that it is less vulnerable to the kind of shocks that were experienced by the Eurozone.
South African business enterprises have become more and more capital intensive, so there is very little rationale for government to focus on industrial policy and labour absorbing sectors to achieve growth. The recent unrest in labour markets coupled with low productivity of labour makes these efforts seem futile. There should be a paradigm shift from this way of doing things to concentrating more on the further development of sectors in which the country has significant advantages.
The government must also not underestimate the importance of making the people buy into this idea of a developmental state. Confidence in the public must be restored, otherwise the strides towards becoming a developmental state that need to be accomplished will never materialise.