This is the message delivered by David Lipton, the First Deputy Managing Director of the International Monetary Fund, speaking at the University of the Witwatersrand about ways of bridging South Africa’s economic divide.
Despite warning that South Africa is grappling with growth that is too slow to raise average living standards, “there are ways to tackle these economic problems,” he said.
“… it is deeply problematic that one-third of the working population is effectively excluded from the economy. Fortunately… as is often the case in economics, the root of your problems contains the seed of their solutions. Inclusion of the excluded one-third of South Africans could and should be a source of growth and dynamism for the generation to come.”
Lipton advocates a new approach to economic reform. One that is not merely a matter of tax cuts or spending increases. “Rather, it is a question of fundamental, transformational reforms that can boost employment – particularly for young people – reduce inequality, and promote economic inclusion.”
“This approach should focus not just on levelling the playing field, but opening up the playing field—for individuals and businesses.”
He admits that this will not be easy. “Tackling vested interests and promoting a truly inclusive economy will require buy-in from all stakeholders, and require stakeholders to take a long-term view of their interests in a more dynamic South Africa of the future.
In what he describes as ‘blueprints for change’, he lists some steps that will lead South Africa’s economy in the right direction. They are:
Lipton said even though many of these policy ideas “fly in the face of established interests”, the challenges facing South Africa call for reforms that create opportunities and enable all people to successfully pursue them – particularly the excluded one-third.
“The primary goal must be to re-energise growth by seeking inclusion and job creation. As I have outlined, that will require filling infrastructure gaps, encouraging more competition, reaching agreement on sensible labor market policies and industrial relations, improving education and training, and insisting on better governance.
“These reforms must be undertaken with the same commitment that this nation brought to democratic change. This is how South Africa can build stronger, inclusive growth – with jobs for its young people. This is how South Africa can serve as a beacon of economic change, just as it once emerged as a model for political change. While the politics of the moment may favour the status quo over sweeping change, it is helpful to recall Nelson Mandela’s wise reminder that: ‘After climbing a great hill, one only finds that there are many more hills to climb’,” he said.