Thu Oct 27 12:53:04 SAST 2016

cope will focus on innovation

By unknown | Apr 07, 2009 | COMMENTS [ 0 ]

Ido Lekota

Ido Lekota

Macro-economic policy has been too rigid and lopsided in favour of an excessive focus on monetary policy at the expense of industrial policy.

When attempts at aspects of industrial policy were made, for example Asgisa (Accelerated Shared Growth Initiative for SA), they were weak, uncoordinated initiatives that did not bring to the forefront a solution to the three interrelated barriers to South Africa's development and advancement, which are inequality, unemployment and poverty.

High inequality and poverty results in South Africa having a dysfunctional consumer market. The demand for specific goods is concentrated on commodities and services for either the extremely rich or extremely poor.

This means that domestic demand for a large variety of goods and services that we might be able to produce is limited by skewed and low demand. However, this issue could have been strengthening and focusing on SADC and Nepad to create a regional bloc to which South African firms supply goods. In the absence of this we are overly reliant on our exports of raw commodities which have a high price variability.

The government should have focused on the creation of small and medium enterprises which the Department of Trade and Industry has failed to support. This would have created a rich layer of entrepreneurs and small business owners, including cooperatives, which in turn would have created employment. Cope sees the development of SMMEs as a major policy to build skills, create employment and address inequality by encouraging the sector to ensure transformation.

Cope also believes that the government has been too lax on textile imports into South Africa while claiming to protect the industry, that is, the government has taken a half-hearted approach to protectionism without giving the clothing and textile industry adequate support and backup to make it competitive.

The reality is that if South Africa is a signatory to the World Trade Organisation, it means that aggressive protectionism is not really an option for the country.

Instead, we have to do what other countries are doing, which is to support and build industry through incentives and research and development. Cope would create support for training, research and development of the clothing and textile industry by, for example, giving lower rates of interest for investment into capital equipment and tax incentives for every job created.

Like the textile industry, productivity performance and modernisation have not been the cornerstone of government policy towards the automobile industry. Instead, the industry has operated on the basis of a hidden subsidy.

An efficient and competitive automobile industry might mean that we can attract companies which produce cars like the Tata Nano, which will find a much bigger and more stable market across Africa. We need to ask ourselves why isn't South Africa innovating and coming up with cheap and basic cars that would be within the reach of South Africans at large?

Why should we depend on importing other countries' technology? We should focus on innovation. Cope will focus on this type of strategic planning of individual sectors of the economy to maximise our potential in each one.

A big focus of Cope's economic policy is on transforming energy production into more clean and renewable energy. This, along with a focus on recycling, efficient use of resources and focus on the agri-sector, the services sector and the information technology sector, will create a more educated, trained and skilled labour force. This will benefit the entire manufacturing sector and diversify our economy. It will also leave workers less vulnerable to the vagaries of the global economy.

Finally, we need to be ready to cushion poor people against the additional fallout from the global contraction. This requires adequate budgeting for the additional people expected to fall into poverty. Social grants, other poverty alleviation programmes and extending the public works programme must ensure that help reaches rural areas sufficiently.

The government talks a good talk but it has not adequately budgeted for the coming crises or taken a serious and effective approach to ensuring that the public works programme acts as a reliable social safety net.


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