Political Economy of Development: South Africa since … · Introductory Observations: 1. Despite...
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Presentation for : Harold Wolpe Conference: Re-Visiting The Political Economy of Social Change in Contemporary South Africa Political Economy of Development: South Africa since 1994 14 June, 2012, Liliesleaf Farm, Rivonia, Johannesburg By Dr Iraj Abedian Pan-African Investment & Research Services (Pty) Ltd.
Transcript of Political Economy of Development: South Africa since … · Introductory Observations: 1. Despite...
Presentation for : Harold Wolpe Conference:
Re-Visiting The Political Economy of Social Change in Contemporary South Africa
Political Economy of Development: South Africa since 1994
in Contemporary South Africa14 June, 2012,
Liliesleaf Farm, Rivonia, Johannesburg
By
Dr Iraj Abedian
Pan-African Investment & Research Services (Pty) Ltd.
Outline
� Introductory Observations
� 1994: The Starting Point Status
� Key Trends since 1994
Slide # 2
� Key Trends since 1994
� Concluding Remarks
Introductory Observations
Introductory Observations:
1. Despite 15 years of uninterrupted growth(1994-2008), the triple
evils of structural unemployment, widespread poverty, and gross
inequality persist.
2. Whilst considerable ‘poverty alleviation’ has taken place, the
systemic roots of poverty remain in place.
3. Whereas considerable and unprecedented wealth has been
Slide # 4
3. Whereas considerable and unprecedented wealth has been
created since 1994, the mal-distribution of income has worsened.
4. Despite the democratic nature of the government, the citizens’
discontent persists
5. SA’s current political economy configuration is unsustainable,
given that there is no credible solution offered.
6. Increasingly, the focus is more on the form than the substance.
1994: Starting Point Status
Note: Initial endowment matters a great deal.....
The Starting Point Status in 1994:
1. Macroeconomic conditions were dire with deep instability.
2. Fiscal stress, high inflation, high nominal interest rates, negative
forex reserves, low tax morality, rising public debt, and weak
revenue collection ability.
3. Global macro-financial conditions were volatile, but SA had
favourable support due to “ historic peaceful transition”.
Slide # 6
favourable support due to “ historic peaceful transition”.
4. Legitimate expectations of diverse groups soon translated into
contested moralities and interest groups’ claims and aspirations.
5. “Project Normalization” of the SA political economy began on the
platform of a tortured history laden with the remnants of
colonialism, racism and class struggle.
6. Ideological contestations were confronted by the obstinate reality.
The Overwhelming Macroeconomic Concern
Slide # 7
The Starting Point Status in 1994 (II):
7. The new government had high aspirations, considerable moral
and political authority, but little experience.
8. The state was fractured, technically unfit to cope with the
potential demands on its services.
9. Furthermore, the emerging constitutional dispensation was
foreign to the culture of all stakeholders, old and new!
Slide # 8
foreign to the culture of all stakeholders, old and new!
10. Institutionally, the entire framework had to be redesigned and
developed…
11. In short, SA was much like an airplane that had to be fixed during
flight! There was no luxury of time, or prior experience!
Key Trends Since 1994
Key Trends Since 1994
Pro-Poor Policies.....
Trends since 1994: Number of Welfare Grant Recipients
1000
3000
5000
7000
9000
11000
13000
15000
17000
Panel (a): Total Number of Grant and Pension Recipients ('000)
10
15
20
25
30
35
Panel b: Total Grant and Pension Recipients (as % of Population)
Slide # 11
-1000
19
96
/97
19
97
/98
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/99
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99
/20
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20
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/15
Projected Revised Total Grant and Pension Recipients ('000)
0
5
19
96
/97
19
97
/98
19
98
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19
99
/00
20
00
/01
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/15
Projected
Trends since 1994:Welfare Spend and GDP Ratio
2.5%
3.0%
3.5%
4.0%
70000
90000
110000
130000
Figure 2: Value of Welfare Grant Budget and as a % of GDP
Slide # 12
0.0%
0.5%
1.0%
1.5%
2.0%
-10000
10000
30000
50000
20
00
/01
20
01
/02
20
02
/03
20
03
/04
20
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/05
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/06
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/08
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20
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/11
20
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/12
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/13
20
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/14
20
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Projected Revised Value in Rands (million) (LHS) As percentage of GDP (RHS)
Trends since 1994:Selected Indicators of Poverty Alleviation
75.0%80.0%85.0%90.0%95.0%100.0%
9000
10000
11000
Households with piped water in dwelling or on site
75.0%80.0%85.0%90.0%95.0%100.0%
9000
10000
11000
Households using electricity or solar energy as fuel source for cooking
Households with piped water
Households with electricity or solar power
Households in Formal Dwellings
Slide # 13
0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%55.0%60.0%65.0%70.0%75.0%80.0%
0
1000
2000
3000
4000
5000
6000
7000
8000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Number ('000) Proportion
0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%55.0%60.0%65.0%70.0%75.0%80.0%
0
1000
2000
3000
4000
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6000
7000
8000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Number ('000) Proportion
Key Trends Since 1994
Pro-Elite Policies & Interventions...
Trends Since 1994:Pro-Elite Policies and Interventions:
1. “Project Normalization” entailed interventions necessary from a
political economy perspective, but all with unintended
consequences.
2. The Employment Equity Act (No. 55, 1998), The BEE legislations,
and subsequent BBBEE amendments, the policy of “cadre
deployment”, the politicization of SOEs, are but examples of
Slide # 15
deployment”, the politicization of SOEs, are but examples of
interventions that have had considerable pro-elite outcome.
3. The extension of pro-elite into the public sector’s procurement
system evolved into a culture of “tenderprenuership”- with
systemic corruptive damage.
4. Globalization of the economy further benefitted the elite, and
exacerbated the anti-poor systemic fault-lines….
Key Trends Since 1994
The Upshot for Political Economy Scene......
Trends since 1994:Income Distribution Patterns Worsened
Per Capita Income Gini Coefficient in South Africa
Aggregate Black African Coloured Indian White
1993 0.67 0.55 0.43 0.46 0.42
Slide # 17
2000 0.67 0.61 0.53 0.50 0.47
2005 0.72 0.62 0.60 0.58 0.51
2008 0.70 0.62 0.54 0.61 0.50
___________________________________________________________________
Source: PSLSD (1993), IES (2000, 2005) and NIDS (2008): Calculations by Leibbrandt, M. et al.
1. Policy focus has been on poverty alleviation not on poverty
eradication.
2. Sources of poverty perpetuation are allowed to persist. These
are:
a) Failed education and training policy (HRD framework) in the face of rising
skills-intensity of the economy….
Trends since 1994:Why Poverty Trends Persist?
Slide # 18
skills-intensity of the economy….
b) Inefficient public sector operations…
c) Over- politicization of the public sector at all levels of management.
d) Rampant abuse of public resources via corruption as well as wastage.
3. The emergence and deepening of “value deficit”; driven by ever-
spreading ‘duality of values’ across the society.
4. The technology meanwhile drives automation….
The economy has become more automated..
45.0
50.0
55.0
60.0
% of GDP
Slide # 19
Source: South African Reserve Bank
20.0
25.0
30.0
35.0
40.0
45.0
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Compensation of Employees Gross operating surplus
Concluding Remarks
1. The political economy of development is complex and often
unpredictable, riddled with domestic and external tensions.
2. South Africa’s developmental path is captured by short-term
political dynamics.
3. The old structural factors are compounded by the new and
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more complex dynamics of factionalism, political ideology
and sheer personal greed.
4. There is a need for an inspired leadership across the various
social stakeholders if these obdurate political economy
issues are to be resolved.
Thank you for your attention
Slide # 21
Trends since 1994:
Slide # 22
