As South Africa turns to a new elected leader in Cyril Ramaphosa, many question the direction he will lead the country economically. Following the economic downturn in 2008-2009, the economy of South Africa has more or less grinded to a halt. The unemployment rate has reached an alarming 27.7%, while GDP growth stands at a mere .7%. Among these trends, public debt is rising, real household income per capita has flatlined, inequality remains extremely prevalent, and social discontent is at large.
These recent negative economic actualities have caused many influential people to formulate different opinions on the steps that need to be taken. Some hold the feeling that economic leadership needs to lock down the economy in order to facilitate growth. This includes fiscal consolidation plans, reduction/expulsion of union power, and a deregulation of the markets. Other South African economists and scholars believe the solution lies in the exact opposite approach, calling for state-led industrialization, free tertiary/university education, and a more equal redistribution of land. In recent history, these questions regarding reform have struggled to reach an answer due to the lack of strong leadership and stakeholder involvement. The citizens of South Africa now turn to the new elected leadership and President Ramaphosa for a strong plan forward in hopes of sustained, healthy economic growth and development.
The institutional reforms are heavily debated and necessary, but other reforms are more clear. For instance, urbanization and investment in cities is something that would greatly improve economic productivity and quality of life. Many residents live in “informal settlements” which limits work opportunities because of location. The current cities suffer from racial divides and are not good options for living. While the universities and financial institutions are there, the development needs to be more inclusive. Investment into cities, urban areas, and developing a good blueprint for living and working would allow more people the opportunity for work and enhanced quality of life. This would result in a more productive economy and growth of GDP.
There are a couple more steps that can be taken in order to improve the livelihood of South african residents. The development and facilitation of agricultural lands would not only create more jobs, but also increase the food security in the nation. Along with facilitating agriculture, the energy sector of the country is currently monopolized by state-owned industries and prices are very high. If private ownership can compete in that market it would allow prices to drop for the entire nation.
Which approach would most improve South Africa’s economic development issues? Can President Ramaphosa rally the country behind him and prove his leadership skills? Would the investment in cities be the most beneficial investment for South Africa right now?
Sources: Andrew Donaldson, Project Syndicate