Monitoring and Evaluation: The National Heroes

In 1985, a movie starring Mel Gibson called Mad Max III (Beyond Thuderdome) was released; it was a post-apocalyptic saga that formed part of the Mad Max trilogy. The movie’s soundtrack was a song by Tina Turner, titled “We don’t need another Hero (Thunderdome)”. Well, South Africa is not a post-apocalyptic wasteland, but the country can learn a few things from Tina Turner’s song. The words of this song remind us that sometime new strategies (or new heroes) are not always necessary to solve age-old issues, but rather clear-minded review of the existing programmes.

The national government is currently flying the flag of the New Growth Path (NGP) and the National Development Plan (NDP) Vision 2030. The NDP is the blue print for all of South Africa’s national state departments driving towards the year 2030. A clear direction to lead South Africa is necessary, but what of the strategies of the former administrations. Are there lessons that can be learned from previous initiatives, rather than just aggressively marketing a new path?

Any newly elected president brings their own perspective, a new way of doing things and a few new projects. Surprisingly in South Africa’s case, the previous four presidents (Mandela, Mbeki, Motlanthe and Zuma) all came from the same political party, yet we see very little consistency in their actions and virtually no follow through from their predecessors (there are many reasons why that is the case, but I’m not going to dwell on that). The current administration of President Jacob Zuma is still battling with the same problems that were experienced during the Mandela and Mbeki eras: problems such as inequality, unemployment and an aging infrastructure.

Former programmes such as the “Reconstruction and Development Programme” (RDP), “Growth, Employment and Redistribution” (GEAR) and the “Accelerated and Shared Growth Initiative of South Africa” (ASGISA) are currently shelved (Sanlam 2013), but there remains very little literature that reviews the success or failures of these erstwhile measures. In their times, these programmes of action are touted as new plans meant to save poor South Africans from their dire situations. With much media hype, the proposals are flaunted as ‘national heroes’ created to save South Africa and make the country great – the present NDP is no different.

Currently, there is a lot of media attention surrounding the government’s National Infrastructure Plan (NIP), because it is in line with the New Growth Path. With the NPI, the South African government plans to spend ZAR 827 billion, over a period of three (3) years, for infrastructure upgrades nationwide (South African Government 2013). That is an expenditure of nearly a trillion Rands that is aimed at creating jobs, improving infrastructure, linking multiple industries and stimulating the economy (that’s a lot of money by any measure). Spending on development is a good idea; of concern is not how much money is being spent, but rather how it will the funds ultimately be used. We have seen many new major projects in the past, but publicly available reviews of the progress of previous projects and monitoring mechanisms remain scarce.

The concept of the NDP is nothing new to South Africans; it is but a new hero following in the footsteps of previous heroes (such as RDP, GEAR and ASGISA). It is the new catch-phrase used to excite the masses and entice the media. It is uttered in the same breath with other new-age ideas that include “the green economy” and “integrated development projects”. Is the NDP a new way to deal with old problems? Is this new initiative the government’s way of separating itself from its predecessors in order to chart its own course? Or is it a way to way of throwing new money at old problems?

Unfortunately the numbers do not speak well of these ‘national heroes’; the unemployment rate, poverty and inequality show us that very little progress has been made. The National Development Plan (NDP) has been heralded as South Africa’s road map for the next 20 years (All Africa 2013), but I am afraid that during the next 20 years a new administration will be in place to announce yet another new plan to try to solve the same old problems.

All Africa (2013), “NDP Is South Africa’s Roadmap – Zuma” (14 June 2013), Retrieved July 7, 2013, from allafrica.com, Website: http://allafrica.com/stories/201306140799.html

Sanlam Investor and Economic Relations (2013), “How new is the New Growth Path really?”, Retrieved July 7, 2013, from sanlam.co.za, Website: http://www.sanlam.co.za/wps/wcm/connect/sanlam_en/Sanlam/Investor%20Relations/Economic%20Information/Economic%20Commentary/How%20new%20is%20the%20New%20Growth%20Path%20really?presentationtemplate=Shared/PT-Print

South African Government Information (2013), “National Infrastructure Plan” (04 June 2013 16:19:57), Retrieved July 6, 2013, from info.gov.za, Web site: http://www.info.gov.za/issues/national-infrastructure-plan/index.html

Job Creation: Another Government Urban Legend

The South African government has a few inexplicable phenomena that seem to be carried over from one administration to another: such as poverty, unemployment and the chronic skills shortage. To explain their way out of the unemployment problem, the current administration enjoys throwing around a popular urban legend, “job creation”, to pacify the rioting masses. The national government has committed itself to eliminating poverty, fighting inequality and reducing unemployment. In this regard, President Zuma is quoted saying: “We intend to create 4.5 million jobs”, when referring to the extended public works programme (South African New Agency, 2013). Many of the participants of the extended public works programme can be found in towns such as Mahikeng and Carlentonville, in bright orange overalls, with sickles in their hands and cutting dry grass on the side of the road – but can these be seen as real jobs.

I am of the opinion that the concept of “job creation” needs further scrutiny: How is a job “created”? What is the ultimate goal once jobs are “created”? Is it possible to measure the value added once a job is “created”? What is the effect on the broader economy if a job exists without its intrinsic value being established from the very beginning? (If I decide to hire someone, then pay them ZAR 4.50 a day to open up and switch on my laptop every morning, and call him a Personal Computer Operator, can that be considered job creation? Considering that I can switch on my computer without needing any assistance.)

Some time ago, there was an article on Fin24 (2013) that highlighted Anglo Gold’s intention of automating some of its operations. The article describes this as a blow to the mining industry, due to the potential job losses because systems and machinery will replace people. Automation in this sector is nothing new, but it raises questions on how “Productivity VS Employment” is viewed. Increased economic growth (or increased output) does not necessarily equate to a decrease in unemployment, because introducing technology that allows more to be done with fewer people, eventually leads to job losses. Although within the manufacturing sector, improved technology has the benefits of increased output, lower input prices, standardization of products and can even improve the quality of the goods produced. Instead of looking at the negative aspects, in the light of job losses, the question beckons as to whether automation could actually be beneficial to the labour-market in the long-run.

South Africa’s financial services sector has embraced technology and this has helped the tertiary sector to become the country’s leading contributor to GDP. The focus of this sector has been more on the value added and the client experience. Banks try to make the lives of their clients easier by using improved internet banking, self-service channels and paperless processes. This has lead to a lower head-count (less branches and administrative staff), but it improves efficiency, productivity and the over-all client experience. Insurance companies have increasingly used internet services points to administer quotes and claims, in order to offer clients a 24hr daily service. This is an example of how technology has actually contributed to economic growth (in the long-run) that can actually be seen in the final GDP numbers.

On the other hand, South Africa’s manufacturing industry has suffered greatly at the hands of cheaper Asian imports, but that sector needs to find other ways of being more competitive (other than competing price alone). Greater investments in research for the engineering, technology and other similar fields are necessary to become globally competitive. No matter how well meaning a job creation strategy is, companies (and industries subsequently) need to become more productive and competitive, otherwise they will suffer in the face of competition (as seen in the local manufacturing sector). Once competitive, the growth of these companies would require them to hire more people – the value added, output and competitiveness should be considered first before job creation. I am of the opinion that jobs should not be created, but rather productivity and competiveness should be allowed to yield growth and employment.

Unfortunately, the success of the services industries cannot be directly translated to manufacturing and other sectors directly. A highly skilled workforce, investment in research, constant development of processes and the optimal allocation of financial resources is needed. South Africa already has the natural resources, basic infrastructure and a sophisticated financial industry necessary to become more productive, the only outstanding issue is skills within the labour-market. It is thus important to view the country’s unskilled labour force as an untapped opportunity for growth, rather than a hindrance to development.

President Zuma said that South Africa should reach full employment by 2030 (Pillay, 2013); the truth is that the jury is still out on whether or not this goal is an attainable one (it is not clear, in his speech, if the president himself fully understands what full employment entails). Most of the Zuma administration would have retired by 2030 and none of them would be around to answer questions if full employment is not achieved – but that would be a problem for the new administration to answer, with the proverbial urban legend… “job creation”.

Sources

Fin 24 (2013), “AngloGold chooses machines over people” (13 May 2013), Retrieved June 27, 2013, form fin24.co.za, Website: http://www.fin24.com/Companies/Mining/AngloGold-chooses-machines-over-people-20130513

Pillay V. (2013), “Zuma briefing turns into electioneering” (24 June 2013), Retrieved June27, 2013, from mg.co.za (Mail and Gaudian), Website: http://mg.co.za/article/2013-06-24-zuma-briefing-turns-into-electioneering/

South African News Agency (2013), “Zuma details job creation in address” (10 February 2011), Retrieved June 27, 2013, from sanews.gov.za, Web site: http://www.sanews.gov.za/south-africa/zuma-details-job-creation-address

BRICS Summit Durban, 2013: Are these the Right Building Blocks?

Zapiro is South Africa’s most popular political satire cartoonist, and I recently spotted one of his works that highlighted the 2013 BRICS summit that was held in Durban, South Africa. The comic showed South Africa as a little puppy running ahead of the other BRICS members, that was held on a leash by the Chinese President Xi Jinping (Shapiro, 2013: see the link below). The piece shares an interesting opinion on the relationship between South Africa and the other BRIC member countries. Now that the summit has drawn to a close, and the international delegates have returned home, it is a great opportunity to take thoughtful look at South Africa’s role beyond the summit.

The BRIC countries were first noted in a Goldman Sachs journal that identified Brazil, Russia, India and China (BRIC) as the world’s leading emerging market economies (Global Portfolio Strategy, 2009). In the years following the 2008/09 global financial crisis, the BRIC countries became more notable because emerging market economies were experiencing growth, while many of the industrialized economies were shrinking and feeling the full effects of the recession.

South Africa is a major regional player in Africa, but it remains unclear whether it should be grouped together with countries like India and China. I am of the opinion that the BRICS group (BRIC including South Africa) of countries makes more sense as a measurement of the progress of emerging markets, rather than a global network partnership. There remain too many ideological and cultural differences among these countries for any meaningful collaboration. As things stand, South African intends to align itself further with the group and even commit to group’s idea of a BRICS-funded development bank. Firstly, it is important to take note the traits and any similarities that bind the BRICS group members together – as they show intentions of future partnerships. Secondly, South Africa needs to carefully examine both the economic successes and institutional voids of the other BRIC members, in order to create its own success while avoiding structural inefficiencies found in their home countries.

With the media hype surrounding the BRIC countries, it is easy to start thinking that they are the new economic powerhouses the 21st century. Certainly the numbers speak for themselves, the size of the BRIC economies rival the old superpowers in the top 10 list of the world’s largest economies – China is 2^nd, Brazil is 6^th, Russia is 8^th and India is 10^th (Bergman, 2013). The BRIC members also have very large populations, which make them very attractive as potential markets for suppliers of consumer goods. Unfortunately, South Africa is far off the mark when it comes to these two (and other important) measurements.

Although South Africa looks like the little guy in the room, but in fact, its GDP per capita is higher than that of China and India (World Development Indicators, 2013). It is also important to note that South Africa’s financial service industry is one of the most sophisticated in the world. The numbers start looking a lot better when you compare South Africa with other developing countries outside of the BRICS framework – especially in Sub-Saharan Africa. The truth is that although the BRIC members have made many positive steps in international trade and economic growth, they all still face domestic issues of poverty, unemployment, low literacy rates and institutional voids (Khanna, Palepu & Carlsson, 2005).

Assessing the BRIC countries purely based on their GDP numbers is limiting, because they are defined as developing countries purely based on the fact that they still possess structural inefficiencies (Khanna, Palepu & Carlsson, 2005). Any other developing nation that chooses the BRIC’s “path to economic success”, faces the danger of experience economic growth without dealing with structural market inefficiencies or improving on the nation’s living standards. Thus, it is necessary to not only judge developing countries on their GDP growth, but also using other softer metrics – such as ease of doing business, access to basic services and income distribution.

Institutional voids occur when a country’s (trade or judicial) institutions that are supposed to deal with elements of market failure are inadequate. The three main sources of market failure are unreliable sources of market information, uncertain regulatory environment and inefficient judicial system. In practice, this is when institutions that are supposed to ensure the flow of trade and optimal use of resources by protecting both the buyers and sellers, are found to be substandard. South Africa has comprehensive regulatory bodies across all industries, but these bodies do not reach all sectors of the economy (especially the informal trade activities). These institutional voids continually hamper efforts to develop and industrialize South Africa’s local economy.

If South Africa to reach the level of its BRICS counterparts and to grow its economy, it is therefore important to carefully examine its own basic market structures a gear its economic development fundamentals towards growth. This means that South Africa  needs to convincingly deal with its own institutional voids to cover informal trade, as it continues its efforts to industrialize.

Sources

Bergman, A (2013), “World’s Largest Economies”, CNN Money, Retrieved: http://money.cnn.com/news/economy/world_economies_gdp/

Global Portfolio Strategy (2009), “The BRICs Nifty 50: The EM & DM winners” (4 November 2009), Goldman Sachs

Khanna t., Palepu K. & Carlsson K. (2005), “The Nature of Institutional Voids in Emerging Markets” 2005 (Note: 106-014), Harvard Business School Publishing

Shapiro, J (2013), “Zuma’s Leading Role in BRICS” (Date: 28 May 2013), Retrieved: www.zapiro.com/cartoon/1571937-130328tt

World Development Indicators (2013), “GDP Per Capita”, World Bank Group ©2013, Retrieved: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD