The National Development Plan (NDP) put forward by the National Planning Commission in support of its Vision for 2030 is a wide-ranging document that deserves serious consideration. A comprehensive response to the NDP would go far beyond the limits of this commentary series, and I therefore limit myself to a few comments on the economics underlying the report.
The focus of the NDP is on the challenge of reducing poverty and inequality in South Africa, as is to be expected. It acknowledges the intermediate trade-off between eliminating absolute poverty and reducing relative poverty/inequality as inevitable once one recognises the importance of economic growth as a necessary, although not sufficient, condition for reducing poverty. There are numerous examples indicating that accelerating growth often goes hand in hand with increased inequality.
The NDP then comes down firmly on the side of eliminating absolute poverty as the first priority. In contrast to the vision of poverty, defined with reference to a poverty line of R419 (in 2009 prices) per person per month, being eliminated by 2030, the NDP envisages a still relatively high level of inequality at that point in time, with the Gini coefficient expected to decline from 0,7 to 0,6.
Although the NDP proposes a rather utopian vision (poverty eliminated by 2030, aided by the creation of 11 million jobs on the back of growth averaging 5,4% per annum), it does display a remarkable willingness to face up to the hard reality of the challenges confronting South Africa. It is particularly frank about the need to vastly improve the capacity of the state in implementing policy and it pulls no political punches in identifying the requirements for this goal to be achieved.
The NDP puts a lot of emphasis on the need for social cohesion for its vision to be realised, and it therefore not surprisingly displays a willingness to reach compromises across different ideologies and between opposing interest groups. This is specifically applicable to the economic strategy underlying the NDP.
The NDP could easily have been positioned as an alternative to the New Growth Path (NGP), given the latter’s lack of evidence-based reasoning, but it goes out of its way to avoid confrontation by incorporating much of the thought contained in the NGP into its own reasoning and softening the discrepancies between the two approaches. However, it does challenge the NGP’s blind faith in the state as the key role player in the quest for economic advancement.
The NDP is clear in its vision that the private sector is the key role player in the economy. It inter alia acknowledges that government lacks the fiscal capacity to finance South Africa’s vast infrastructure needs beyond building schools and hospitals, requiring much greater use of public-private partnerships in removing key logistical bottlenecks. It also proposes ameliorating the capacity problems in local authorities through the establishment of regional implementation agencies. Both these proposals resonate with suggestions I have made in the past (for example, see my commentary dated 26 October 2011 on the Medium Term Budget Policy Statement).
Unlike the Industrial Policy Action Plan, the NDP accepts the limited opportunities for job creation in the manufacturing sector because of South Africa’s global positioning and consequently puts much more emphasis on our revealed advantages in services sectors. It nevertheless embraces the approach of promoting specific industries, such as e.g. agro-processing. In other words, the NDP does not reject industrial policy outright.
Most tellingly, the NDP recognises that the desired expansion in employment will not come from big business, but as a result of entrepreneurial activity in the small and medium enterprise sector. Perhaps this realisation, more than anything else, drives home the inability of the state to directly create employment beyond its role in creating a business climate that is conducive to entrepreneurship..
The economics of the NDP bears a striking resemblance to the report of the Commission on Growth and Development that was released in 2008 (which is not surprising in view of Minister Trevor Manuel having been a member of the Commission!). It also seems to embrace much of the thinking of Nobel prize-winning development economist Amartya Sen, with his emphasis on enhancing the capabilities of individuals to improve their own conditions. The result is that there is a depth to the NDP that is lacking in the NGP.
The NDP certainly subscribes to the importance of the five common characteristics of high growth economies identified by the Growth Commission, viz.
- They fully exploited the world economy
- They maintained macroeconomic stability
- They mustered high rates of saving and investment
- They let markets allocate resources
- They had committed, credible, and capable governments
The NDP reflects the conclusion of the Growth Commission that promoting economic growth requires a multipronged approach hence its wide-ranging nature. The National Planning Commission has succeeded in putting forward a framework within which all South Africans can grapple with the challenges confronting the country, regardless of whether they agree with the minutiae of its Vision for 2030 or not. It has opened up the possibility for South African society at large to rise above the debilitating political squabbling that inevitably accompanies the mere promotion of self-interest.
It has provided a platform for engagement that one can only hope will be taken up by business and civil society. However, a prerequisite for this is a clear demonstration from South Africa’s political leadership that it has accepted the National Development Plan as the blueprint for South Africa’s future.
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