SA welcomes OECD report, notes concerns

Tuesday, March 5, 2013

Midrand - Finance Minister Pravin Gordhan had welcomed the latest OECD report on South Africa, which states that although strides have been made, the country is not fully reaching its potential.

The third Organisation for Economic Cooperation and Development (OECD) economic survey on South Africa was released in Johannesburg on Monday. The economic survey is published every two years for each of the 34 OECD  countries as well as for major non-member economies. It identifies the main economic challenges faced by the country and analyses policy options to meet them.

The report found that while South Africa was advancing, it was failing to fully achieve its considerable potential.

The report found that per capita incomes are growing and that public services are expanding. Crime rates were also found to be falling.

Government's National Development Plan (NDP) and the New Growth Path were lauded for their focus on growing jobs. However, the OECD said the country had a long way to go in eradicating the lack of jobs.

Among the recommendations made to help reduce unemployment among the youth is support for the training of young entrepreneurs.

The objectives of the NDP are to eradicate poverty as well as to sharply reduce inequality by 2030 while the NGP is an economic framework for 2010-2020 with the overriding objective being employment.

The report credited South Africa's public finances as being in better shape than those of many OECD countries.

While the financial system was healthy, the report made reference not only to the country's high unemployment rate as well as income inequality.

It used South Africa’s Gini coefficient to demonstrate this.

However, Gordhan said the gini coefficient was not the only indicator of wellbeing. The minister said there were improvements in the wellbeing of the country's people.

“There are common themes both in terms of the diagnostic which means that we understand our problems many of which are confirmed by this report, we understand our potential which is also important,” said Gordhan on Monday.

OECD general secretary Angel Gurria pointed out that the country has yet to fulfil its potential adding that “unemployment is stubbornly high” and that the distribution of income is skewed.

“Growth in South Africa has been sluggish compared to other countries. There is a need for faster progress,”   he said at a media briefing.   In 2012, real annual GDP increased by 2.5% following an increase of 3.5% in 2011.

Inequity remained, said the minister.

“Certainly you pointed out our sharpest challenges which are unemployment and inequality and just last week in the budget speech we reflected on these challenges very frankly. And we told our public  that we need to acknowledge the problem but at the same time need to ask ourselves a very serious question which is what are we each contributing towards solving the problem,”  he questioned.

Additionally, the macroeconomic policy mix had been insufficiently supportive of growth while allowing large budget deficits to persist. The report recommended that the macroeconomic policy mix be adjusted using the full available scope to reduce interest rates to support economic activity.

The report noted the interaction of weak competition in product markets and the dysfunctional labour markets saying this was holding back growth and aggravating unemployment.

Turning the focus to education, the report found that “educational outcomes are poor on average and hugely uneven and frustration is growing with public service delivery failures and corruption”.

Gurria said education was below standard even though access to education increased. “There is an urgent to raise the quality of education,” he said.

“We welcome your survey in the series, because as South Africans we understand that it’s important to open ourselves to external comparison, to hear other people’s view about our economy. But also because benchmarking is an extremely useful way in which one gets feedback about the kind of progress you’re making but also about the kind of progress we need to make,”  said Gordhan.

The minister added that there “was a lot of room for South Africans to do better and the economy to do better”.

The first OECD report for South Africa was done in 2008. The second survey was conducted in 2010 with the 2013 edition being the latest.

The OECD provides a forum in which governments can work together to share experiences and seek solutions to common problems. The Paris based think tank works with governments to understand what drives economic, social and environmental change. The mission of the OECD is to promote policies that will improve the economic and social well-being of people around the world. -