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SA-Tied discusses measures to grow South Africa’s economy, combat inequality

31st January 2019 BY: Marleny Arnoldi
Creamer Media Online Writer

Inequality is a massive inhibitor of inclusive economic growth in South Africa and, to lower income inequality, the country needs policies that are inclusive of those at the bottom of the income distribution rank or not economically active at all, Amargi Media CEO and journalist Nikiwe Bikitsha said during a Southern Africa Towards Inclusive Economic Development (SA-Tied) research results meeting.

The event, which was held on Thursday, discussed measures through which South Africa could deal with the inequality that persists despite government taking measures to redistribute income more evenly, for example, by promulgating the Minimum Wage Bill last year.

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National Treasury acting international and regional economic policy deputy director-general Duncan Pieterse pointed out that South Africa needed to create more evidence-based economic policy, which should also aid in better decision-making.

To this end, SA-Tied is working to produce meaningful research that will inform policy.

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SA-Tied has partnered with two international institutions and local entities, including the United National University World Institute for Development Economics Research, the European Union, the International Food Policy Research Institute, the South African Revenue Service, the departments of Trade and Industry and Planning, Monitoring and Evaluation, as well as the National Treasury.

However, Pieterse said policy was but a first step towards greater equality, and that government and the private sector alike should focus on capacity-building to take policy implementation forward.

SA-Tied has six work streams that cut across various research themes that have been identified as important for future economic policy, including enterprise development for job creation, public mobilisation – with tax incentives involved, macroeconomic modelling for policy formulation, climate change and energy transition, and regional growth for Southern Africa’s prosperity.

SA-Tied senior researcher and Trinity College Dublin Associate Professor Carol Newman said South Africa was experiencing the same issues Ireland had historically faced in terms of income inequality, poverty and unemployment; however, Ireland has become one of the fastest-growing economies in the world.

She suggested factors that helped turn Ireland’s economy around, which included regional issues such as integrating with the European Union to gain access to larger markets; export-oriented manufacturing industries were stimulated with major investment, which was supported by strong export tax incentives; investment into skills and education, with skills regularly being assessed according to what is necessary in the economy; and social partnerships, which Ireland managed to create with government, business unions, trade unions and civil society.

Department of Planning, Monitoring and Evaluation employment through inclusive growth outcomes facilitator Rudi Dicks, meanwhile, weighed in on equality and economic growth by stating that policy should become more oriented towards those who are not formally employed.

“Getting into employment or economic activity is the first step to levelling inequality, over and above the minimum wage issue.”

“However, it is vital to look at the impact of the minimum wage; there may be a negative impact in low-wage sectors that are vulnerable to increases in cost. Employers may say they can not afford the minimum wage and end up retrenching people; therefore, it requires careful implementation.”

Congress of South African Trade Unions president Zingiswa Losi noted that it was necessary for businesses to respect laws and comply with the minimum wage.

“They should provide evidence if affording the minimum wage is an issue to the sustainability of the business,” she said, adding that reducing profits did not equate to unaffordability.

“Government has to ensure that there is an environment for business to come and invest, but also ensure that they respect the laws in the country since the advent of democracy. The working class are the backbone building the economy.”

Business Unity South Africa president Sipho Pityana highlighted that both macro- and microeconomies needed to be fixed. For example, unemployment and poverty were issues, but public sector debt, especially among State-owned entities, was also weighing on the economy.

He noted South Africa should also consider that some technological changes would decimate jobs and, ultimately, negatively affect the economy.

Losi echoed Pityana’s sentiments, and added that the country needed functional healthcare, education and transport systems. If these are not functional, the majority of people’s wages and salaries are spent on basic necessities.

Pityana concluded that investment into small, medium-sized and microenterprises was key. “We should be developing people with ideas, it is no longer just about helping someone get a job.” 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online
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