Since the advent of South Africa’s democracy in 1994, policies and programmes were introduced to transform the economy and the labour market. We experienced a gradual growth averaging 3.3% from then until 2008. However, in recent years, the momentum and progress have slowed considerably due to partial structural challenges, weak growth and the 2008-2009 global financial crisis.
Furthermore, the prolonged and devastating drought affects our agriculture and agro-processing sectors and related industries, threatening their competitiveness and sustainability. The continually low Gross Domestic Product (GDP) growth and depressed domestic demand are barriers to economic growth and the persistently high levels of South Africa’s unemployment and inequality of income, wealth, and opportunity.
The Productivity Statistics Report (2019) stipulates that we are still experiencing low overall productivity growth after a decade since the global financial crisis, which is a crucial driver of long-term competitiveness and economic performance. Labour Productivity (LP), Capital Productivity (CP), and Multi-Factor Productivity (MFP) have worsened yearly and will indeed worsen post-Covid-19.
Out of 63 countries, South Africa’s Global Competitiveness ranked 59 on the IMD Global Competitiveness Index in 2020, which falls short of what is necessary for the country to respond to the challenge of realising full and productive employment and creating decent work as embodied in UN Sustainable Development Goal 8: Promote sustained, inclusive, and sustainable growth, full and productive employment and decent work for all, while delivering healthy returns for investors.
Problem areas resulting in South Africa’s low productivity growth, competitiveness, and economic growth:
- The lack of a national productivity-enhancing policy mix and strategy/framework and policy cohesion to expand the productive assets in our economy by investing in people’s skills and in an environment where all firms across priority economic sectors have a chance to succeed.
- The lack of a productivity mindset and culture and accountability to unlock the country’s productivity potential at all levels (national, sector and enterprise).
- The lack of country-wide appreciation of the value that productivity has on sustained economic growth and competitiveness.
What is of utmost concern is that we neglect these fundamental issues when deciding on policy options and priorities for economic transformation and job creation. Our country’s capability to unlock its productivity potential gets undermined by our lack of consciousness and urgency to sustain economic growth and improve competitiveness. Key measures of economic performance, low productivity and efficiency, labour market efficiency, business efficiency, and integrated skills development and a training system that responds to the labour market demands are disregarded. This is also because of the inadequate investment of financial and other resources in productivity-enhancing initiatives present in most competitive economies.
A Different Approach To Doing Things
The currently low levels of performance make it onerous to stimulate economic activity, attract Foreign Direct Investment (FDI), engage meaningfully in regional and global trade, and absorb the millions of people who are either unemployed or are operating informally on the economic fringes, unable to make a decent living or realise their potential.
Productivity SA is in a strategic position to lead a Productivity Driven National Agenda to unlock South Africa’s productivity to improve long-term competitiveness and sustained economic growth. We recommend focusing on these 3 strategic pillars over The Medium Term Strategic Framework (MTSF) 2020 and towards 2030:
- An Integrated Training and Skills Development Ecosystem that also encourages life-long learning, with the active involvement of employers’ organisations in the governance of skills systems order to ensure that the supply of skills responds to labour market needs.
- An Integrated Enterprise Development Ecosystem to improve enterprises’ competitiveness and sustainability, with a focus on SMMEs. Helping SMMEs to restructure and move up the productivity value chain through well-coordinated assistance programmes is critical. Experience to date is that there are limited policy cohesion and programme alignment, resulting in efforts to support enterprises (SMMEs in particular) being very fragmented, which often results in duplication and/or even competition amongst public sector entities for scarce resources to provide such assistance.
- An Integrated Research and Innovation Ecosystem that ensures productivity and competitiveness related to value-added information and statistics to inform evidence-based planning and monitor and evaluate the impact of our interventions.
Observe Part 2 of South Africa’s Economic Recovery Plan with a more descriptive explanation of these three pillars.