The Business Day carried this submission today, Ingredients to make an economy grow. It’s written by Augusto Lopez-Claros, the chief economist for World Economic Forum. Lopez-Claros has identified eight important factors, policies and institutions which best contribute to boost productivity and thus economic growth.
I have long argued that BBBEE is an economic plan with political drivers. Simply put if we don’t implement it we will look like Zimbabwe in a very short space of time. It makes for an interesting excercise to correlate his eight points with BBBEE principles.
1) Do not live beyond your means.
South Africans (including the self-styled black middle class) do not seem to follow this simple rule. Perhaps tomorrow’s announcement by the Reserve Bank might curb this behaviour. BBBEE and sustainability are synonymous, a savings culture breeds sustainability.
2) Low taxes are not a miracle cure.
No real BBBEE application here, other than the fact that the more people who have jobs the greater the tax revenue. Remember empowerment is about people standing on their own two feet and living as far away from the breadline as possible, job creation is the first step in this process.
3) Corruption is a killer of growth.
Difficult to even vaguely disagree with this. Some South Africans somehow seem to revere people convicted or suspected of corruption. This can’t be sending the best message out to the world.
4) The virtues of judicial independence.
Our legal system has always been regarded as independent (even in the old days). There has been some talk of how the government chooses to ignore court orders and the like to get their way. On a slightly unrelated note take a look at Anton Harber’s discussion of the PHD graduate from Bulgaria and the SABC in today’s Business Day.
5) The evils of red tape.
I did a search on Business Day’s web site on red tape and the results were alarming. Red tape crops up everywhere and in many government departments. A recent survey shows that it takes something like 30 days to register a new company properly, compared to the two days it takes in Australia. Trying to get a work permit for a foreign national is another story – and we need to important skills under JIPSA (Joint Initiative on Priority Skills Acquisition).
Lopez-Claros explains this point best.
The World Bank’s Doing Business Report 2006 highlights the high costs of red tape and mindless bureaucracy. The World Economic Forum’s own annual Executive Opinion Survey provides corroboration for the notion that it is precisely in those countries where the emergence of new businesses and an entrepreneurial class is most desperately needed that governments will often erect the most onerous obstacles to the creation of new firms. For governments, the challenge is to strike the right balance between the need for some regulation and excessive bureaucracy which stifles investment and the entrepreneurial spirit.
6) Education as the central pillar.
Education and skills development are core components of the BBBEE scorecard. At least 40 points on the scorecard have an education aspect – Skills Development (20 points), Enterprise Development (10 points) and Corporate Social Investment (10 points). There is a chronic shortage of skills in this country (the average age of an artisan is 55 years old – on this subject there are plans to increase the number of new artisans from 5000 to 20 000 under JIPSA). Lopez-Claros describes the investment in education as "the key driver of productivity".
7) Computers and mobile telephones as the new engines of growth.
To quote Lopez-Claros.
There is a high correlation between the ranks achieved by countries in the World Economic Forum’s Global Competitiveness Index and the penetration rates of these technologies, which contribute to enhance productivity growth.
It comes back to education. Already South Africa is regarded as a market leader in terms of the number of cellular users. The next step is to provide these consumers with the ability to maximise the power of this technology. I don’t think this will take too long – we just need a dramatic reduction in the telephony costs (this is one of ASGISA’s goals).
8) Empowering women.
Every time black people appear on the scorecard there is a separate target for black women. Lopez-Claros says it best.
There is well established empirical evidence that the most profitable investment a country can make is to educate its women, particularly its girls. Female education, employment and ownership rights greatly empower women and allow them to shape their environment. Literacy helps reduce fertility rates, including the bias against female child mortality. Where women are empowered to participate in the economy and the political process, productivity and growth will benefit.