South Africa Too Dominant in Economy-Report

By Alex Mazabane Posted 23 July 2008 @ 01:02 am EET     Print     Reprint     E-Mail     Comments

Johannesburg (IBTimes.com) - South Africa must do more to improve competition in its economy, and is giving the state too big a role in tackling the constraints to growth, the Organisation for Economic Co-operation and Development (OECD) has said.

In its first report on SA, the 30-member group criticised the government's latest strategy for development, the Accelerated and Shared Growth Initiative for SA , saying that some of its policy responses were weak or inappropriate.


Plans to give incentives to some industries to create more jobs would also limit competition, it said.

Emphasis on government programmes and initiatives was "at odds with the recognition of failures of official planning, co-ordination and capacity" to achieve faster growth, it said.

The OECD report praised SA for policies that have boosted economic growth, lowered inflation, and produced the country's first budget surpluses in history.

But it also highlighted what it sees as weaknesses stemming from high unemployment, poverty, the spread of HIV/AIDS, and crime. These could be linked to recent attacks on immigrants who were blamed for the problems, it said.

"The most disappointing aspect of post-apartheid economic performance is the emergence and persistence of extreme levels of unemployment," it said.

SA's official jobless rate has fallen from a peak of more than 30% in 2003, but at 23% is still four times the OECD average.

"Structural policies aimed at enhancing competition appear to be most promising to unleash the enormous potential of SA's labour force," the OECD said.

The report is a result of the group's drive to boost co-operation with emerging market economies which may want to join the OECD in the future.

It said SA should strengthen antitrust laws and lift barriers to investment in energy, transport and communications.

Dominance of large private sector companies was also seen as negative, as this could be linked to "lower output, employment and prices", it said.

Many of the OECD's conclusions appear to clash with plans by the African National Congress (ANC) to bolster the role of the state as it works to ease chronic poverty and income inequality.

ANC president Jacob Zuma said last week the party wanted to put the state right at the centre of development, with a "critical role" for state enterprises.

"We envisage the integration, harmonisation and alignment of planning and implementation across all spheres of government," he told the Black Management Forum.

Finance Minister Trevor Manuel said the report made "useful points" and the government did not see the OECD as "praise-singers".

He also hinted that the treasury may revise down its growth forecasts for this year when it presents its medium-term budget policy statement in October.

Global "imbalances" had become more pronounced since growth was forecast at 4,2% this year - versus 5,1% last year - in the February budget, he said.