South Africa: OECD Report – Reforms Needed to Boost Economy

The South African government says it concurs with the findings of the 2017 OECD Economic Survey that reforms are needed to revive economic growth.

The Organisation for Economic Co-operation and Development (OECD) says while South Africa has made tremendous progress in the last two decades, reforms are necessary to spark economic development.

OECD Secretary General Angel Gurría presented the organisation’s latest Economic Survey of South Africa to Finance Minister Malusi Gigaba on Monday.

“We agree with the observations made in the 2017 Economic Survey that, among others, boosting entrepreneurship and growing small businesses will contribute to creating jobs. We also agree that entrepreneurship in South Africa is low compared to other emerging economies… Government is in the process of finalising a complementary government fund aimed at financing SMMEs in the start-up phase.

“We further agree with the observation that the quality of the education system and lack of work experience contribute to gaps in entrepreneurial skills and, in that regard, government policies will provide more support for entrepreneurs and small businesses,” said Minister Gigaba.

Minister Gigaba said State-owned companies (SOCs) can play a role in advancing the objectives of employment and inclusive growth, particularly targeting micro enterprises and black owned small businesses. From April 2017, 30% of every large contract must be, where feasible, sub-contracted to SMMEs.

Reforms in the telecommunications sector would be supportive of entrepreneurs and small businesses through reduction of costs to do business, said the Minister.

The report noted progress such as almost 90% of households having access to piped water and 84% access to electricity. However, challenges remain.

“South Africa has made huge strides and a lot of progress [in] delivery of services to millions of citizens,” said Gurría, noting that South Africa remains as a highly unequal society.

“Low employment rates, especially for black South Africans, contribute to high income inequality. When inequalities are high… this feeds frustration and perceptions of corruption.”

Action Plan

Last year, South Africa faced low investments. The drought also reduced gross domestic product (GDP) to 0.3%. The OECD — which is an international organisation that promotes policies to improve the economic and social well-being of people worldwide — forecasts growth to remain sluggish at 0.6% this year, picking up to a moderate 1.2% next year.

“Looking ahead, more needs to be done to achieve growth but also inclusive growth,” Gurría said.

Minister Gigaba reassured that the country is actively dealing with its challenges through the 14-Point Action Plan, which has strong support from the President and Cabinet to address the slow domestic growth.

The Action Plan, which was unveiled at a media briefing in Johannesburg recently, aims to accelerate progress, coordinate government efforts and act as a mechanism for accountability.

Entrepreneurship and recommendation

Efforts to improve entrepreneurship and SMEs, widened access to higher education and expanding regional markets are some of the areas identified as foundations for inclusive growth in the future.

The survey found that attitudes towards entrepreneurship have become more positive. However, knowledge and skills gaps persist. The OECD recommends that second chance programmes for early school leavers be expanded.

The survey also recommends that entrepreneurial education and work placements in the post-school education system be increased.

National Minimum Wage

The OECD welcomed the introduction of the National Minimum Wage, which will come into effect on 1 May 2018.

The national minimum wage has been set at R20 per hour or R3 500 per month for those that work a 40-hour week. Those who work a 45-hour week will have their minimum wage set at R3 900.

“I welcome the initiative of the South African authorities to introduce a National Minimum Wage to reduce poverty among workers and make growth more inclusive and that the minimum wage will apply to all not just to certain sectors,” said Gurría.

Unemployment

When coming to unemployment, Gurría said there is now a scenario referred to as “in-work poverty”.

“Low growth has kept unemployment high at 27%. Now what we have is that even people with jobs, because they are paid very little, have a scenario of in-work poverty. It is, however, not only the case in South Africa. We have to face it.”

The last survey on South Africa was released in 2015.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

7 + 4 =