Growth and inclusive growth

Creating jobs, reducing poverty V: Is ‘formalising’ the informal sector the answer?

Frederick Fourie, REDI3x3, based at SALDRU, University of Cape Town on 21 August 2018
Reads 678

This extract from a new REDI3x3 book proposes a constructive way to approach the possible ‘formalisation’ of the informal sector. A common impulse is to reduce formalisation to regulating and taxing informal enterprises – two blunt instruments that can be destructive. Formalisation must rather be seen as a means to aid the quest for better livelihoods for more people and stronger, more self-standing informal enterprises. Smart formalisation can be pursued with a ‘formalisation menu’.

REDI3x3 conference: Policies for inclusive growth

Murray Leibbrandt, University of Cape Town on 15 February 2017
Reads 4,295

The REDI3x3 research project has completed most of its research at a time when unemployment, poverty and inequality is intense. With growth at just 0.5%, government needs to become more innovative in fixing the social policies that hamper progress. It should draw on all the research evidence to find ways to transform the structure of the economy without inhibiting growth. Addressing education, low labour intensity, the informal sector and the spatial legacies of apartheid can make a real difference.

Redistribution is part of the toolkit to promote growth

Andrew Donaldson, National Treasury on 7 October 2014
Reads 8,050

A recent IMF study of several countries provides robust evidence that a high level of income inequality weakens the prospects of sustained economic growth and reduces the duration of growth spells. Redistributive steps, by contrast, do not have a noticeable negative effect on growth. Therefore, a reduction in inequality that is achieved through redistributive steps could have a net pro-growth effect. The policy challenge for South Africa is to find the best policy mix to achieve that.

How inclusive is economic growth in South Africa?

Frederick C.v.N Fourie, University of the Free State on 9 September 2014
Reads 13,791

While everybody seems to favour the pursuit of inclusive growth, this concept is rarely clearly defined in the policy debate. Inclusive growth is often confused or conflated with pro-poor growth or broad-based growth. A recent definition from researchers at the UNDP integrates the latter two concepts to include employment, poverty and inequality. A derivative Inclusiveness Index shows that South Africa has a very low degree of inclusiveness compared to other developing countries and that its growth since 1996 has not been inclusive.

How suitable is a ‘developmental state’ to tackle unemployment, inequality and poverty in South Africa?

Philippe Burger, University of the Free State on 26 March 2014
Reads 10,578

The National Development Plan envisions the achievement of a ‘capable and developmental state’. Developmental states are usually associated with high economic growth. Such states in East Asia often are seen as models for SA to emulate. However, given the structure of the SA economy, state and society, a developmental state is not suitable, nor attainable. The concept of a social investment state is a better alternative, but it will need key institutional and policy reforms to work.

Is the middle class becoming better off? Two perspectives

Justin Visagie, Human Sciences Research Council on 15 July 2013
Reads 9,833

Two very different pictures emerge when one compares income changes of the relatively affluent ‘middle class’ with those of people in the literal middle of the income spectrum. In the affluent middle there has been significant racial transformation and growth of the ‘black middle class’. However, households in the actual middle of the income spectrum have experienced the lowest income growth of all groups since 1993. Both perspectives are crucial for the pursuit of an equitable path of development.

The Budget: both the fiscal stance and ‘structural stance’ are sound

Kuben Naidoo, National Treasury on 25 March 2013
Reads 6,671

Many economists have argued that the government’s fiscal stance in the recent budget is verging on the risky. This article argues that the fiscal stance is both correct and prudent. In addition, the article puts the budget in a broader developmental context, highlighting its contribution to long-term growth and development and to tackling poverty and inequality.

Reducing unemployment: Waiting for high growth? Waiting for Godot?

Frederick C.v.N Fourie, University of the Free State on 12 March 2013
Reads 37,653

In trying to reduce unemployment in South Africa, the pursuit of higher economic growth is the single most agreed-upon policy strategy. The consensus on this ‘obvious solution’ may blind us to the fact that economic growth, though important, may only be half of the solution. Attempts to fine-tune and turbo-boost the formal-economy ‘engine of growth’ to absorb more labour are fundamentally constrained. Economic policy makers must look at other options for generating employment and self-employment for unemployed people.

Reducing inequality to promote growth: a proposed policy package

Kuben Naidoo, National Treasury on 30 January 2013
Reads 24,289

Any growth strategy for South Africa should include elements that address inequality explicitly. This article identifies reforms that are likely to support growth in the long term and proposes a policy framework to ensure a more equitable distribution of the dividends of economic growth. These relate to high-quality education for the poor, progressive taxation, a social safety net, anti-monopoly policies and labour market reforms to promote the employment of low-skilled people.

The National Development Plan and exports as a catalyst to generate employment growth: Can it work?

Philippe Burger, University of the Free State on 20 November 2012
Reads 8,359

Small and medium-sized firms hold the potential to absorb most of the unemployed in South Africa. In this the NDP may be correct. However, the NDP may not be correct in arguing that exports can be the main catalyst of the growth the country needs to address poverty and employment. Several factors hinder such a strategy. A more domestically-focused policy aimed at production (and services) for local consumption might bear more fruit.