The South African government is not short of expert advice, especially on the economy and the underpinning policies that aim to drive growth. SA’s economy goes through an annual check-up at the hands of the International Monetary Fund as part of the Article IV assessment process.
The World Bank also issues regular updates on the economy, and since 1999, SA has enjoyed a special relationship with the World Bank as a knowledge partner. The World Trade Organisation, too, regularly scans SA’s trade policies.
In June, a team from the Organisation for Economic Co-operation and Development (OECD) has toured SA to present an assessment of the state of the economy and to prescribe various medicines to restore the patient to vitality.
Effective infrastructure and business regulations, especially to support the expansion of the small business sector and enhance job creation, and broadening the tax system were two major themes that the OECD focused on. Other notable policy issues that came under the spotlight were labour market efficiencies, fiscal policy, trade policy and energy.
While the recommendations are impressive, there is nothing that the government does not already know, especially given the surfeit of external advice it has been receiving since the mid-1990s.
Although not yet a member, SA’s formal relationship with the organisation goes as far back as 2007, when the OECD council of ministers took a decision to engage Brazil, India, Indonesia and SA in a courtship process known as “enhanced engagement” in order to socialise these countries into the policy standards of rich members. The regular economic surveys of the organisation on SA are a product of this courtship.
At a seminar co-hosted by the organisation and the Treasury, there was a strong emphasis on the new policy tool — New Approaches to Economic Challenges — which was developed as a response to disruptive shifts occasioned by the 2008 global crisis and to rising inequalities. It is aimed at delivering “comparative and evidence-based” advice for managing the effects of such shifts. This tool underpins the OECD recommendations.
While very helpful in supporting policy innovation, the major weakness of the process is that it does not take into account political bottlenecks in policy implementation. There are three major bottlenecks in this respect.
The first has to do with ideological contestations over economic policies. Through various phases of government since 1994, factional differences over economic policy — from the Growth, Employment and Redistribution framework to the Accelerated and Shared Growth Initiative of SA to the current overarching National Development Plan — have contributed very little to policy innovation. Instead, they have led to bureaucratic paralysis.
Second, ambiguity over the ultimate locus of economic policy authority makes it harder to take bold decisions that are required to smash regulatory barriers or to curb wasteful expenditure in government.
Finally, human capital and institutional capacities within the government are generally lagging. The pockets of excellence that exist tend to be suffocated by the politicisation of policy.
The political culture can make it difficult to attract top skills that may perceive it as a reputational risk to work in the government. Appointing highly capable leaders at the top echelons of government who are sufficiently insulated from politics could go a long way towards optimising high performance.
The OECD recommendations are useful in identifying macroeconomic challenges. However, deeper problems are to do with political will and institutional capacities. These challenges are not insurmountable.
Article originally posted on Business Day Live 24 July 2015.