Africa, Development & Aid, Economy & Trade, Headlines, Poverty & SDGs

Q&A: The Key is Economic Growth for People

Kristin Palitza interviews TERENCE CORRIGAN, researcher, South African Institute for International Affairs (SAIIA)

JOHANNESBURG, Jun 15 2009 (IPS) - Countries around the world have committed themselves to reach eight Millennium Development Goals (MDGs) by 2015. MDG 8 seeks to develop a global partnership for development, including sustainable debt and an open, rule-based and non-discriminatory system of trade and finance.

Economist Terence Corrigan reflects on how well the South African government has been doing to achieve good governance, fair trading mechanisms and economic growth.

IPS: MDG 8 is to develop a global partnership for development. What has the South African government done to reach this target? Terrence Corrigan: South Africa has relationships with various developmental agencies, the United Nations and African initiatives, but it could do more for global political engagement with development.

An issue close to government’s heart is reorienting the World Trade Organisation (WTO) and global financial institutions to not just focus on free trade but also on development issues.

South Africa is on course to meet the MDGs in the numerical sense. For example, the number of children enrolled in [primary] schools will meet the target, but the quality of the education system is still lacking. Or, the country has made lots of progress in reducing poverty by introducing social services, but leaning heavily on social grants is not ideal because it creates dependency.

At the moment, we have about five million tax payers versus 13 million grant recipients. We need to turn those figures around and we need an entrepreneurial ethic to do this.

IPS: Can South Africa’s trading systems be called non-discriminatory? TR: Yes, they are reasonably non-discriminatory. South Africa is a member of the WTO and operates in line with its rules. We also have some bi-lateral agreements, for example with the European Union (EU), but those are in agreement with WTO rules, too. South Africa is a good global trading citizen.

IPS: What tariffs and quotas hinder export of South African products and thereby economic growth? TR: It’s an interplay of domestic and foreign factors, with the main issue being agriculture. Sugar quotas in the EU hamper export of South African sugar and so do subsidies given to European, American, Canadian and Japanese farmers. South African farmers don’t receive the same support.

There are also a few sanitary issues of South African agricultural products. The EU, for instance, is discussing stopping imports of South African ostrich meat, which is a one billion rand [$125 million] industry [because some abattoirs didn’t meet EU sanitation standards]. This points towards deficiencies in the South African governance system that should be solved quickly.

Another point of hindrance is restrictions on South African trade with other developing markets, such as India and China. India has one of the highest tariffs on agricultural products in the world.

IPS: How successful has South Africa been in working towards debt relief? TR: When South Africa became a democracy, its macro-economic decision was not to fall into the debt trap. We paid off a lot of debt after 1994. We are not entirely debt-free, but certainly in a good position. Debt is not a big issue in South Africa. There are even some who say South Africa is ‘under-borrowed’.

South Africa raises money through tax, which is not that common in Africa. This means it can finance programmes through its own sources. In fact, we have a lot more resources than we are using effectively. South Africa is in a very positive position, and I hope government will maintain this.

IPS: What financial and trade strategies could South Africa implement to bolster poverty reduction and development? TR: The key issue is to have economic growth that produces growth for people. South Africa needs to identify hindrances to doing business to get there. Issues of education and qualification need to be addressed as a matter of urgency.

The role of technology is important, too. We need to focus on innovation. For example, South Africa’s water supply is extremely stressed. We need a high-tech water management system to make the most of smaller resources.

I am wary of protectionism to create economic growth. It will have a blow-back on competitiveness and could trigger inflation, which would have an especially negative impact on the urban poor.

IPS: What should be the role of developed countries or international institutions, such as World Bank, to help countries like SA achieve this? TR: South Africa is in a funny situation, because in WTO terms it is classified as a developed country. To move towards economic growth, we need open markets, even trading relations and to encourage interest from investors. Exactly how to do this is a difficult question.

South Africa needs cooperation, investment, tourism and diplomacy in trade with equal partners that share common parameters. Sometimes, government has lost sight of this.

For example, it aligned itself with China, but doesn’t get much in return from this partnership. Government needs to ask if its interests are really well served and where potential allies are. Trade with China is mainly in primary products, while the United States is interested in manufactured products, so perhaps that’s a better market.

IPS: Part of MDG 8 is the aim to achieve good governance. What areas could the South African government improve upon? TR: Good governance and democracy have an ambivalent relationship with economic growth and profits. Measuring the quality of governance depends on the type of economy you want. My hope for South Africa is that it develops as an advanced, innovative economy.

There are four key issues that need good governance: First, we need a better education system for a skilled workforce. Second, we need high quality management to build up and maintain our infrastructure. Third, we need accountability and fight corruption, and fourth, we need to manage our resources well. But whatever government decides to do, it needs to do it competently.

IPS: What role has the African Peer Review Mechanism (APRM) played in this? TR: There are key governance issues that crop up again and again throughout the continent. There is lack of constitutionalism, and parliaments [in Africa] are emasculated.

A useful set of recommendations has come out of the APRM. It’s a process that could go a long way towards improving governance, but it needs follow up to be effective. Unfortunately, the responses from governments haven’t always been enthusiastic. We haven’t seen many African heads of state holding their peers to account. This would need a lot of integrity.

The APRM could be a catalyst for reform, but at this stage, it remains in the realm of potential.