Myths and realities south africa s ip
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MYTHS AND REALITIES; SOUTH AFRICA’S IP. TIPS – WORLD BANK WORKSHOP 27 OCTOBER 2011. MYTH NO. 1 : SOUTH AFRICA IS UNDERGOING DEINDUSTRIALISATION. THE DECLINE IN MANUFACTURING AS A SHARE OF GDP IS (A) EXPECTED (B) IS NOT A GENERAL PHENOMENON OF ALL SECTORS. Manufacturing Pattern:.

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MYTHS AND REALITIES; SOUTH AFRICA’S IP

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Myths and realities south africa s ip

MYTHS AND REALITIES; SOUTH AFRICA’S IP

TIPS – WORLD BANK WORKSHOP

27 OCTOBER 2011


Myth no 1 south africa is undergoing deindustrialisation

MYTH NO. 1 : SOUTH AFRICA IS UNDERGOING DEINDUSTRIALISATION

  • THE DECLINE IN MANUFACTURING AS A SHARE OF GDP IS (A) EXPECTED (B) IS NOT A GENERAL PHENOMENON OF ALL SECTORS


South africa industry structure in relation to gdp is high

Manufacturing Pattern:

SOUTH AFRICA INDUSTRY STRUCTUREIN RELATION TO GDP IS HIGH


South africa performs poorly in labour intensive sectors

SOUTH AFRICA PERFORMS POORLY IN LABOUR INTENSIVE SECTORS

  • SA WELL BELOW “NORMAL”


Myth no 2 ip is the answer

MYTH NO. 2: IP IS THE ANSWER

  • SECTORS ALREADY ENJOY:

  • HIGH RATES OF PROTECTION

  • SUBSTANTIAL SUPPORTS.


Conclusion wage and labour market reform

CONCLUSION: WAGE AND LABOUR MARKET REFORM

  • FOCUS ON IP TAKES AWAY FROM THE FOCUS ON LABOUR MARKET

  • RAISES A MUCH BROADER QUESTION: WHAT SHOULD THE OBJECTIVES OF IP BE?

  • THE END OBJECTIVE OF ALL ECON. POLICIES IS GREATER OUTPUT AND EMPLOYMENT, BUT…


The objectives of ip sa and the nics

THE OBJECTIVES OF IP: SA AND THE NICS

  • INDUSTRIAL POLICY METRICS ARE OUTPUT, EMPLOYMENT AND EXPORTS.

  • THE IPAP (AND THE GROWTH PATH) ARE EMPLOYMENT


Examples of how this can lead to wrong policies

EXAMPLES OF HOW THIS CAN LEAD TO WRONG POLICIES

  • FIRST QUESTION FOR IP – WHAT ARE THE BINDING CONSTRAINTS.

    WHAT IS THERE THAT GOVT. CAN DO TO IMMEDIATELY RAISE OUTPUT AND EXPORTS?


The infrastructure programme local procurement

THE INFRASTRUCTURE PROGRAMME: LOCAL PROCUREMENT

  • HIGHER COSTS; DELAYS; RECONFIGURATION.

  • TIGHTENING THE BINDING CONSTRAINTS

  • A TAX ON BUSINESS IN GENERAL.

  • AND IT WILL NOT WORK!!


Cheap finance for labour intensive activities

CHEAP FINANCE FOR LABOUR INTENSIVE ACTIVITIES

  • LOWERING COST OF K ENCOURAGES LABOUR SAVING INVESTMENTS


Tariffs

TARIFFS

  • RAISING TARIFFS IN PURSUIT OF EMPLOYMENT

  • TARIFFS ARE A TAX ON EXPORTERS


Many ip interventions are k intensive

MANY IP INTERVENTIONS ARE K INTENSIVE

  • AUTOS

  • DEFENCE

  • NUCLEAR.

  • INCONSISTENT EVEN IN ITS OWN TERMS


Horses for courses

HORSES FOR COURSES

  • IP WILL MAKE A POSITIVE CONTRIBUTION TO EMPLOYMENT IF IT RAISES THE RATE OF INVESTMENT AND PRODUCTIVITY AND INCREASES EXPORTS.

  • THE GROWTH IN EMPLOYMENT WILL BE LARGELY OCCUR IN THE NON-TRADED SERVICES SECTOR


Policies to create employment

POLICIES TO CREATE EMPLOYMENT

  • EMPLOYMENT POLICY – LABOUR MARKET REFORM

  • PROMSISING JOBS VIA THE IPAP AND THE GROWTH PATH OBFUSCATES THE NEED FOR THIS DISCUSSION


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