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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. 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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  1. MYTHS AND REALITIES; SOUTH AFRICA’S IP TIPS – WORLD BANK WORKSHOP 27 OCTOBER 2011

  2. 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

  3. Manufacturing Pattern: SOUTH AFRICA INDUSTRY STRUCTUREIN RELATION TO GDP IS HIGH

  4. SOUTH AFRICA PERFORMS POORLY IN LABOUR INTENSIVE SECTORS • SA WELL BELOW “NORMAL”

  5. MYTH NO. 2: IP IS THE ANSWER • SECTORS ALREADY ENJOY: • HIGH RATES OF PROTECTION • SUBSTANTIAL SUPPORTS.

  6. 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…

  7. THE OBJECTIVES OF IP: SA AND THE NICS • INDUSTRIAL POLICY METRICS ARE OUTPUT, EMPLOYMENT AND EXPORTS. • THE IPAP (AND THE GROWTH PATH) ARE EMPLOYMENT

  8. 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?

  9. THE INFRASTRUCTURE PROGRAMME: LOCAL PROCUREMENT • HIGHER COSTS; DELAYS; RECONFIGURATION. • TIGHTENING THE BINDING CONSTRAINTS • A TAX ON BUSINESS IN GENERAL. • AND IT WILL NOT WORK!!

  10. CHEAP FINANCE FOR LABOUR INTENSIVE ACTIVITIES • LOWERING COST OF K ENCOURAGES LABOUR SAVING INVESTMENTS

  11. TARIFFS • RAISING TARIFFS IN PURSUIT OF EMPLOYMENT • TARIFFS ARE A TAX ON EXPORTERS

  12. MANY IP INTERVENTIONS ARE K INTENSIVE • AUTOS • DEFENCE • NUCLEAR. • INCONSISTENT EVEN IN ITS OWN TERMS

  13. 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

  14. 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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