SOUTH Africa’s most urgent priorities should be to improve the standard of education and health care, and reduce unemployment and income inequality. These indicators have become stuck at worrisome levels and constitute the biggest threat to SA’s future.
This is a key finding of a Boston Consulting Group (BCG) report on the SA economy. It argues that while reigniting and sustaining growth is a critical issue, it is only the first step. Equally important is understanding why SA is so bad at turning what little growth it has into higher living standards for its citizens.
The BCG ranks SA 138 out of 149 countries for its ability to turn the nation’s wealth into greater well-being. This puts it below many of SA’s sub-Saharan African neighbours, all other Brics countries and numerous other developing nations, including Poland and Romania.
So why is SA failing at this all-important hurdle? "There is no way of hiding from the fact that short-term self-interested behaviour has been prevalent; that the emphasis in SA has been on cutting rather than growing the pie," says Adam Ikdal, BCG senior partner and a co-author of the report.
"There’s no shortage of policy analysis in SA but rather of policy implementation, which, in turn, hangs on the quality of leadership."
Ikdal says it came as a bit of a surprise after months of study and interviews with economists, business leaders and other stakeholders to discover that what SA most needs is better leadership.
"We thought it would be that SA must focus on one important area like unemployment. But the resounding message was that SA needs to fundamentally lift leadership at all levels if it is to transform wealth into wellbeing," he says.
The report, "Four Priorities Requiring Leadership for SA’s Future", notes that the National Development Plan (NDP) is a good roadmap for SA. But, says Ikdal, the plan doesn’t set out priorities and isn’t being implemented.
The BCG uses its own methodology, its so-called sustainable economic development assessment tool. This allows it to measure how effectively SA converts wealth into wellbeing along 10 socioeconomic dimensions, and to compare this across nations.
SA performs on a par with or slightly ahead of its sub-Saharan African peers (including Angola, Botswana, Ghana, Kenya, Nigeria and Zambia) with respect to income levels, economic stability, the strength of civil society, governance and infrastructure. But it barely keeps pace with or lags well behind these countries in education, health care, employment and income inequality.
"These four problem areas are linked," states the report, "They are key components of a vicious circle that undermines prosperity and social wellbeing."
Poor education results in a lack of skills, which contributes to high unemployment. This fosters income inequality and contributes to slow economic growth, which further limits funding for and access to education and health care.
The report notes that while SA’s national unemployment rate is 25%, among university graduates it falls to only 2%-5%. In SA unemployment coexists with skills shortages of technicians, artisans, teachers, managers and professionals. "It came as a surprise to us that SA spends proportionately much more on education than countries like Kenya, Zambia and Ghana but their education outcomes are almost twice as good as SA’s," says Ikdal. "Something is fundamentally wrong in SA’s education system."
The report says government’s education reform programme is well intended but needs to focus on four priorities: achieving a shift in mind-set across the population about the high value of education; making teacher quality measurable; strengthening vocational opportunities; and reducing school drop-out rates.
"Leaders need to start a drumbeat of recognition for the critical role that educators play. At the same time, this has to be balanced with local leadership at schools, including a focus on accountability for teachers’ performance, which will improve educational quality," it says.
One way to reduce drop-out rates, the BCG suggests, would be to make welfare payments conditional on school attendance. Only 5% of all pupils between 16 and 18 finish school within the required time frame.
Grants could also be tied to recipients undergoing mandatory health checks, given that SA has the lowest immunisation rate for measles and diphtheria and much higher child mortality rates than many of its peer countries.
The report urges SA to reduce, over time, the role that welfare plays in supporting more than 17m people. But it concedes that until growth gets going, it remains "a necessary evil" without which millions more would fall into poverty.
The report also draws lessons from what other countries are doing to raise the proportion of employment from the small business sector. Turkey and Chile have reduced red tape; Brazil and Cambodia have shown what can be done in skills development; while in Germany and Denmark, flexible labour laws are used to provide incentives for hiring.
"The solutions ... are straightforward and proven," states the report. "They have been shown to work time and again around the world. SA should not permit itself to be left behind. But — and this is a big but — a concerted programme of execution is essential. In many instances this will mean putting the greater good ahead of individual or institutional interests."
Still, Ikdal feels there is plenty of reason for hope, noting that SA has notable strengths. The NDP is one. "It’s on the right track, addressing many of the most important issues with practical solutions," he says. Solutions are also being developed by business and civil society, sometimes because they won’t wait for government to act.
But he cautions that private-sector leadership cannot substitute for a lack of government leadership and that while hope has carried SA a great distance, it needs to be fuelled by progress.