Madam Deputy Speaker, on Tuesday, Statistics SA released Gross Domestic Product, data for the second quarter. The seasonal real GDP increased by an annualised rate of 3,2% compared with the increase of 4,6% during the first quarter. This increase was below the Reuters Consensus of 3,7%, which means that our economy is recovering from the recession at a slower pace than generally anticipated. If this decelerating pace of recovery continues, we are unlikely to reach 3% growth in our economy this year.
This is not good news for South Africans, especially those who have experienced the pain of losing their jobs during the recession. Despite the modest recovery, our economy continues to shed jobs and poverty remains firmly entrenched in communities across the country. The Minister of Finance has stated that we need a sustained growth rate of 7% for our economy to create jobs and reduce poverty.
Our current growth path will not achieve this objective. Events in the global economy are not working in our favour. The developing economies face the very real prospect of sliding back into recession after experiencing mild recoveries in the wake of the world financial crisis. If this double dip does happen, our own economy will be negatively affected. As an emerging economy, South Africa aspires to join the Bric nations, an informal group of major emerging economies that includes Brazil, Russia, India and China. Expectations are that these economies will be the forefront of global economic growth as developed economies take time to fully recover. We are currently excluded from Bric, because our economy is not considered to be in the same league. This is an easy conclusion to reach when we consider the growth rates that the Bric countries are achieving in comparison to our own. They have emerged far stronger than we have, because they are more sharply focused on achieving economic success.
Before the world financial crisis began, our economy was already lagging behind its full potential. The International Panel on Growth identified several barriers to growth, but its recommendations were lost in the noisy transition from the Mbeki administration to the Zuma administration. The panel exposed poor policy choices that were made by the ANC government, particularly in education, resulting in a significant mismatch between skills available to our economy and skills required by our economy, and in its misdirected microeconomic interventions that stifled economic activity rather than it being promoted.
Although our room for manoeuvre is limited by a combination of adverse global events and domestic constraints, it is possible for us to craft a new economic growth path that will lead our economy to the forefront amongst emerging economies. It requires government to make the right choices and to exercise the necessary political will to do the right things for all the people of South Africa and not only for its politically connected cronies.
The role of government in the economy and its shaping of economic policy need to be clarified. The ANC government makes reference to the developmental state, but we still do not have clarity on what this actually means. The model applied to the state-owned enterprises doesn't work and we are still waiting for the review that was promised last year. We are also waiting for Minister Manuel's National Planning Commission to plan and for clarity on how it will interface with Minister Patel's advisory panel. It appears that political tension in the tripartite alliance has paralysed coherent economic policy-making and implementation. Investors are unsure about our economic policy direction. The prospect of nationalisation makes them extremely nervous.
The world financial crisis offered several lessons that we should apply to our economy. Most significantly we have learnt that government can perform a vital function in intervening where the market fails. In the South African context, this has important implications for government in positioning itself within the economy.
The ANC government seeks to position itself at the centre. This is a poor policy choice. From this central point, it seeks to control all aspects of our economy. In this way, it can dispense patronage to its loyal cadres and exert control over the population by providing or withholding access to jobs and poverty alleviating services. It should rather focus on encouraging people to make choices for themselves within an environment, facilitated by government, which enables them to become everything that they are capable of being. Government's primary objective, post recession, is to facilitate economic activity and not to attempt to act as a job provider, which it has proved unable to do in any event.
Our economy needs to be attractive to local and international investors. Our macroeconomic framework needs to facilitate this environment. South African businesses invested R44 billion in Ireland because the Irish government offered an attractive tax regime. We need to consider fiscal incentives to attract and retain foreign capital and to encourage South Africans to save more, especially towards funding their retirement.
Poor policy choices by the ANC government include unattractive corporate tax rates, an overly complex and complicated tax regime, suggestions to implement a Tobin tax, and a pension reform process that has dragged on for over seven years. To resolve this, we need a commission to review our tax regime and deadlines for completion of the pension reform process.
Millions of South Africans are neither employed nor in education. This is an enormous waste of human capital and the result of poor policy choices. Our education system is not producing the skills that our economy needs. To achieve a new growth path we need to ensure that our basic learning institutions provide quality education and that our higher learning institutions, of various kinds, can absorb far more students than they do now. Good policy choices would include incentives to establish more learning institutions and generate the specific occupational skills vital to our economic prosperity. If government builds the path to quality education, our people will walk on it and our economy will benefit.
Our rate of unemployment remains amongst the highest in the world and we are currently experiencing the phenomenon of jobless growth. Employers are reluctant to employ because poor policy choices make it really difficult for an employer to correct job mismatches and impossible for an individual to negotiate the terms of his or her own employment. Entrepreneurs thrive across the African continent, and we should be no exception. The environment needs to be conducive to the entrepreneurial spirit and good policy should remove obstacles to starting and operating a business enterprise. Technology and infrastructure needs to be developed and made available to those who are on the road to business development. It is currently very cumbersome for small businesses to operate in South Africa; for a new economic growth path, this needs to change.
A wide range of good policy choices can also be made to encourage employers to absorb more people from the available labour market; a wage subsidy is one of them. Although the Minister of Finance mentioned in his Budget Speech that a wage subsidy to encourage employment would be pursued, it now seems clear that it does not possess the political muscle to drive the policy to implementation.
The quality of life of millions of South Africans is unacceptably low. Many live in extreme poverty and do not have access to basic service delivery. Quality health care for all has not been achieved and results from poor policy choices. We know that the market does not provide universal access to quality health care and that government intervention is required, but instead of fixing the broken system that it currently operates, the ANC government looks to implementing a National Health Insurance Scheme that has not been comprehensively costed and is likely to make health care even more expensive.
Many other policy improvements are needed, including a more efficient and effective procurement process and a model for public/private partnerships that avoids patronage for the politically connected. Time is limited and the people will not wait forever.
On his recent visit to China, President Zuma said that plans are being developed in order for us to achieve a target growth rate of at least 7% per annum in the near future. The actions of the ANC government, to date, do not inspire confidence and the current public sector strikes point to deep divides within the tripartite alliance. Its previous plans have either failed or fizzled out under the weight of political agendas that cannot be reconciled within the ANC. Hoping for a bailout from China, as we have seen happen in Zimbabwe, is not good enough.
The people of South Africa deserve more. They deserve a government that will facilitate the economic activity that is required for them to achieve their full potential. They deserve a government that will focus on eradicating poverty at its root causes. They deserve a government that will work for the people, and not the other way around. Most importantly, they deserve a government that is capable of making the right policy choices. Thank you. [Applause.]