OBG talks to President Jacob Zuma

Interview: President Jacob Zuma

How would you rate South Africa’s economic development in the past 20 years?

PRESIDENT JACOB ZUMA: In 1994 the democratic government inherited an economy characterised by deep structural faultlines and serious obstacles to growth. Both the market economy and the labour market were defined by the apartheid system, which acted as a powerful barrier to economic growth across a wide variety of fronts, including foreign investment, a massive skills deficit, inadequate economic infrastructure, a small domestic market that was defined by race, trade relationships based on apartheid, a poor standing in the African and global economy, and so on. In addition, the economy was dependent on the export of primary commodities, energy and capital-intensive sectors.

By the time of the democratic transition, the manufacturing sector, which had grown out of the country’s mining-led industrialisation, was also faced with structural problems – some of them arising from the isolation of South Africa by the global community and an over-reliance on an import substitution growth path under apartheid. Many efforts to develop a stronger growth trajectory have had to be taken since 2007 in the face of the worst global recession since the Great Depression, which depressed demand for products among South Africa’s traditional trading partners.

Against this backdrop, significant achievements have been made. These include a national initiative to address the skills shortage and mismatch, driven by the Department of Higher Education and Training, with a strong focus on artisanal skills programmes at tertiary institutions and colleges for continuing education. Infrastructure backlogs, including at railways and ports, are being urgently addressed through a massive infrastructure building programme. The shortage of electricity has been a critical constraint to growth and investment, and now significant new coal-fired capacity will come on-stream and is being augmented by the Renewable Energy Independent Power Producers Programme, the world’s largest such project on a per capita basis.

Efforts to stop and reverse deindustrialisation in South Africa have been underpinned by the publication of an annual Industrial Policy Action Plan (IPAP), which sets out a wide range of practical measures to support re-industrialisation across a broad range of sectors, including automotive, clothing and textiles, mining, transport and others. The IPAP is aligned with the broad vision set out in the longer-term National Development Plan. All government efforts to rebuild the economy post-apartheid rest on the principle of building a strong relationship with business and labour.

Much has also been achieved regarding the economy’s inclusiveness. Government policies, including the broad-based Black Economic Empowerment initiatives and codes, have resulted in significant empowerment of previously excluded and disadvantaged blacks, women and hitherto disadvantaged strata such as the youth. It is clear, of course, that much more needs to be done with respect to building a more inclusive growth trajectory. Inequality, as has been widely acknowledged by many multilateral organisations, is in itself a barrier to growth. Government will therefore do even more to focus support on the development of small and medium-sized enterprises through the newly formed Department of Small Business Development, as well as increase its levels of financing, infrastructure and training support for black entrepreneurs and business people.

What sort of diplomatic role do you see for South Africa on the continent?

ZUMA: Over the past decade, there have been vast improvements in the continent’s economic prospects. Africa is today the second-fastest-growing region in the world after Asia and offers the highest rate of return on investment. Its full economic potential, however, will remain unfulfilled unless we address the challenges of inadequate infrastructure, the limitations imposed by small and fragmented markets, and inadequate diversification of industrial output, all of which are responsible for the low levels of intra-African trade.

South Africa is championing an ambitious integration and development agenda in Africa regarding our engagements in the Southern African Customs Union, the Southern African Development Community (SADC), and in the Tripartite Initiative to integrate SADC, the East African Community and the Common Market for Eastern and Southern Africa. Our efforts to advance a “developmental integration” approach to regional and continental cooperation combines market integration, cross-border infrastructure development and policy coordination to advance industrial value chains.

What are the challenges to realising the benefits from South Africa’s membership in the BRICS Forum?

ZUMA: South Africa’s membership in this forum with Brazil, Russia, India and China has become a vital element in our global economic strategy, as it provides a unique platform to promote closer cooperation between our countries and support our growth, development and poverty reduction objectives, building on our respective economic strengths. South Africa’s trade with these four countries has been growing rapidly, and they today account for about 20% of our total trade. China is our largest trading partner, while India has quickly moved into fifth position. We also continue to attract significant investment from BRICS partners into a range of diversified sectors, and invest in turn into their economies. A major priority for South Africa is to shift its basket of exports to more value-added products in line with the IPAP. This will be supported through a group of BRICS trade and investment promotion agencies to implement recommendations on how to grow more value-added exports for intra-BRICS trade.

What can be done to improve the delivery rates on public sector projects?

ZUMA: The administration’s main emphasis since 2009 has been to improve the delivery of services to citizens by changing the way government works. We introduced a new system focusing on critical outcomes and monitoring how government operates. While this has begun to show results in various departments, in some instances progress has taken longer than intended.

We have begun to add new life into some spheres, for example by launching the “Back to Basics” campaign for local government to deal with challenges of capacity, bureaucracy and administrative bottlenecks. All municipalities must be able to provide basic services such as water, electricity, refuse removal and road repair. This campaign will support municipalities that are struggling and reward those that are doing well. Our focus moving forward is to fast-track the removal of bureaucratic obstacles, hire staff with the right skills and ensure that the innovations we introduced in 2009 are applied throughout the system of government.

What impact will urban migration have on the economy in the coming years?

ZUMA: South Africa’s history of racial discrimination has continued to influence internal migration, even after 20 years of democracy. This comes despite the fact that control over the spatial distribution of individuals and groups is no longer a key government strategy. Government policy has now shifted its focus towards urban development as a deliberate means of driving economic growth and development.

As for urban migration, we are seeing trends increasingly informed by the unravelling of apartheid spatial planning and by the poor economic conditions in rural areas, which induce migration to urban and peri-urban centres in search of jobs and better living conditions. The former driver is likely to continue for a while, albeit at a decreasing pace as the effects of apartheid dissipate organically, while the latter driver is likely to increase in both importance and pace over time.

Going forward, the government has devised a comprehensive policy response to address both the causes and consequences of urban migration, including for regional industrialisation, urban planning, the construction of national infrastructure and rural development.