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Exploiting the Synthetic Triad of the South African TPSP, NIPP/IPAP and NDP

Essay 2016 14 Pages

Economics - Industrial Economics

Excerpt

Table of contents

1. Introduction

2. Analysis
2.1. Visions for development
2.2. Trade and industrialization: The inclusive economic growth
2.3. Trade and industrialization in South Africa
2.4. The Constraints

3. Conclusion

4. References

Abstract

The UN SDG number eight (decent work and economic growth) is matched with the NDP vision of employment and economic growth. Particularly, the role of trade and industrialization are assessed in enabling the realization of the goals in South Africa. It is shown that trade and industrialization form the basis for accelerated labour-absorbing economic growth characterized by high productivity and higher incomes. Underpinned by this, a ‘synthetic triad’ of South Africa’s TPSF, NIPF/IPAP, and NDP is key to achieve the NDP goal. ‘Synthetic’ because there is a synthesis between trade policy, industrial policy, and the broader development policy that reflects in the synthesis between the three policy frameworks aforementioned.

1. Introduction

In a world teeming with national drives to develop, both national and international visions for the future are prevalent. Looking into South Africa, the National Development Plan (2012), NDP, outlines its own set of visions for the country, with targets to be achieved by the year 2030. On the international front, the United Nations’ 17 Sustainable Development Goals (SDG) have gained popularity globally. The aim of this essay is to examine whether the NDP’s vision for economy and employment can match the SDG (number eight) of economic growth (specifically, promoting inclusive and sustainable economic growth, employment and decent work for all). Furthermore, an analysis is made of the contribution that trade and industrialization can make towards the realization of this vision. In particular, what is examined is the power of the ‘synthetic triad’ of the NDP, the country’s trade policy and its industrial policy as formulated by the Department of Trade and Industry in realizing the vision of economic and employment growth in South Africa. The paper begins with a description of the visions and their explicit targets, as well as the current empirical reality in South Africa and within the global North. Following this, an examination of the literature on inclusive and labour-absorbing economic growth for developing countries is conducted to provide a conceptual framework – with a focus on the roles of trade and industrialization. Thereafter, the revealed conceptual framework is applied to the case of South Africa, while giving a little attention to the broader case of developing countries apropos the SDG. The conclusion then provides a summarized consolidation of the argument.

2. Analysis

2.1. Visions for development

In the NDP (NPC, 2012:109), there is a vision of eliminating poverty in South Africa – which stands at an incredible 47.1% (Amstrong et al. 2008) – by enabling employment growth through faster, but inclusive, economic growth. Hence, there is a joint and complementary task of sparking rapid economic and employment growth. The key proposals listed in the NDP (NPC, 2012:115) are using fiscal policy to raise savings and investment, raising exports, incentivising the hiring of young, unskilled work seekers, improving skills development, increasing competition, strengthening the social wage to raise living standards of those out of work or in low paying jobs, and lowering the costs of transport and logistics and addressing spatial divides.

The SDG vision does not differ significantly. While the goal is to eradicate poverty, the stipulated means is also [sustainable] economic growth. The aim is to expanding job opportunities and decent working conditions for the whole working age population. There are 12 explicit targets (United Nations, 2016) made under the SDG vision for 2030 which include, inter alia, higher levels of economic productivity through diversification, sustained per capita economic growth, including through a focus on high-value added and labour-intensive sectors, education or training, development-oriented policies supporting productive activities, decent job creation, entrepreneurship, achieve full and productive employment and decent work for all, and substantially reduce the proportion of youth not in employment, technological upgrading and innovation.

To realize the vision of decent employment growth, South Africa cannot continue to rely the past de facto model which was characterized by commodities-led exports. This is because, as the ECA (2016) narrates, much of the recent economic growth in Africa has been the result of a boom in the prices and exports of natural resources, and its effect on decent employment generation has been marginal. Most people who enter the labour market in Africa end up in vulnerable jobs, such as informal jobs and undeclared work – which reflects as what Pons-Vignon and Anseeuw (2009) refer to as ‘casualization’ of workers in South Africa. It is for this reason that the NDP recognizes that South Africa must develop a more diversified and competitive economy (NPC, 2012:115). To underpin this, the plan aims to increase net exports, raise the level of investment, and improve skills and human capital formation. The NDP claims that “Success on these three fronts will lead to rising employment, increased productivity, improved living standards and a decline in inequality” (NPC, 2012:115).

It is at this juncture that one can find synthesis between the NDP vision for economic and employment growth and the Department of Trade and Industry’s Trade Policy and Strategy Framework (TPSF) and the National Industrial Policy Framework (NIPF) implemented through the Industrial Policy Action Plan (IPAP). While the NDP charts the country’s broad development policy, the NIPF/IPAP charts the narrower industrial policy to support economic and employment growth underpinned by industrialization and diversification of the country’s production structure, and the TPSF charts trade policy to cohere with industrial policy. This synthetic triad, as it could be called, reflects the role that trade and industrialization can play in achieving the developmental goals of economic and employment growth for poverty reduction. Particularly, it is argued that they are critical factors in the NDP’s aim to increase net exports, the level of industrial investment, and improvement of skills and human capital formation.

2.2. Trade and industrialization: The inclusive economic growth

Industrial development and industrialization has had a vital role to play in the economic growth of countries like Indonesia, Taiwan, Korea, and China (Kniivila, 2007:295). The reason that industrialization through manufacturing is key is that the manufacturing sector has faster productivity growth that allows for the expansion of productive capabilities, and it plays the leading role in diffusing technological progress throughout the economy (ECA, 2016:31). Due to the higher productivity growth, industrialization is also associated with higher per capita incomes (Timmer and Szirmai, 2000) – which enables the development of a domestic consumption base that supports further economic expansion and employment growth. There is recognition within the traditions of institutional economics, evolutionary economics, and endogenous growth theory that manufacturing (industrialization) is imperative for economic development (Szirmai, 2012) because as economic growth is mainly driven by technological change and innovation that drive productivity growth, and industrialization enables such productivity growth, it follows that industrialization is thus at the heart of modern economic growth (Kniivila, 2007:295). For economic diversification of the production structure and the creation of job opportunities for an ever-growing workforce, industrialization is a key catalyst (ECA, 2015).

Trade growth often goes hand-in-hand with industrialization as it provides an avenue for the increase in domestic production beyond the constraints of domestic demand. In this way, trade supports industrialization. Furthermore, trade (both through imports and exports) provides a key channel for the flow of services required to further improve productive capacity in agriculture, industry and services, the flow of technology, and finance, by connecting global markets to developing-country consumers and producers (UNCTAD, 2014:2). These are needed in turn for structural transformation of economies. When correctly exploited, the creation of jobs, the improvement of living standards, and the efficient use of resources can result from the opportunities brought by international trade (UNCTAD, 2014:1). However, although trade can, under certain conditions, promote industrialization, it can on the other hand lead to deindustrialization (ECA, 2015). Therefore, sequencing of trade and industrial policy is important for sustainability of industrialization – for instance, gradual trade liberalization is often better than fast or leaping liberalization when increasing the exposure of the industrialized economy to foreign competition (Rodrik, 2010).

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Details

Pages
14
Year
2016
ISBN (eBook)
9783668543300
ISBN (Book)
9783668543317
File size
501 KB
Language
English
Catalog Number
v376783
Institution / College
Rhodes University
Grade
90%
Tags
South africa SDG industrial policy trade policy

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Title: Exploiting the Synthetic Triad of the South African TPSP, NIPP/IPAP and NDP