1. Trade and Investment for Inclusive Growth, Evidence and Elements of a Coherent Policy Framework – Lessons from Southern Africa Ramos Mabugu Financial and Fiscal Commission, South Africa
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2. What are the issues?
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3. Issues
(i) Although Southern African countries have followed trade liberalisation and regional integration for some time, the reality is:
(ii) Investment in infrastructure in the region has been on the decline.
(iii) Unemployment is high and poverty is high.
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4. The main purpose of the presentation is to suggest some core elements of a coherent approach to trade, investment and inclusive growth in Southern Africa based on selected observations and recent literature…….
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5. South Africa Apartheid ended in 1994
Country has long tradition of trade liberalisation
Trade policy is guided by multilateral arrangements as well as by bilateral and regional agreements
Member of SACU
Has FTAs with the EU and SADC
Also benefits from USA’s African Growth and Opportunity Act.
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6. Trade, Technology and Labour Markets
Debate on effects of trade on employment and wages
Unemployment blamed on technology and unskilled labour market rigidities
Excessive wages the main cause
BUT prevailing unskilled wages cannot meet basic needs
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7. Trade, Poverty and Fiscal Policy
Studies find small positive output gains in short run
But slight increases in poverty and inequality especially for poor rural Black women and children
Labour market participation increases at expense of leisure
Allowing for accumulation, trade induced total factor productivity increases accelerate growth and reduce slightly the incidence of poverty and inequality
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8. Trade and Education Policy
South Africa suffers from severe skill shortages
Expansionary secondary and tertiary education policy boosts employment and leads to improvement of the skilled labour endowment of households
Certain undesirable long term outcomes including skilled unemployment, increased foreign indebtedness and reduced government savings
If the education policy financed by a direct tax on households, this would be too expensive for households and would lead to a crisis for the economy.
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9. Trade and Social Policy
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10. Trade and Social Policy (cont’d)
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11. Let us now look at Zambia…….
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12. Introduction
A recent study by Ianchovichina and Lundström identifies the key constraints on inclusive (and sustained) growth in Zambia.
We then use it to sequence interventions that may lead us to get inclusive growth going
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13. Approach
Uses method along lines of growth diagnostics by Hausmann et al.
Supply and demand side factors preventing poor people participation in growth process identified
Supply side factors refers to constraints hampering poor people access to labor markets or employability
Demand side refers to obstacles to job creation and productivity improvements.
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14. Bindings constraints to shared growth in Zambia
Lack of positive coordination externalities (rural-urban connectivity)
Poor government effectiveness
Regulatory uncertainty and government interventions (stop doing harm before doing good, especially severe in agriculture)
Real exchange rate appreciation (international connectivity)
Access to post-primary education and health for the poor
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15. We can now bring the two bits of observations about each country to propose elements of a coherent strategy needed in Southern Africa to achieve inclusive growth……….
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16. Elements of strategy (1)
Promote greater regional integration through financing infrastructure
Promote broad-based participation in economic activities
Skills development: Improve the quality of and access to secondary and tertiary education and health.
Social Protection: Government transfers to the indigent should remain part of measures to fight poverty
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17. Elements of strategy (2)
Trade Liberalising Fiscal Policy
Improve access to capital
Poverty relevant social services such as health and education remain vital
Improve governance
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18. Thank You!
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