Johannesburg - South Africa needs to embark on a different growth path if the economy is to grow and poverty beaten, says Trade and Industry Minister (dti) Rob Davies.
Addressing reporters ahead of the release of the UNCTAD's Trade and Development report 2010, the minister said the report showed "that we need to put ourselves on a different growth path".
"The growth we had before the crisis is not likely to reappear like before. Even though we were on a growth path before the recession we did not manage to get unemployment below 22.8 percent of the economic year to publication," said Davies.
Deputy President Kgalema Motlanthe at the weekend said government was working towards finalizing a new growth path aimed at providing a policy framework for a labour-intensive growth strategy.
The new growth path, he said, is expected to identify the policy tools available to support employment growth across the economy. "As government, we hope that the new growth path will provide another stepping stone towards the shared vision that we will require to address the structural constraints of the South African economy. [It] will define the nature of the South African jobs and equity challenge and address labour-intensive growth," he explained.
Motlanthe said there were a number of challenges in achieving a more labour-intensive growth path in the country, suggesting that social partners could do more to contribute towards achieving a higher participation rate and a better utilisation of labour.
In March, Economic Development Minister Ebrahim Patel announced a shift by government to a more labour-absorptive economy and the new growth path would include a focus on manufacturing, infrastructure development, rural development and agro-processing, and the "green" economy.
At the time he said the new growth path would recognise the crucial role of the private sector in creating new jobs.
Government earlier this year launched the Industrial Policy Action Plan 2 (IPAP), which seeks to respond to various economic and industrial imperatives and to address weaknesses that exist in the South African economy.
The UN report found developing countries to be overly reliant on exports. These countries, the report found, needed to strengthen domestic demand for growth as well as job creation.
Davies said: "Developing countries need to recognise that they cannot expect in the future to be overly dependent on exports as a driver of economic growth. And that what is needed now is a greater re-orientation of all countries where you have to have greater balance between domestic growth and also of export growth," said the minister.
He added that Africa needed to add value to the mostly mineral products it exported.
The report anticipates that global average growth will reach 3.5 percent this year. The developed world is expected to reach 2.2 percent growth while the developing world is anticipated to reach 6.9 percent growth with Africa reaching 4.8 percent growth. South Africa is anticipated to reach growth of 3 percent.
Low interest rates and economic growth are the preconditions for job creation and poverty alleviation. It said that real wage growth at the same pace as productivity would generate domestic demand.
The document also a highlighted that an incomes policy that favours a sustained increase in wage income in line with productivity growth would have impact on keeping wages from falling, would raise consumption and productivity at the same time as productivity and thereby keeping unit labour costs unchanged therereby preventing cost push inflation. The policy had been tried by some European countries.
"As a result, monetary policy can be geared more to providing favourable conditions for financing favourable conditions for financing real productive investment that is essential for job creation," reads the report.
Additionally wage growth in line with average productivity can be greatly facilitated by institutional arrangements for collective bargaining among workers' and employers' association.
Davies said the over-valuing of currencies posed a danger, adding that a strong rand increased competitive pressure on local and abroad producers. "The issue is to ensure a competitive currency".
The report showed global recovery was fragile and uneven with emerging markets leading the recovery. The possibility of a double dip recession because of fiscus stimulus being withdrawn too quickly particularly in Western Europe is another of the issues pointed to in the report.
The report also found that there was a risk the global imbalances which contributed to the crisis in the first place would not be corrected because of a lack of macroeconomic policy.
In the US debt financed households can no longer serve as an engine of growth while in China there is reorientation of policies towards supporting faster growth of domestic consumption coherence among major economies, the report noted.
