Final Recommendations of the International Panel on ASGISA¶

Literature › Works

Ricardo Hausmann (2008). Final Recommendations of the International Panel on ASGISA. CID Working Paper No. 161, Center for International Development, Harvard University. Center for International Development, Harvard University.


Type	working paper
Scope	Post-1994 South African economy
Method	policy analysis
Period studied	1994–2008
Regions	South Africa
Themes	transition post apartheid, inequality poverty unemployment, labour markets wages, macro fiscal finance debt, manufacturing industrial policy, education human capital, mining migrant labour
Citation key	`hausmann2008`

Argument¶

The Harvard-convened international panel for the National Treasury's ASGI-SA argues that post-1994 South African growth has been too slow and externally unsustainable, with very high unemployment. It identifies binding constraints as a volatile and overvalued real exchange rate, tariffs and poor logistics, weak competition, labour-market rigidities, a skills shortage, and obstacles to structural transformation. The paper holds that mining and agriculture have shed jobs and that manufacturing has also declined, while growth has concentrated in skill-intensive non-tradables. It recommends a strategy of 'exports for jobs' via 21 policy recommendations covering counter-cyclical fiscal policy, exchange-rate management, tariff reform, a youth wage subsidy, high-skill immigration, industrial policy and recalibrated Black Economic Empowerment.

Evidence and method¶

Synthesis of the panel's 20 commissioned working papers (Appendix 2), plus aggregate statistics on growth, unemployment, employment by sector, exports, exchange-rate volatility and union wage premia. Underlying data and sources are not detailed in this synthesis.

Findings¶

Per capita growth was modest in the first democratic decade while unemployment rose sharply. (p. 3)

during the first decade of democracy GDP per capita grew by only 1.1 percent per year.
Unemployment rose substantially between 1995 and 2004. (p. 3)

caused a very large increase in unemployment from close to 15 percent in 1995 to over 27 percent in 2004.
Long-run export performance was extremely weak compared with peers. (p. 4)

In the 44 years between 1960 and 2004, the real value of exports grew by only 34 percent (about 0.7 percent per year).
The post-2004 growth spurt was demand-led and financed by a widening current account deficit. (p. 4)

the acceleration of growth has been driven mainly by domestic demand and has been financed through a rising current account deficit
Manufacturing employment also fell substantially, so primary sector job losses were not absorbed. (p. 6)

manufacturing jobs fell by 11.7 percent or 165,448 jobs and by 21.0 percent or 332,441 jobs since its 1982 peak.
Only a minority of the working-age population is employed, with joblessness concentrated among the young, black, female and poorly educated. (p. 5)

At present there are about 13 million South Africans working. This represents only about 42 percent of the working age population.
The union wage premium widened among unskilled and semi-skilled African workers. (p. 11)

it increased from 21 and 15 percent respectively in 1995 to 37 and 33 percent respectively in 2004.
Real exchange rate volatility is high by international standards. (p. 8)

It has averaged around 11 percent per year over the last quarter century and over the last 15 years.
Mining specialisation is a poor stepping stone to diversification and mineral exports per capita have declined. (p. 12)

Mineral exports per capita have been on a downward trend over the past 45 years, and finding other areas of economic activity to replace them has been slow and difficult.
The panel recommends a one-off wage subsidy for 18-year-olds to ease the school-to-work transition. (p. 15)

a once-and-for-all wage subsidy card of a fixed amount (e.g. 6 months of minimum wage) to all South Africans when they turn 18-year olds.