Our future - make it work

NATIONAL DEVELOPMENT PLAN 2030

Prof Mohammad Karaan

GOSA February 2013

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National Planning Commission Background

2012

Apr President Zuma appoints the Commission

Jun Diagnostic Report published

Nov Draft National Development Plan released

Public consultation

2013 onwards2010 2011 2011/12

Aug Handover to President and NationSep Cabinet adopts the Plan

Focus on implementation

Dec ANC Conference adopts the Plan

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The National Development Plan is:

Shaped by vision of the Freedom Charter & Constitution

A plan for the whole nation

A product of wide consultation

Endorsed by all major political parties

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Under apartheid, the economy was oligopolistic: strong mining sector and

sophisticated financial services sector

Ownership and control patterns largely unchanged & contribute to high levels of poverty and inequality

Low skill jobs have declined & high skill jobs grew significantly

Loss of low skill jobs has raised inequality

Too few skills to compete with advanced economies & high cost structure to compete with developing countries

Our weak economic performance is largely attributed to poor export performance since the early 1980s

St Francis2013/01/27

Diagnostic of the SA Economy

Elements of a Decent Standard of Living

A decent standard of

living

Employment

Health care

Recreation and leisure

Safety and

security

Clean environment

Nutrition

Education and skills

Transport

Housing, water,

sanitation, electricity

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Broad Goals of the Plan

- Build a united country

- Resolve historical injustices

- Uplift the quality of life of all South Africans

- Accelerate social and economic change

- Eradicate poverty and unemployment and Reduce inequality

- Expand the economy and distribute its benefits equitably

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- Inclusive rural economy

Objectives and Targets of the Plan

- Reduce unemployment

- Improve quality of education

- Provide quality public services (water, sanitation, electricity, etc.)

- Better built environment

- Critical infrastructure

- Effective & affordable public transport

Eliminate poverty and reduce inequality

Key Targets for 2030

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Explaining the slow progress on jobs

Redistribute money

Redistribute assets (e.g. Housing)

Broaden reach of quality education

Create work for unskilled people

Har

der t

o do

Gre

ater

impa

ct

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Promote manufacturing in areas of competitive advantage

Grow agricultural output and focus on agro-processing

Improve the functioning of the labour market to make it easier

for young work seekers to get jobs

Better coordination and implementation of economic policies

Partnerships with business to increase investment in labour

intensive areas

Lower the cost of living and of doing business

Undertake small business reforms

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Proposed measures to create jobs

Storylines of a premise

Zeno’s paradoxes

Visionary Industrial Policy (Ha-Joon Chang)

:Doesn’t matter if the cat is black or white, if it catches mice it’s a good cat” (Deng Xiaoping)

3 kids and a flute (Amartya Sen)

The Next decade: demography & tech shift

Doesn’t matter if the cat is black or white, if it catches mice it’s a good cat” (Deng Xiaoping)

THE CASE FOR AGRICULTURE1. Economic growth premised on agric and manufacturing (Linsey Whitfield)

2. Labour intensive exports Hecksher-Ohlin Theory, Sameulson

3. Urbanisation does not advance productivity (Chang & Lin)

4. Two sectors (capitalist, non capitalist) Arthur Lewis.5. Tech change drives trade specialisation. Paul Krugman

6. Opportunity of technical innovation from advanced commercial agriculture.7. Growth in cities depend on rural markets and rural growth depend on urban

markets.8. Subsidising agric is a political response to the unequal benefits of economic

development

9. Rich nations: positive capital flows to agric; Poor nations: Neg capital flows10. Labour absorption capacity11. Influences human settlement patterns12. Africa expansion potential13. Sustains rural areas14. Can address the homeland question15. Multifunctionality

Broad proposals

Job creation (11m jobs)Regional growthSolve Land reformWater & conservationAdvance the Green economy Improve labour marketsSpatial inequitiesUneven public service

An inclusive rural economy-proposals-

Expand irrigationDevelop communal areas Jobs upstream & downstreamLinking smaller farmers to marketsTenure security in communal areasUmzimvubu valley and Makathini flats Invest in Adaptive research Improve and expand training

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1. Market expansion2. Aggressive trade regime3. Technology shift R&D system4. Water efficiency5. Expansion into developing areas6. Human capital incubators7. Infrastructure investment

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A ‘NEW DEAL’ FOR AGRICULTURE

The identification of “winners” Three approaches to identify

industries that can contribute to significant growth in employment: Large export industries with high

labour requirements High volume imports that can be

substituted with locally produced goods

Growing small industries with high labour requirements

The employment creation matrix

SummaryTarget group Primary

jobs created

Secondary jobs

created

Assumption

Small scale farmers with >5 ha of land

75 000 37 500 These farmers employ themselves and two others

Small scale farmers with between 0.5 and 5 ha of land

165 000 82 500 The livelihoods of half of the farmers in this category are improved

Subsistence farmers with <0.5 ha

83 000 41 500 The livelihoods of one in ten of the farmers in this category are improved

Better use land redistribution land

70 000 35 000 Redistribution beneficiaries employ themselves and two others; one in ten restitution beneficiaries become self-sufficient

Labour intensive winners

200 000 100 000 Critically, this requires investment in irrigation, support to smallholder farmers and the opportunity to grow their businesses

Labour extensive field crops

10 000 5 000

Labour extensive livestock

40 000 25 000

Total 643 000 326 500 The total is 969 500

Food security

In most years, South Africa is food secure at the national level, and has been so for a number of decades

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

-500000

0

500000

1000000

1500000

2000000

Net exports ($1000)

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

-4000000

-3000000

-2000000

-1000000

0

1000000

2000000

3000000

4000000

5000000

Net maize exports (tons)

Food Security

Maintain positive trade balanceRegional strategiesPublic works programmesNutritional educationFarming-nutrition linkProduct development

LAND Proposals

1. Inspired by the Green paper (proactive acquisitions, LMC)

2. Focus on people, not land (incubation)3. Intended to remove uncertainty and get

closure4. Purpose to integrate support measures5. Make the 30% target 6. Reduce failure rate7. Build investor confidence8. Reward commercial farmers who contribute9. Remove land price speculation10.Avoid land market distortion

First, each district municipality where there is commercial farming land in South Africa should convene a committee (the District Lands Committee) with all agricultural landowners in the district as well as key stakeholders such as the private sector (the commercial banks, agribusiness) the government (Departments of Rural Development and Land Reform, the Provincial Department of Agriculture, Water Affairs where relevant, etc.), and government agencies (Land Bank, ARC, etc.) This Committee will be responsible for identifying 20% of the commercial agricultural land in the district, and then for giving the current commercial farmers the option of assisting in the transfer of this 20% of agricultural land to black farmers. They go about this in the following manner: To identify land they would first look around their district for land that is readily available from any of the following categories: land that is already in the market; land where the farmer is known to be under severe financial pressure, land held by an absentee landlord willing to exit, in an estate, etc. In this manner 20% of the land could comfortably be found without distorting markets. Upon identification, the land is obtained by the state at 50% of market value (which is closer to its fair productive value). The 50% shortfall of the current owner is then made up by cash or in-kind contributions from the commercial farmers in the district who volunteer to participate. In exchange, they are absolved from losing their land in future and they gain BEE status. This should remove the scourge of uncertainty and mistrust that surrounds land reform and the related loss of investor confidence. A stepped programme of financing would address most of the financing problems of land reform beneficiaries, gives the implementers of land reform the comfort that beneficiaries have the necessary skills for successful farming, and spreads the fiscal cost of the programme between future earnings of the farmer and the pockets of the taxpayer. This can be done for example by giving successful applicants a two or three years rent-free probation period and if they successfully demonstrate that they are capable of farming they then move to a long-term lease of say 40 years with the full commercial rental phased in over four years and a part of the rental fee applied to a sinking fund held at the Land Bank that eventually gives them full title to the land.

A PRAGMATIC LAND REFORM SCHEME

Land acquisition at 50% concern

50% state subsidy Other 50%= private contributions and/or

development finance, targeted subsidies (CASP, etc) Private contributions: Landbank bonds, extension,

mentoring, incubation, marketing, harvesting, collective buying, guarantees, schemes, financing, other concessions, education,

Landbank 30-40yr mortgage Landbank bonds: 10yr guaranteed return for land

reform BEE status for commercial farmers who contribute Willing sellers still get market price !

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1. Migrant labour dilemma2. Service delivery protests3. Marikana4. De Doorns5. Cost of living6. Debt and conspicuous consumption7. ‘The grapes of wrath’

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A perspective on labour unrest and the minimum

wage

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R105 pd is the thresholdLay-offs and mechanisationUnionisation driveProductivity pushCompetitivenessWinners and losersTrade policyA new deal?

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The consequences

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