Democratic presidential hopeful Andrew Yang has promised that if he is elected US president he will “modernise GDP to include health, life expectancy, mental health and environmental quality”.
Yang argues that GDP is a “terrible measurement for national wellbeing”, and that the three chief indicators for measuring the economy — GDP, the unemployment rate and the stock market — are misleading because they don’t reflect the living conditions of most Americans.
It would seem that SA’s finance minister, Tito Mboweni, has taken a leaf out of Yang’s book in his approach to repairing our ailing economy. In his economic policy paper released by the Treasury in August, Mboweni makes it clear that the SA economy must be geared towards inclusive growth, economic transformation and competitiveness.
This will require interventions to boost SA’s growth in the short term, while also creating conditions for higher long-term sustainable growth. But it will also require a paradigm shift in the way economic policy is evaluated. To achieve genuinely inclusive growth and economic transformation the government needs to commit to looking beyond purely economic indicators and place equal value on both economic growth and social progress.
Disempowered and excluded
Traditional economic metrics such as per capita GDP are useful in providing a high-level overview of the economy, but they do not take into account the way in which citizens live and how wealth is distributed. SA is a prime example of this. Despite relatively solid economic growth over the past two decades, inequality and joblessness have increased and many South Africans feel disempowered and excluded from the economy. This has manifested in persistent and violent and disruptive social unrest across the country.
The type of unequal growth experienced in SA over the past two decades — growth that enriches the few at the expense of the many — is both unsustainable and unethical. Extensive research backs this up and shows that traditional measures of national income fail to capture the overall progress of societies. It is essential that the government take into account that the lived experiences of our citizens is as important as their relative wealth.
To achieve the sort of social and economic progress outlined in Mboweni’s policy document the government needs to bring the private sector firmly into the fold. This requires putting adequate pressure on businesses to go beyond business as usual and understand that doing what is best for their shareholders and doing what is best for the country do not have to be mutually exclusive.
It is the private sector’s responsibility and in its best interests to play an active role in driving inclusive growth. We need a new social narrative that strikes a balance between shareholder needs and broader, social capital investment. Business has a critical role to play in changing this narrative.
Education and skills transfer form a key area where business and government can work together. Improving educational outcomes is crucial to the future performance of the SA economy, but for the government to do so alone will take time we do not have. As things stand more than half of SA’s youth are unemployed, and those who remain in school are by no means guaranteed to find employment when they graduate. This is largely due to a skills mismatch between the labour force and the economy on the one hand, and poor educational outcomes overall on the other.
One way to leapfrog this educational shortfall is to promote the transfer of skills from successful private-sector entities directly to the public sector. This can be achieved through private initiatives such as Partners for Possibility, where experienced leaders in business partner with the head teacher and management team of a school to find workable solutions to everyday problems, as well as develop leadership skills and potential.
Though SA performs well in terms of physical, legal and commercial infrastructure, one of the greatest challenges we face is a lack of institutional capacity. This is seen keenly in the high failure rate of small businesses, low levels of compliance in both the public and private sectors, and a low level of entrepreneurial activity. It is also seen in the planning and governance failures experienced throughout the public sector — from municipal level all the way through to the presidency.
There is no question that profit is a powerful motivator that drives investment, innovation and growth, but that does not mean shareholder value needs to be pursued at the expense of social value. It is only through genuinely inclusive growth that delivers benefits to all members of society that SA can rise again and reach its full potential.
• Craker is the CEO of IQbusiness.