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Your editorial opinion on Heineken’s takeover offer for Distell refers (“Distell takeover could cause more JSE blues”, November 22).

The demographic dividend only translates into improved economic prosperity if it results in a short-term increase in the proportion of the population that is economically active. SA has shown for many years now that this need not be the case.

Thomas Malthus — and those replicating his reasoning nowadays (the climate worriers) — were gradually proven wrong. Malthusian economics relied on the assumption that there would be no technological improvements and that our stock of technology would remain the same, which was invalidated.

It is true that a demographic dividend is the result of a low birth rate that leads to a change in the dependency ratio (there are fewer children) for a period (until the dependency ratio rises again as the population ages). Alternatively, the demographic dividend creates an opportunity for a society to have an abnormally high economically active population, expressed as a proportion of the entire population (not just the workforce).

Unfortunately, due to things such as the generally inferior education system (resulting in low levels of literacy and, say, compared to Eastern Europe, low levels of coding skills), labour market barriers (minimum wages in SA are above the market clearing rate) and non-human capital-related ceilings on economic growth (low levels of electricity production, widespread corruption, distance from markets, lower levels of property rights), the demographic dividend in much of our continent is not translating into an improvement in the proportion of people who are economically active, which would in turn translate into a rapid improvement in economic prosperity for society as a whole.

The demographic dividend means either increased unemployment or economic growth. For many years now SA has been showing what happens when corruption and insecurity discourage foreign direct investment, when labour laws benefit the incumbents (not society more broadly), and how human capital needs to be internationally competitive (lowering matric standards helps nobody).

It is a travesty that our real GDP per capita is lower than in 2008. The next July riots will be because of this, and the sense of hopelessness that more than a decade of declining fortunes engenders.

Greg Becker
Via BusinessLIVE

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