NDP: less easy than 1-2-3

3 February 2016
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(Today’s music pun comes to you courtesy of the Jackson 5.)

I bought a print copy of the Business Day today, which I don’t normally do (because free online). There’s a front-page article by Ntsakisi Maswanganyi that talks about the poor state of our economy. The interesting bit for me is the World Bank-cited growth rate that the economy needs if we are to meet our original National Development Plan (NDP) goals – it’s calculated at 7.2 per cent, which I assume is the average rate needed from here on until 2030.

Here’s a quick review of the macroeconomic and demographic calculations that have gone into the NDP :

– The targeted outcome of the NDP is the unemployment rate: from 25 per cent in 2010 to just 6 per cent by 2030. It’s crucial to keep this in mind, as every other calculation and assumption is subordinate to the targeted unemployment rate

– The next step in the modelling was a demographic projection of the 2030 population, specifically the working-age population (aged 16 to 64). The number of jobs needed to lower unemployment to 6 per cent by 2030 was calculated at 24 million

– The targeted outcome of the NDP was therefore the number of jobs to be created by 2030

– The targeted average growth rate was calculated at 5.4 per cent per year from 2010 to 2030. This growth rate would yield the 24 million jobs needed to lower the unemployment rate to 6 per cent.

So far, so good – at least as far as the mechanics of the model were concerned. The model relies heavily on the creation of many, largely low-paying jobs to meet employment targets. Cosatu and other labour interests have opposed the NDP’s focus on creating such jobs as they don’t constitute ‘decent work’, but that’s another story for another time.

There are at least two major speedbumps on the road to the targeted 6 per cent unemployment. The first, obvious one is that if the economy grows at a rate below the targeted 5.4 per cent per annum (which it definitely has since 2006, never mind 2010) then the targeted growth rate for subsequent years will have to be higher than 5.4 per cent. This brings us to a revised growth rate of 7.2 per cent for the next 14 years, which we’ll almost certainly fail to achieve.

The second problem is that the 5.4 per cent growth target was based on the most favourable scenario planning by the National Planning Commission. Very few people have read through the entire NDP manifesto, and they don’t know that there is reference to three scenarios. Only the first, most optimistic one is quoted in the popular media.

This first scenario assumes that we’ll achieve the necessary economic and social reforms needed to raise the average growth rate to 5.4 per cent. It also assumes that the favourable conditions of the global commodities markets would prevail from 2010 to 2030. These conditions have evaporated with the downturn in the global economy.

The worst-case scenario assumes poor economic growth and a sluggish commodities market, leading to a shortfall in job creation of about 5 million How does the model make up the shortfall in job creation? By funding 5 million ‘job opportunities’ through public works programmes like the expanded public works programme (EPWP).

These EPWP job opportunities would have to be funded by the fiscus. The assumption that there would be money to pay for these job opportunities is increasingly unrealistic – we currently don’t even have money to pay for public sector bonuses.

I think it’s time that we revisit the basic assumptions behind the NDP model. We can’t wait until 2030 to formally recognise that we’ve failed to achieve our development goals.

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