ASGISA – IS THE BAR SET HIGH ENOUGH TIPS CONFERENCE NOVEMBER 2008, CAPE TOWN Marie Kirsten & Glynn Davies DBSA

INTRODUCTION Battles have been won but the war is not over CHALLENGES – Significant advances end of first decade BUT – Ten Year Review identified binding constraints – Repeated in 2005 State of Nation address TARGETS – Economic growth 6%; halve unemployment & poverty – By 2014 COMMITMENTS – AsgiSA ISSUES – Increase spend increased growth but impact on poverty not clear cut Therefore the Report addresses two impact dimensions: economic growth – more traditional arguments development outcomes in general & needs of communities in particular This paper/presentation focuses on some of the lessons

CONCEPTUAL OVERVIEW Economic development is characterised by: Structural changes – diversification & – shifts in supporting infrastructure needed Lead & lag; Sequencing & synchronisation

PRO POOR INFRASTRUCTURE Importance for: – Creating infra assets – mkt access – lowering production & transaction costs – Direct involvement by poor in public works – employment & income – Constructing social sector assets – clinics – productivnes increase BUT take cognisance of: – Affordability – Link to outcomes is not automatic – needs to be managed – Burden inequitably borne – household/gender – Local insight & knowledge

SA INVESTMENT OUTLOOK Low base further constrained by GEAR Exacerbated negative impact due to Decline in government spend and Slow down in private investment NEVER THE LESS Public investment rising Acceleration now visible BUT the legacy of low spend visible

SA PERFORMANCE What assists or impedes – Policies and programmes NSDP; NIPF/IPAP; PGDS/PSDF; IDP/SDF; ISRDP; URP; BNG – Data & benchmarking

Investment-led scenarios What are the prospects for increased infrastructure spending to help achieve faster growth and radically reduce poverty and unemployment? High Growth Low Growth Low PovertyHigh Poverty

Less Poverty More Poverty Four Possible Development PathsHIGHERGROWTHLOWER 1. Full Steam ahead Development with economic growth Declining rich-poor divide Inclusive transformation Pro-poor growth 3. Coming off the tracks Free reign of market forces Expanded rich/poor divide Increased polarization Pro-rich growth 2. Riding Steady on the Local Train Social Progress but economic stagnation Declining inequality Pro-poor 4. Derailed! Economic stagnation/declining social progress Increased rich-poor divide Increased inequality

A macro-micro economic model of SA was used to test 4 different groups of possible policy interventions: A base scenario was first developed to illustrate economic growth and development without AsgiSA related investments Group A scenarios tests for different levels and sequences of public infrastructure investment. A1 - Fully implementing the current infrastructure investment plan – 100% A2 - Investing 50% less A3 - Investing 50% more Group B scenarios gradually doubles the employment elasticity of growth during the next 7 years. (B4, B5, B6) Group C scenarios rolls out a guaranteed public employment programmes to 3 million people by 2014 (C7, C8, C9)

FINDINGS: GROWTH RATES

FINDINGS: UNEMPLOYMENT

FINDINGS: POVERTY RATE

100% A SGI SA SPEND PLUS DOUBLING LABOUR INTENSITY PLUS G UARANTEED EMPLOYMENT PROGRAMME TO 3 MILLION JOBLESS GROWTHPOVERTYUNEMPLOYMENT Base % A % B % C %

FINDINGS Identified four possible development paths: 1. Full Steam ahead 2. Riding Steady on the Local Train 3.Coming off the Tracks 4.Derailed! Used modelling to techniques to test different policy decisions SA’s current public infra investment prg can raise the average growth rate However, the growth path will not automatically be pro-poor It has to be accompanied by policies to increase the employment intensity of the growth or a large scale employment creation prg

A G UARANTEED EMPLOYMENT PROGRAMME FOR S OUTH A FRICA The main features of the GPE programme are: One part-time job per unemployed person 10 days of work per month or 120 days of work per year Remuneration of R100 p/day (R1000/month), adjusted to the inflation rate In first year the programme cover unemployed. The number of participants will expand to 1.6 million by 2011 The number will expand to 3 million unemployed by The programme could reach 75% of the estimated unemployed by 2014

What are the prospects for increased infrastructure spending to help achieve faster growth and radically reduce poverty and unemployment?