ASGISA – IS THE BAR SET HIGH ENOUGH

TIPS CONFERENCE29-31 NOVEMBER 2008, CAPE TOWNMarie Kirsten & Glynn Davies DBSA

INTRODUCTIONBattles 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 particularThis 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 GEARExacerbated negative impact due to• Decline in government spend and• Slow down in private investment NEVER THE LESS• Public investment rising• Acceleration now visibleBUT 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 Poverty High Poverty

Less Poverty More Poverty Less Poverty More Poverty

Four Possible Development PathsHHIIGGHHEERR

GGRROOWWTTHH

LLOOWWEERR

1. Full Steam aheadDevelopment with economic

growthDeclining rich-poor divide Inclusive transformation

Pro-poor growth

3. Coming off the tracksFree reign of market forcesExpanded rich/poor divide

Increased polarizationPro-rich growth

2. Riding Steady on the Local Train

Social Progress but economic stagnationDeclining inequality

Pro-poor

4. Derailed!Economic stagnation/declining

social progressIncreased 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% ASGISA SPEND PLUS DOUBLING LABOUR INTENSITY PLUS GUARANTEED EMPLOYMENT PROGRAMME TO 3 MILLION

JOBLESS

GROWTH POVERTY UNEMPLOYMENT

Base 0.043 44.17 30.2%

A1 0.056 42.64 28.4%

B1 0.057 38.77 23.6%

C1 0.064 27.01 14.2%

FINDINGSIdentified four possible development paths:

1. Full Steam ahead2. Riding Steady on the Local Train3.Coming off the Tracks4.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 GUARANTEED EMPLOYMENT PROGRAMME FOR SOUTH AFRICA

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 200 000 unemployed. •The number of participants will expand to 1.6 million by 2011 •The number will expand to 3 million unemployed by 2014. •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?