Day 19 - May 11th 2017 - The South African econony

We spent this morning visiting two different institutions and learning about the South African economy. Investec is a large investment bank and our agent Stephen had set up a talk with Brian Cantor, who according to Stephen,  is one of the most important economists in Africa. Brian had just published a book titled How to Get Africa Growing Again and although Investec is mainly a wealth and asset management firm, the talk at our request, focused on macroeconomic and growth constraints faced by the economy.

The thrust of Brian's arguments were that the South African econony is burdened by excessive regulations, especially in the labor market, and that preferential racial treatment and the heavy welfare state won't lift the majority of the poor out of poverty in a sustainable way since the youth unemployment rate is close to 50%. He believes that the economy needs to be more liberalised and focus on growth which will result in job creation and a more long-term solution to the poverty issue.

We then visited The Free Market Institute which as the name suggests is an economic think tank focusing on economic liberalisation as well. We were greeted by Temba Nolutshungu, the director of the Institute, who spoke to us for almost an hour about his vision for how best to solve the problems facing the South African economy including slow growth, high unemployment, poverty and income inequality.  For the most part Temba echoed many of the same points as Brian , with a more extreme focus on liberalisation and the removal of barriers and regulations which hinder free enterprise. His beliefs were firmly rooted in the power of the free market as the engine of economic growth and poverty reduction.  He even gave us a critique that he had published of Thomas Piketty's Capital in the 21st Century which is peppered with criticisms of socialism,  Marx and the welfare state (I wish I had a fire extinguisher to put out the smoke coming out of Martha's ears : ).

As an economist,  for the most part I agreed with many of the basic precepts expressed by them on deregulation and liberalisation. However, I also believe that the unfortunate legacy of apartheid has left many systemic and structural imbalances in the country which need to be addressed by a more focused development policy before the gains of economic growth can trickle down to the lowest echelons of society.   The unequal distribution of human capital (health and education) is one of the most glaring causes of the current disparities in income distribution.  However, when  pressed on these issues with questions Temba and to a lesser extent Brian, continued to stress economic liberalisation as the only path forward with no complementary development policy.

I was proud of our students who focused intently on what were two fairly long and academic discussions and asked pertinent questions of both speakers. We were quite privileged to have gotten these oportunities as they are both important and high-ranking individuals who went through considerable trouble to take time to meet with us. We learned a great deal and kudos to Stephen for setting this up for us!