The National Planning Commission has slashed its most optimistic forecast of SA’s unemployment rate by 2030 in half, warning of slow progress across the board in reaching the targets of the National Development Plan (NDP).
The commission, tasked with providing a blueprint for SA’s socio-economic development, reports to minister in the presidency for planning, monitoring & evaluation Nkosazana Dlamini-Zuma.
It has provided proposals aimed at returning SA on the path set out by the NDP. Some of them have already found their way into President Cyril Ramaphosa’s stimulus plan.
In its latest report on the economy, "The Crossroads: Accelerating progress towards the NDP’s vision 2030", the commission says a 6% unemployment rate by 2030 is an impossible goal. The best SA can hope to achieve is a jobless rate of 14% by then.
"While the democratic government achieved significant improvements in employment, poverty and growth over the decade up to 2008, SA is once again engaged in self-inflicted growth strangulation," the report begins.
"While one can point to many areas of successful investment and public delivery, the most important social and economic indicators reveal that — at best – the country has not made meaningful progress since the global economic downturn in 2008/2009.
"At worst, there are indications that it has lost significant economic capacity. Employment is growing at about 30%-40% of target and poverty rates may have worsened."
According to the report, there is now a "clear and present danger" of the country falling into a spiral of falling investment and lower revenue.
Though Ramaphosa’s stimulus plan did not propose any new state spending, it has been welcomed for its emphasis on accelerated infrastructure spending, simplification of visa regimes and policy clarity.
The commission’s report warns against further tax hikes and calls for performance-based salaries in the public service.
Its report is an updated version of an economic revitalisation paper the commission planned to release in July, but this was cancelled.
Ramaphosa has twice referred to the report during public speeches.
The commission says that between 2010 and 2015, most government targets for the economy were met, but low rates of economic growth and diminishing economic capacity mean improvements are no longer sustainable.
Despite declining poverty rates in the early 2000s, there has been no improvement since 2010, and poverty rates may have worsened in SA.
The report maintains it is possible to boost SA’s growth rate to 3% a year within two years, and proposes, among other things, a review at the South African Revenue Service (Sars) to restore "tax buoyancy".
Tax buoyancy is a measure of the responsiveness of tax collection to economic growth, with the commission raising concerns about the effect on tax morality of scandals at Sars.
The long-run tax buoyancy ratio is about 1.1, but fell to 1.01 and 0.95 in 2016-17 and 2017-18 respectively, the report says.
While tax increases in 2018 will serve to stabilise government finances, it is better to strengthen collection than raise them further, as this will "fine those that pay" and further motivate those that avoid paying taxes, the report reads.
"More structural and institutional improvements will be needed to create a sustainable fiscal path that involves lower tax rates and improved collection, as well as measures to improve delivery per rand spent," the report reads.
The commission proposes the establishment of a "social charter that is needed to strengthen alignment around the NDP".
"It should align on what needs to be done most urgently in the next two years. This can be done with an eye to also aligning key issues of national importance to embed the vision of a decent life and shared prosperity," the report concludes.
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