Deepening Integration in SADC - Macroeconomic Policies and Their Impact

1. Deepening Integration in SADC- Macroeconomic Policies and Their Impact South African Country Study 3rd – 6th April 2006 Zambezi Sun Hotel, Livingstone, Zambia

2. Target Indicators on Macroeconomic Stability and Convergence (1)

3. Target Indicators on Macroeconomic Stability and Convergence (2) • SA is on track for most of 2008 targets • Main challenges -growth rates, current account deficit and domestic savings • On growth rates 7% appears too ambitious • Current account, strength of the currency

4. Macroeconomic Policies (1) • Broad Policy Approach (GEAR) • Main areas were fiscal, monetary, trade and labour market. • to link fiscal prudence with the ability to ease monetary policy • encourage private local and foreign investment - clear goals and objectives to benchmark the economic performance

5. Macroeconomic Policies (2) • Origin of Policies • Mainly National, • Very little alignment to SADC Policies, but the trade aspect had regional context • Lack of consideration for regional issues has direct impact on the failure of the policy in some areas • However, under GEAR, SADC tariffs were lower than any other trading partner • Main disappointments: investment and job creation

6. Impacts of the Macroeconomic Policy Approach (1) • Linkages with Social Impacts • No significant impact on unemployment, income distribution and poverty • Increase in social security expenditure • Increase in health expenditure - HIV/AIDS • The EPWP - national initiative to create temporary jobs • increase the uptake of candidates and participants in other skills development programme • Improve investment in technical colleges • Facilitate completion of immigration regulations

7. Impacts of the Macroeconomic Policy Approach (2) • Institutional and legal reforms • Labour market reforms, enhancement of job skills • The introduction of a MTEF • PFMA was passed -establishes strict transparency • Transformation of the health system • Most departments were strengthened to focus on regional and continental agenda, i.e. SADC, NEPAD and AU

8. Other Issues that impact on SA’s RI process in SADC • The accession to the WTO • South Africa has a trade agreement with the EU • SA’s SACU membership • Investment in the region • Capacity constraints, immigration laws and relatively high wages • Relatively developed manufacturing sector • Infrastructure (transport, financial and telecommunications) • Diplomatic and peace-keeping role

9. Conclusions / Recommendations (1) • Main Constraints • Lack of Human Capital, • HIV/AIDS, • Inadequate infrastructure, • Low Savings rates • Critical Policy Issues • Investment in education to close the skills gap that exists in the economy • Upgrade of personnel, facilities and management, especially with the ARV roll out. • Addressing rigidities, skills deficiencies and relatively high costs of labour • Strengthen skills development programs

10. Conclusions / Recommendations (2) • Effects on Policy Approach • Long term growth • Regional spillover effects • Drive harmonization with SADC policies • employment of non-citizens, labour migration • Social Impact Consideration • business, labour, government and community representatives are involved. • consensus on issues of social and economic policy • engages in research and information

11. Conclusions / Recommendations (3) • General Recommendations • Movement of labour in the region • Facilitate harmonisation of trade codes • The need for adjustment of SADC trade, economic and environmental policies • Efficient institutional framework/institutional capacity • Possibility of SADC manufacturing hub • Political will