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Liberalisation and textiles

The impact of liberalisation on the South African economy: the case of the tourism and clothing sectors

Introducing a developmental state in South Africa?

Authors: ; SARPN-IGD Policy Dialogue
Publisher: Southern African Regional Poverty Network , 2007

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This paper summarises the main findings from a one-day policy dialogue on “The Impact of Liberalisation on the South African Economy: The case of the tourism and clothing sectors” held in May 2007 in South Africa.

Questions guiding the dialogue included:

  • what nature of state would be desirable to put in place these economic policies?
  • do we want a developmental state? What does that mean and what should it do to manage development?
  • what should be the role of the regional economic communities (RECs) and the customs unions?
  • is deeper trade integration the way to go? Should we go more slowly and build capacity before integrating?

South Africa’s clothing and tourism sectors were presented as case studies, raising issues around industrial policy, the role of the developmental state and the Accelerated Shared Growth Initiative (ASGISA). An over-riding theme was the need to understand the linkages between trade, development and poverty.

Participants pointed out that while South Africa faces constraints when making economic policy, the rest of the region has even less room to manoeuvre due to their dependence on foreign aid and loans. African countries therefore need budget independence from donors. Finally, when discussing what sort of policies a developmental state would adopt, recommendations proposed by the participants included:

  • a corporatist arrangement, based on a social contract in which the state, labour and industry/capital agree on fundamental principles such as wage and price controls
  • on foreign direct investment versus local investment, Kenyan companies are able to produce cheaper goods than multinationals, due to favourable policies and government support for local producers. Conversely, government ‘double taxes’ local companies in Zambia and elsewhere by taxing property and profits while foreigners get tax holidays
  • there should be a partnership between government and civil society, based on cooperation and support rather than only criticism. Civil society could do impact studies, propose policies and collaborate with government to develop solutions