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This chapter of the review seeks to outline economic developments and changes to
economic policy within the review period by examining broad themes that run through
economic life in South Africa. Ensuring broad-based economic development, creating
jobs and improving incomes remained the principal challenges of the ANC government
during this period. The government’s response to these challenges likewise remained
the Growth, Employment and Redistribution Strategy (GEAR), adopted in 1996.
With a restrictive fiscal policy and a commitment to free market principles, GEAR is
not very different from a standard International Monetary Fund/World Bank structural
adjustment programme, and is, in fact, a policy that owes much to the ‘Washington
Consensus’. While slightly more varied than traditional IMF programmes, there are
similarities between GEAR and the neo-liberal model (Mather and Adelzadeh,
2000:2), and GEAR’s main tenets and its current approach to the South African
challenge reinforces such a description, namely:
budget reform to strengthen the redistributive thrust of expenditure within deficit
targets;
fiscal deficit reduction across government to contain debt service obligations,
counter inflation and free resources for investment;
an exchange rate policy of keeping the real effective rate stable at a competitive
level;
consistent restrictive monetary policy to prevent a resurgence of inflation;
gradual relaxation of exchange controls with a view to their removal;
tariffs reduction to contain input prices and facilitate industrial restructuring,
compensating partially for exchange rate depreciations;
tax incentives to stimulate new investment in competitive and labour-absorbing
projects;
restructuring of state assets to optimise investment resources;
an expansionary infrastructure programme to address service deficiencies and
backlogs;
structured flexibility within the collective bargaining system;
a strengthened levy system to fund training on a scale commensurate with needs;
an expansion of trade and investment flows in Southern Africa; and
a commitment to the implementation of stable and co-ordinated policies.
As has been extensively noted by government, these policies were expected to produce
growth and economic expansion adequate to addressing South Africa’s socio-economic backlogs while also reducing unemployment and providing employment
for new entrants to the labour market. However, the reality from 1996 to 2002 was
that while certain of GEAR’s technocratic targets were met, and a measure of economic
stabilisation was achieved, the end result remained sluggish growth and only slight
poverty reduction. South Africa’s GDP growth has remained around 3 per cent, and
as the 1996 GEAR strategy document itself noted, a growth trajectory of 3 per cent
per annum would “fail to reverse the unemployment crisis in the labour market; or
provide adequate resources for the necessary expansion in social service delivery; or
yield sufficient progress toward an equitable distribution of income and wealth”
(GEAR:1996).1 These failures are clear when key indicators and their performance
against the targets set by GEAR are examined.
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