Towards a growth strategy for the South African economy

This article outlines the elements of a growth strategy, that is, a set of policies designed to promote an increase in real income in the medium term. The consistency of the policy package suggested here is investigated by way of a multi‐sectoral, dynamic computable general equilibrium model. A savings‐based growth strategy is compared with a more heterodox approach in which public sector spending lowers the marginal capital‐output ratio in various sectors, small and medium‐sized enterprises are encouraged and some real devaluation is achieved. The results show considerable improvement in growth and employment performance vis‐à‐vis the orthodox model.

Notes

Professor in Economics, University of Vermont and Policy Analyst, Development Bank of Southern Africa respectively. We are grateful for constructive comments from Nick Vink, Andre Roux, Craig McKenzie, Diane Flaherty and especially Lance Taylor and Stephen Gelb, who collaborated on an earlier version of the model. The comments of two anonymous reviewers are also gratefully acknowledged. All views expressed in this article are those of the authors and not the DBSA.