Why South Africa could be the next Mexico. If we're REALLY lucky.

Statistics SA revealed this week that the number of people living in poverty had increased since 2010.

In 2010 a massive 20% of South Africans lived below the poverty line, that has increased to 21,5% in 2014.

Many are of the opinion that the economic interventions put in place by Government are not effective enough - that inequality remains a problem and aligned to it, the pressing issue of unemployment and poverty.

Now some feel there's a lot we could learn from Mexico. The North American country has embarked on one of the most important reform experiments in the world today.

A report issued by the Centre for Development and Enterprise (CDE) - regarded as one of South Africa’s leading policy centres for social and economic development - outlines how despite the many challenges the country faces, the broad package of reforms are making a marked difference.

The ‘Pact for Mexico’ - a reform agenda put together and led by President Pena Nieto but supported by all major political parties, has contributed to its low unemployment rate (5%), healthy balance of trade, and low level of debt to GDP.

This is not a wishlist like the National Development Plan. This is thought-through and detailed.

Nieto’s focus has been on making the labour market more flexible and more inclusive, especially for women and young people; education reform to make the system more transparent and merit-based by introducing evaluations and performance tests; and reforming telecommunications by creating a more powerful regulator, thereby opening up the sector to break current monopolies.

Sound dreamy? But wait, there's more...

Education reform is a crucial component as is labour reform. President Pena’s reforms aim to reduce the power of the unions and to only allow the best and most committed teachers to stay in the profession.

The labour reform that the President was able to implement after negotiating with opposition parties has three central elements. The first was to increase unions’ transparency; the second was to introduce more flexibility in the hiring and firing of labour, allowing employers to experiment with untried and especially young workers without facing undue costs; the third was to allow continuous contracts for seasonal workers.

Since the reforms the Mexican labour market generated 185 000 jobs in one month, which was the third-best month in Mexico’s history.

Speaking to Cape Talk's John Maytham, CDE Executive Director Ann Bernstein says Mexico's issues are certainly pertinent here...

South Africa also needs stronger growth and better market-supporting policies if we are to deal with unemployment and achieve faster growth.

They have already introduced the privatisation of their electricity sector ever. They've liberalised their telcom sector which used to be dominated by one major player.

CDE’s Executive Director, Ann Bernstein

In Mexico reform is happening, the economy is diversifying, the middle class is growing and formal jobs are being created.

CDE’s Executive Director, Ann Bernstein

Listen to the full interview with Ann Bernstein here...

So what should be South Africa's next step? None of this will happen unless we focus on vitally necessary reforms and can build the political coalition to see them through... Is this something that we could hope for at next week's State of the Nation address? Your comments below...


This article first appeared on 702 : Why South Africa could be the next Mexico. If we're REALLY lucky.


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