South Africa’s GEAR versus NGP Macroeconomic Policies: Theoretical Basis and Financing Strategies

Sibonginkosi Mazibuko
(Department of Development Studies, University of South Africa, South Africa)

Abstract: This article addresses four issues in relation to macroeconomic development and its ability to address the development challenges of inequality, poverty and unemployment in South Africa. Addressed first is a brief historical background to poverty, inequality and unemployment. This historical analysis is done using the deprivation approach and the sustainable livelihoods approach (SLA), arguing that South Africa’s development challenges are rooted in its history. The other three issues are the post-apartheid attempts at macroeconomic reconstruction, which looks at what has been happening in the country since 1994, and an analysis of the modernization theories of new growth and balanced growth; the analytic contrast of the two macroeconomic policies of Growth, Employment and Redistribution (GEAR) and New Growth Path (NGP); and the options open to finance South Africa’s development efforts. This paper argues that the theoretical underpinnings of these macroeconomic policies are fundamentally those of modernization (which, itself, is based on various growth theories). This paper therefore argues that, at the theoretical level, there is little difference between the old macroeconomic policy of GEAR and the newly adopted policy of NGP, in that NGP outcomes could prove difficult to achieve. This paper further argues that it is by no means clear how NGP will be financed and that South Africa could find itself borrowing heavily to finance its development path.

Key words: development; theory; South Africa; economic policy; inequality; poverty; unemployment

JEL codes: B00, E00, E02, E60, O10