‘Change urban rules and everyone will flourish’

South Africa needs to change urban regulations to stimulate a construction boom, which would generate jobs and the millions of state grant recipients should be brought into the labour force, says an expert.

To address this and enable people to contribute to productivity and economic growth, they should be “empowered to build housing closer to where they want to live” to cut down on commuting times.

ALSO READ: Homelessness explodes in Canada as rents, housing prices soar

These were among the suggestions made by Prof Ricardo Hausmann, founding director of Harvard University’s Growth Lab and the Rafik Hariri professor at Harvard Kennedy School.

Growth Lab is an interdisciplinary team of researchers that explores the secret of economic growth from both academic and applied levels.

Hausmann spoke during a wide-ranging virtual interview with the centre for development and enterprise executive director Ann Bernstein this week.

Real change needed

“A grant is better than nothing, but it doesn’t transform poor people’s prospects,” he said. In South Africa, millions were not participating in the economy, and the chosen few at the top were promoted at the expense of those at the bottom.

“SA is making the top of its society blacker, instead of making the bottom of its society better off. Millions are excluded from the labour force who need to be included in the sources of productivity, which are in organisations,” said Hausmann.

“Let South Africans have what they want. We need to change urban regulations. “That will lead to a construction boom, generate jobs and generate growth and create jobs in the long run. It’s win, win, win,” Hausmann said.

ALSO READ: Standard Bank secures R4.4bn loan for renewables and affordable housing

The country couldn’t prevent its talented people from leaving and was unable to attract talented people from other countries.

Yet, if the country wanted a Silicon Valley, it must be able to attract talent from outside. Although the population of California in the US was 40 million, only 46% of the people at Silicon Valley were locals, with the rest talent from outside.

The country needed to attract foreign talent to increase its productivity and economic growth. “A society can’t do what it doesn’t know how to do.

Sourcing knowledge

“The way it solves that problem is by bringing in people from elsewhere who have that knowledge. “That is why migration is so important for economic growth,” Hausmann said.

He said South Africa had been a disappointment. “South Africa has underperformed sub-Saharan Africa and mining exporters. “Any benchmark you choose, has been lousy.

“Unemployment and inequality were world records and it has got worse,” he said. Despite the government’s commitment to grow manufacturing, employment in the sector had been very poor and that could mainly be blamed on poor electricity supply and lack of state capacity.

ALSO READ: City of Cape Town has built fewer than 20 social housing units in the inner city in six years, say activists

While the primary cause of South Africa’s growth deceleration was the deterioration of commodities, the situation was worsened by the collapse of the state capacity.

The post-1994 government focused its energies on attempting to transform society, which led to the diminishing of the state capacity. “At the time of the democratic transition, the idea was that the state was going to transform society.

Gridlock in economy

“That translated into preferential procurement and cadre deployment, which has undermined state capacity,” Hausman said.

There had been a gridlock in all aspects of the economy and the government saw no urgency in fixing things, including the electricity problem because it knew it was not going to be punished at elections.

“In other countries, if you don’t fix things, you lose power,” he said. Hausmann, a Venezuelan, said since 1994, there had been no change in the structural setup of the South African urban cities from the way they were designed under apartheid.