Never mind creation, Gordhan’s mini-budget focuses on job retention

By Osiame Molefe 25 October 2011

The plan used to be to create jobs, at least according to President Jacob Zuma's State of the Nation address. But with Finance Minister Pravin Gordhan's mini-budget speech the reality is now clear: 2011 is the year of desperately trying to save jobs as unemployment soars above 25%. By OSIAME MOLEFE.

To illustrate the problem, Finance Minister Pravin Gordhan’s medium-term budget policy statement to Parliament on Tuesday, says the economy increased output by 6.2% in the two years since 2008 – the start of “the great recession”. This growth, however, has not come with a proportionate increase in jobs. Indeed, existing jobs are now under serious threat.

“You are going to see all parties, employers and labour, finding more creative ways of approaching the question of how do we keep people at work and not retrenched, and keeping enterprises going,” Gordhan said, highlighting the difficulty of keeping, let alone creating, jobs in the current global economic climate.

Unemployment actually increased from 21.8% in the last quarter of 2008 to a massive 25.7% – one person in four being jobless – in June 2011. This excludes the estimated 2.2 million people who have simply given up looking for work. Despite the economy’s recovery in the intervening years since the contraction of 2009, such growth has not been accompanied by commensurate growth in employment. Only 210,000 mostly public-sector jobs were added between March 2010 and June 2011 compared with the 426,000 mostly private-sector jobs lost between December 2008 and March 2010.

The treasury estimates that the South African economy will achieve only 3.1% growth this year, down from the 3.4% predicted at the start of the year. This downward adjustment could be larger given the uncertainty in the global economy as a result of the European debt crises; the stagnant US economy; and, recently, fears that China’s ferocious growth is beginning to wane.

Over the medium term, 2012 to 2014, growth is projected to peak at 4.3% in the final year, which, according to the MTBP, “remains insufficient for South Africa to meaningfully reduce unemployment and poverty in line with the objectives set out in the New Growth Path”.

The R9 billion jobs fund launched in June received 2,651 applications and approved a grant allocation of R352 million, said Gordhan. This was expected to create 115,226 jobs, but these are likely to trickle in over the coming years, and whether they will come at all is largely dependent on an uncertain global economic recovery.

Gordhan held up the recent agreement in the textile industry as an example of the kind of compromise the formal employment sector will need to adopt. In this case, the textile workers’ union agreed to allow employers to hire new workers at a lower wage and, in exchange, employers committed to creating jobs in the coming years and retaining current workers. These types of agreements, Gordhan believes, are going to become more commonplace the longer global economic conditions affect demand in local markets.

Viola Manuel, executive director of the Cape Chamber of Commerce, echoed similar sentiments at an employer-labour jobs summit in Cape Town in September. She said: “The conversation is no longer about how to create jobs, it is about how to save jobs by working together as business and labour.”

In a move that is likely to outrage opposition parties and delight Cosatu, Gordhan suggested that the youth-wage subsidy tabled earlier this year be shelved for now while government considers the kind of wage support it needs to help keep employees on payrolls. He said retooling the R2.4 billion training layoff scheme created to mitigate the effects of 2009 recession on employers to suit current circumstances might be one form of support to help employers save jobs.

This and other forms of support will be funded from a six-year R25 billion competitiveness support package, the nuts and bolts of which will be presented when Gordhan tables the 2012 national budget. What we know now is that the economic support package is aimed at promoting investment in industrial development zones; reducing regulatory and tax burdens for small businesses; diversifying export markets because the country is heavily reliant on exports to Europe, the US and Japan; and growing the “green economy”.
The competitiveness package adds to an already growing budget deficit, which in the long term has to accommodate the rollout of a R1 trillion nuclear-energy programme and the 14-year build-up to national health insurance. In the short term, Gordhan is prepared to live with what he called a moderately expansionary budget, if it will bring the economy anywhere near the 7% growth he thinks necessary to create jobs and alleviate poverty. DM

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Photo: Finance Minsiter Pravin Gordhan. Reuters.



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