South Africa

OP-ED

The social crisis of unemployment is hardwired into the fabric of our neoliberal, capitalist economy

Youth activist NPOs including the Melisizwe Mandela Foundation and Citizens Action Campaign protest during the National Unemployment Campaign March on 24 June 2021 in Johannesburg. (Photo: Gallo Images / Laird Forbes)

If capitalism is incapable of solving unemployment in times of much more rapid ‘growth’ than usual such as at present, can we harbour any illusions that it can create jobs in times of bursting bubbles and crisis that inevitably lie ahead?

 

Trevor Shaku is the national spokesperson of the SA Federation of Trade Unions, Saftu. Convens Masuku is the provincial organiser of the Transport, Retail and General Workers’ Union, a Saftu affiliate.

The latest unemployment statistics prove once again that social crisis is hardwired into the DNA of a capitalist economy. Both the capitalist enterprises and neoliberal strategists use unemployment for the preservation of their own interests.

In the second quarter of 2021, the expanded unemployment rate – including people who have given up looking for work – rose to 44.4%, or nearly 12 million.

Major contributors are fresh job losses from April-June (54,000), the new wave of entrants to the working age group, and those transitioning from educational training to seeking employment (combined, a total of 530,000). This means that in addition to shedding jobs, the economy cannot create additional jobs for those who join the labour force.

But what did we think?! If capitalism is incapable of solving unemployment in times of much more rapid “growth” than usual such as at present, can we harbour any illusions that it can create jobs in times of bursting bubbles and crisis that inevitably lie ahead?

Crisis, profits and retrenchments

Losses of employment in the second quarter of 2021 occurred in the financial sector, manufacturing, and community and social services.

Though it is now considered by far the largest component of the economy at more than 20% of GDP, our financial sector shed 278,000 jobs between April and June. Though the bankers, insurance and estate agency firms blame Covid-19, the truth is that the financial sector had started aggressive retrenchment even before Covid-19.

BusinessTech reported in 2020 that three major banks ― Absa, Nedbank and Standard Bank ― gradually scaled down their employees starting in 2017, especially as robotics and new technologies replace humans. Absa reduced its employees by 3,231 between 2017 and 2020, taking the headcount from 41,703 in 2017 to 38,472 in 2020. In 2019, Standard Bank closed 104 branches across the country and retrenched 1,200 in the process. The African Bank began filing to retrench 1,260 workers.

In July 2021, these commercial banks announced that they are on a hiring spree. But hiring 300 high-tech skilled people is not a “hiring spree”. Perhaps this publicity was meant to sow illusions about the intent and attitude of these banks about job creation. Looked at closely, the high-tech jobs created in these sectors feed into a digitalisation programme that annihilates other traditional jobs in the sector.

But digitalisation and rationalisation in the banking sector is not because these financial institutions were making losses. PwC reported in 2019 that the four major banks had made average profits of between R42-billion and R46-billion from 2017 to 2019. Given their higher earnings, it means they carry out retrenchments for the purposes of maximising profits.

The manufacturing sector, whose decline began with neoliberalism’s introduction in the early 1990s, has never recovered. Director of Isibani, Zanele Salman, noted in a webinar earlier this year that the decline in manufacturing leads to the decline in jobs in the sector. Indeed, jobs in the sector are 682,000 fewer today than they were in 2008.

In 2019, the manufacturing sector retrenched about 7,000 workers. In the second quarter of 2021, manufacturing lost 83,000 jobs.

The excessive weight of the extractive export-oriented economy and lack of import-substitution industrialisation are primarily responsible for the decline of the manufacturing industry. Local products cannot compete with the cheaper imports, and this drowns the local manufacturers, especially in times of an artificially strong currency – up from R19/$ in April 2020 to R14-15/$ over the past 10 months – because their products are therefore more expensive.

Our export-oriented economy still rests on an extractive industry that takes our legacy wealth – minerals – from the ground, and exports them with very little value added in a classical neocolonial arrangement with an unfair global capitalist system. This weight is wasting the potential expansion of the manufacturing sector.

Austerity and unemployment

Government is responsible for most of the formal sector within what has been termed the community and social services components of the economy. But in spite of the terrible social crises that have worsened due to Covid-19, unemployment in the community and social services rose from April-June. Just at the time of greatest need for social solidarity, 151,000 jobs were shed, which we trace to budget cuts imposed by the Treasury.

By 6 April 2021, about 24,000 posts went unfilled in the education sector, even though we need more teachers. Though Minister Angie Motshekga committed to Parliament that some of these posts will be filled, that process is certainly snail-paced. For instance, KwaZulu-Natal has 6,114 unfilled posts as of 19 August 2021. If we juxtapose this with the 7,274 unfilled posts as reported by Motshekga in April 2021, it means KZN’s Department of Basic Education only filled 1,160 of the 7,274 vacant posts.

Public health is facing the same austerity, in spite of pandemic conditions that require far greater medical support for a desperate citizenry. Despite one of the worst doctor-to-patient ratios in the world, graduate medical doctors had to force, through courts, the government to enroll them in the mandatory internship programme in order for them to become fully practising doctors.

In 2018, there were about 37,000 unfilled posts in the health sector. The highly unsatisfactory level of services available in public hospitals, including hospital horrors that occur more often lately, are indicative that the posts in the health sector are not being filled, while others take a long time to be filled.

Similarly, the police and social development departments have unfilled posts, and because of budget restraints, they cannot create new additional posts. Crime is rising at an alarming rate, and our mental health crisis and dysfunctional working-class families have made psycho-social services more crucial.

Unemployment in the public sector is worsening due to budget cuts which are being carried out because of Treasury’s dogmatic neoliberal ideology. Neoliberal monetary and fiscal policies impede the public sector. Suffering artificial revenue shortfalls due to low taxes for corporations – which have fallen from 52% to 27% the past three decades – and due to high debt payments due mainly to very high interest rates, the state is not filling existing posts or creating new ones to correspond with the increasing demand for public services as a result of population growth.

Unemployment and education

The Nids-Cram study showed that 750,000 pupils quit school during the pandemic as learning conditions became intolerable. Most of these pupils, well above 15 years, have joined ranks of the youth that are “not in any form of employment, education and training (Neet)”. Hence, the Neet category between the ages of 15 – 34 is at a record high.

But for the basic education system to bleed 40% of its pupils through drop-out speaks to its systemic faults, most of which are underpinned by budget cuts: understaffing of schools, lack of resources, shortage of infrastructure and inability to effectively roll out inclusive education.

Those who make it to matric successfully are excluded from furthering their education and obtaining skills training because of financial exclusions. Recently, 150,000 prospective tertiary-level students were denied by NSFAS, the student financial aid scheme.

Beyond a shadow of doubt, we can conclude that the prospective students rejected by Nsfas and a portion of those 750,000 who dropped out of schooling contributed to the ballooning unemployment rate. Stats SA confirms that 51.5% of unemployed people do not have matric, and 38% have matric only. Less than 11% of the unemployed have at least tertiary training.

This means, beyond failing to fill vacant posts and creating new additional ones in the public services, government’s commitment to neoliberalism contributes to unemployment in other ways: mismanaging of the education system leading to drop-out of learners and excluding young people from institutions of higher learning.

What these conditions require is nothing short of a socialist transformation, but en route we must all unite to demand that even a capitalist state like South Africa must stop sabotaging citizens at every step when they make reasonable demands on the government. DM

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All Comments 6

  • The article asks “If capitalism is incapable of solving unemployment in times of much more rapid “growth” than usual such as at present, can we harbour any illusions that it can create jobs in times of bursting bubbles and crisis that inevitably lie ahead?”

    What rapid growth? What capitalism? Our current socialism-biased government depends on the Unions (i.e. the writer and their followers) to win elections. So in times of crisis, like now, we still approve unaffordable wage hikes and job protection. The jobless are baying to be allowed to work, but are at the mercy of the unions that entrench the currently employed – you will note I do not use the term “workers”. As the education sector and others show, the fact that you have a job (e.g. teacher) is no guarantee that you can teach, will teach or actually do your work. Positions are there to generate income, and the quid pro quo of producing something in return is not considered important. Allow people to negotiate their own terms of employment, based on produced outcomes, and the economy will change.

  • The authors of this piece came up with an eye-catching headline, and then went into completely different discussions. I’ll tackle the key points, but let’s start at the beginning:

    “The social crisis of unemployment is hardwired into the fabric of our neoliberal, capitalist economy”

    Then why, dare I ask, are countries with far more capitalist societies than ours, struggling with far less unemployment? If anything, the government is anti-neoliberal, at least in the sense that it is far from a free market, and government wants to control the economy. All you need to do is look at the majority of its policies.

    “If capitalism is incapable of solving unemployment in times of much more rapid ‘growth’ than usual such as at present, can we harbour any illusions that it can create jobs in times of bursting bubbles and crisis that inevitably lie ahead?”

    The most prosperous economic times were during the Mandela and Mbeki administrations. These were undoubtedly the two most neoliberal governments we’ve ever had and our economy grew and unemployment decline, and in doing so, so the wealth of MOST people grew as well. This period gave birth to the majority of the black middle class.

    • “Crisis, profits and retrenchments”

      1) BusinessTech reported in 2020 that three major banks ― Absa, Nedbank and Standard Bank ― gradually scaled down their employees starting in 2017, especially as robotics and new technologies replace humans.
      2) The manufacturing sector, whose decline began with neoliberalism’s introduction in the early 1990s, has never recovered. Director of Isibani, Zanele Salman, noted in a webinar earlier this year that the decline in manufacturing leads to the decline in jobs in the sector. Indeed, jobs in the sector are 682,000 fewer today than they were in 2008.

      It’s unfortunate but this has happened before, and it will happen again. Machines will come along and replace humans – unless you want to put a stop on technology, we should expect that technology will pretty much take over certain sectors. For example, if cryptocurrencies ever actually take off, banks will barely need any people – computers and the blockchain will do all the work.

      • “The excessive weight of the extractive export-oriented economy and lack of import-substitution industrialisation are primarily responsible for the decline of the manufacturing industry. Local products cannot compete with the cheaper imports, and this drowns the local manufacturers, especially in times of an artificially strong currency – up from R19/$ in April 2020 to R14-15/$ over the past 10 months – because their products are therefore more expensive.”

        This is unfortunate, but this is the reality of the situation. If you sell me an apple for R5 but I can get it from the shop next door for R4, why would I come to your shop?

        “Austerity and unemployment”

        I’m not going to highlight all the points because I believe I can sum it up in one clear sentence: how can you afford to hire people when you are broke? That’s the situation government finds itself in. The Zuma administration borrowed us into a whole after Mbeki left us with some cash in the bank, and now the CR administration has to make cutbacks unless we want our debt repayments to completely take over our economy.

        This has nothing to do with neoliberalism and everything to do with excessive spending (and probably corruption).

        • “Unemployment and education”

          Let’s start off with the first point I just made: government is broke. It can’t afford to support every student that wants to study.

          Second, and I know this for a fact, many students come out of the government schooling system and aren’t prepared for tertiary level education. It’s no secret that a lot of children who hit grade 4 level can barely read, let alone use computers (because they don’t often have access to them) and we expect them to get through school and into an increasingly digital economy? If you cannot read a book at your age level, how are you supposed to become a programmer or develop the skills for other tech related fields?

          • You try to blame this on “neoliberalism” but you ignore the many, many problems facing schools, such as constant vandalism, teachers who are more interested in being blessors than teachers, and teachers who are themselves incompetent? (This obviously isn’t in all schools, but it comes up enough to be a problem).

            Here are problems identified by a study in 2013 that have little to nothing to do with neoliberalism:

            “When analysing the school system in South Africa it became clear that the education system was flawed, with poorly performing teachers, poor work ethics, lack of community and parental support, poor control by education authorities, poor support for teachers and very low levels of accountability. These factors further spilled over into the morale of learners and could be seen in the lack of discipline, brutal violence in schools, low moral values, truancy, absenteeism, late coming and high dropout rates from Grade 1 to Grade 12 and very poor performance in essential areas such as Mathematics and Literacy.”

            Neoliberalism my brown bum. Schools have been messed up for a long time and anyone who voted for the ANC has only themselves to blame for this.