While jobs have been created and new industries have emerged as South Africa’s economy has modernised, there has still been growing joblessness. At the end of the last global recession, the state took up the mantle of creating jobs as the private sector recovered from the financial crisis.
It was never sustainable and, as such, President Cyril Ramaphosa’s frank admission in last week’s State of the Nation Address that the state can’t solve the jobs challenge alone is welcomed.
“Even if we were to marshal every single resource at our disposal and engage on a huge expenditure of public funds, we would not alone be able to guarantee employment to the millions of people who are out of work,” he said.
Our jobless rate was 29.1% in the fourth quarter, according to Statistics SA. Of the 1.2 million young people who enter the labour market each year, approximately two-thirds remain outside of employment, education and training. Including discouraged work seekers and those who are available to work but have stopped looking, we have an unemployment rate that has increased to 38.7%.
As the president pointed out, more than half of our young people are unemployed.
“We need to make this country work for young people, so that they can work for our country,” he said.
Unemployment really took root in the mid-1980s when South Africa experienced deindustrialisation as a result of international sanctions. At that point, manufacturing, which is the highest job multiplier of any sector, according to the World Bank, made up about 27% of the South African economy. That has plunged to 13.9%.
Even through our high growth years, where we had economic growth averaging 5% between 2004 and 2007, our unemployment remained above 20%.
Over the past three decades, there have been significant changes in the global economy, with the most significant being the rise of China. Its rise was fuelled by a manufacturing and export-driven growth model that has made the entire world consumers of its products. It has been hard for regions to compete with China’s population density that has served to keep its labour costs the most competitive.
Having touched on that global context that has fed into our jobs crisis, the question is, what have we done as a nation to mitigate the changing sands?
In the policy environment, we have drafted a number of economic plans to ensure that we maintain a competitive edge. These plans were largely heralded at their respective launches. The evolution of such plans, however, has been delayed or altogether halted by the factional battles in the governing party.
What mattered more in the political contests of the past decade were the people in the room when such plans were drafted.
Last August, National Treasury produced a 77-page paper entitled “Economic Transformation, Inclusive Growth and Competitiveness”. Despite criticisms of how the document was conceived, it served as an economic blueprint of the “new dawn” and came with the sort of reforms that would unlock greater job opportunities.
We had hoped that with the change of leadership in the ANC over the past two years that the structural reforms long proposed in our labour markets, energy and telecommunications would now be pushed forward with less regard for factional battle lines.
So we are most pleased with the president’s commitment to undertaking far-reaching economic reforms included in National Treasury’s paper. By so doing, he provides a level of certainty to macro-policy at least that has been sorely lacking, especially in the past decade. That uncertainty has weighed negatively on our prospects in this fiercely competitive global economy.
It makes for quite a concoction: a jobs crisis since the mid-1980s, an uncertain policy environment and a growth crisis fuelled by an inability to power the economy.
The economy is likely to hit its sixth consecutive year of growth below 1%, with Moody’s Investors Services now pencilling 0.7% growth for this year.
The dual catastrophes of our unemployment and growth situations can only be met by leadership with a will to make the right but perhaps politically less palatable choices. The constant jostling for places at the big table has weakened policy proposals such as that of National Treasury’s that aim to deal with long-standing structural unemployment and other important issues.
Our political theatre of the past decade in particular, while entertaining for our Sunday papers, has certainly not served in the pursuit of a better life for all. This is especially so in this fiercely competitive global environment.
While the solutions to our jobless rate are understandably long-term in nature, we have an immediate challenge to get the South African economy on a path of inclusive growth. Without it, as the president said last week, “there will be no jobs, and without jobs there will be no meaningful improvement in the lives of our people”.
What has held back higher growth rates in South Africa is plummeting confidence levels. But if the president, party and state back National Treasury’s proposals and steer the country to a more secure policy environment, we may just have found the missing ingredient to rising confidence and, in turn, growth. BM