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The high price of economic bumbling and austerity: 64% of working-age people are without jobs

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Ayal Belling is a founder of the unemployed movement Organising for Work. He previously worked in finance and technology in London and Cape Town. He can be contacted at [email protected]

How does one explain that, even before Covid-19, President Cyril Ramaphosa was South Africa’s worst post-apartheid president at getting people into employment? Even more confoundingly, how do we explain that former presidents Jacob Zuma and Thabo Mbeki increased jobs in the country by a similar number during their terms (three million and 3.3 million)?

Since the advent of democracy in 1994, at no point have more than half of the working-age population in South Africa (ages 15 to 64) been gainfully employed. 

The numbers just released by StatsSA show that a full 64% of those of working age had no work from July to September this year. The world average is 40% (see the note at the end of this article for why it helps to focus on this figure rather than narrow unemployment in South Africa that currently stands at a record 35%).

How the country gets out of this shameful situation has as much to do with a better understanding of how it got here as it does with a replacement of its political establishment.

As the recent death of the last apartheid president, FW de Klerk, has reminded us, the transition to democracy — 1990 to 1994 — had many flaws. It resulted in what can well be described as a trade-off in which white South Africa got to keep its economic supremacy in return for black empowerment business deals that were always going to favour the new ANC political elite.

But is the country dependent on the path set during the transition or has economic and social progress been mishandled? This is a complex question that requires a complex answer.

Since 1994, South Africa has been truly terrible at creating jobs and entrepreneurial opportunities for its growing population. Apartheid, and all periods of rule before it, sought deliberately to exclude the non-white majority from economic opportunity. 

However, despite an ostensibly progressive political party — the ANC — forming the first democratic national government with a 63% majority in 1994, it began by prioritising a reduction in the country’s budget deficit. 

This fiscal priority, along with the excessively hasty reduction in protection of local companies from foreign competition and foreign purchase, was what the late apartheid government was already doing throughout the 1980s. However, up until the transition period, the ANC had far more activist and progressive priorities and intentions that derived from the Freedom Charter it adopted in 1955.

Still, the continuation of some policies of its white supremacist predecessors — while an about-turn for the ANC and an important part of why the country is on a rutted path — is clearly not the only cause of the increase in unemployment and inequality since democracy. 

The budget devoted to education, for example, is higher than almost all poorer countries that have better outcomes in this area. It is hard to explain, therefore, by financial argument alone, why the number of children leaving school before finishing their final year has remained so stubbornly high, casting half a million of them unprepared into a world where jobs are increasingly scarce. 

Similarly, it has become de rigueur to offer up the “lost decade” under former president Jacob Zuma, from 2009 to 2018, as an explanation for the difficulties the country faces. 

Unemployment then and now

In 1995, when the first post-apartheid national household survey was carried out, there were just 9.6 million people in work among the 25 million working-age people in the country. Since then, the working-age population has grown by 1.7% per year to 40 million — slightly faster than the world average of 1.5%. The problem is that there are only 4.5 million more jobs in the country today for 15 million more people.

At just 39% of the working age in work, the country had, at the end of apartheid, one of the worst employment-to-population ratios in the world. To address this and other social inequalities, the ANC was given a large electoral mandate to carry out its core manifesto pledge — the Reconstruction and Development Programme (RDP).

The RDP was originally about far more than what it is known for today — the three million boxy, often poorly built homes, sited in areas that reinforce rather than counteract geographical apartheid. During the ANC’s 1993 election campaign, it was offered as a comprehensive plan to right the wrongs of apartheid. Particular focus was placed on poverty alleviation, work opportunities and the provision of social services to the majority.

However, by the time it was approved in Parliament, budgetary austerity had been baked into it. 

By 1996 though, when Trevor Manuel became finance minister under Nelson Mandela, the RDP was, with the help of deputy president Thabo Mbeki, subordinated from its trajectory towards becoming a super-ministry to a near irrelevant sideline. It was the perceived threat it posed to fiscal austerity that was untenable for Mbeki and Manuel. Power was instead vested with the finance ministry and, in particular, a treasury obsessed with achieving an annual budgetary surplus.

In 2006 and 2007, a small surplus totalling 1.6% of GDP was achieved and is frequently cited by analysts as proof of Manuel’s and Mbeki’s competent handling of the economy. The cost they were prepared to accept was growing inequality, tepid economic growth well below the world average, and underinvestment in desperately needed infrastructure such as schools, clinics, hospitals and transport in the areas where the majority of the country’s population lived. 

From 1999, when Mbeki became president, his dogged Aids denialism and refusal to roll out life-saving antiretrovirals led to more than 330,000 people dying prematurely and reduced the quality of life of hundreds of thousands more. Beyond the tragic loss of life in this period, hundreds of thousands of households lost their primary breadwinners.

Nevertheless, by September 2008, 14 years into democracy, 56% of the working age had no work — down from 61% in 1995. At this point, the country was also suffering the legacy of the disastrous sale of companies key to inclusive developmental growth. The sale in 2002 of South Africa’s state-owned steelmaker, Iscor, to the Indian conglomerate ArcelorMittal, as well as the loss through the sale — and then scuttling — of manufacturing excellence in Anglo American’s mining subsidiaries from 1996, led quickly to rising domestic steel prices and a reduction in our manufacturing know-how.

Added to this was an extremely volatile currency — often overvalued during the Mbeki years — that further suppressed exports. Compounded by the country’s excessive reduction in import tariffs — exceeding that required by the World Trade Organization — it became harder and harder for local firms to compete with foreign firms to make and sell things both domestically and internationally. The country struggled to achieve even modest local content in things like cars, trains, consumer appliances and technical equipment for industry and infrastructure.

What meagre per person economic growth there was in the country from 1994 until 2008 came from the retail and financial sectors, fuelled by an explosion in personal debt. 

Given the decade of brash national-scale corruption that followed Mbeki’s resignation as president, many forget how desperate the left in the ANC and people in the country more broadly were in 2008 for more progressive leadership. The Zuma years saw the appointment of many incompetent as well as criminally inclined ministers, directors-general of government departments and heads of government agencies.

From 2009 until 2018, Zuma introduced one feeble, failed and rehashed employment and economic growth programme after another. His policies, where they related to industry, were contradictory, unpredictable and often favoured political patronage over competent implementation. Listening to him deliver these programmes to Parliament in the dry, stumbling monotones of his State of the Nation speeches left few in doubt that governing was, for him, an annoyance that distracted from his more urgent business of State Capture and looting.

His term was also plagued by the fallout from the global financial crisis (GFC) of 2008. In the eight months from Mbeki’s resignation in September 2008 to May 2009, the majority of Mbeki’s employment gains were reversed, handing Zuma a working-age population with 59% out of work. Further economic constraints were handed to Zuma in the form of the country’s monopoly power utility which suffered frequent outages.

Despite all this, as well as Zuma’s evident indifference to the lives and livelihoods of the average South African, the percentage of the working age without work declined during his term to 56% — the level last seen in 2008 when Mbeki left office. 

The biggest increases in employment over the period were in community and social services (1.1 million more jobs), followed by construction (314,000 more jobs) and agriculture (137,000 more jobs).

The improved health of more than seven million HIV-positive people, the greatest achievement of the Zuma era, may have played a role in these increases. Credit for the roll-out of the world’s largest antiretroviral treatment programme, though, needs to go to civil society organisations like the Treatment Action Campaign and the healthcare workers who fought for and implemented it.

In February 2018, when Zuma resigned as president and Cyril Ramaphosa delivered his inaugural speech in Parliament as the country’s new leader, South Africa appeared to breathe a sigh of relief. Sadly, by the end of March 2020, just as the country’s first Covid-19 lockdown was starting, the percentage of those not working had already risen 2% to 58%. 

Ramaphosa’s slow, plodding approach to addressing unemployment resulted in failed and underfunded programmes virtually identical to those of the Mbeki and Zuma eras.

Much of the commentary on Ramaphosa is about how hamstrung he is by the deals he made to oust Zuma and his subsequent tenuous grip on the top position in the ANC. However, he doesn’t appear to have taken the fight to his finance ministry, which is having an equal if not greater detrimental impact on the number of jobs in the country.

The R500-billion “stimulus” announced by Ramaphosa in April 2020 turned out to be only R120-billion in new spending (ie actual stimulus). Once the full national budget spend was taken into account for the 2020/21 financial year that contained the “stimulus”, the budget, once adjusted for inflation, actually shrunk compared to the previous year.

Ramaphosa’s former finance minister Tito Mboweni, and now his new one, Enoch Godongwana, still cite an entirely debunked inability to continue public borrowing to finance jobs and economic growth. They remain set on cutting spending to get us out of a horrifying workless crisis. 

This course is guaranteed to make the situation worse. DM/MC

Note: Why focus on the employed as a percentage of the working-age population?

The headline figure usually given for worklessness is the narrow unemployment number, which now stands at 35%. This number is not only a complete outlier for middle-income countries, but more than six times the world average of 6%. 

However, narrow unemployment tracks who has actively looked for work in the past four weeks, or who is about to start a business (formal or informal) and ignores those who have given up looking for work, are students, doing childcare, are unwell or have other reasons not to look for work.

The calculation of the unemployment rate has also not been consistent since 1995 when the first post-apartheid household surveys were carried out. StatsSA changed its methodology in 2007 to be more in line with the rest of the world and the requirements of the International Labour Organisation.

StatsSA has produced revised figures for 2001 to 2007 to be in line with the current calculations. However, in an attempt to compare apples with apples from 1995 until today, the percentage of the working age in work (known also as the absorption rate) has been chosen.

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