Is Workers' Day worth celebrating with SA's high unemployment rate?
Over the last decade, the local economy hasn't been growing to its full potential, which has meant that the economy hasn't been creating enough jobs to stem the tide of unemployment.
JOHANNESBURG – As the country gears up to celebrate International Workers’ Day today and with an upcoming general election looming, the status of the unemployed in South Africa remains a major crisis facing the nation, particularly young people who struggle with the lack of job opportunities.
This is despite a decrease in the number of unemployed individuals according to the latest Quarterly Labour Force Survey from Statistics SA released in February, which found that the number of employed persons in the fourth quarter of 2018 increased by 149,000 - to 16,5 million - and the number of unemployed persons decreased by 70,000.
But what are the contributing factors to the stubborn 27,1% unemployment rate in the country, and what can be done to stimulate real economic growth to create jobs now?
Mamokgethi Molopyane, a mining and labour analyst, mentioned three factors contributing to SA’s unemployment problem.
Molopyane cited poor economic growth over the last five or 10 years, the structure of the South African economy post-1994, and the mismatch between the skills job seekers have, compared to the needs and demands of the economy, as some of the endemic challenges impeding job creation in the country.
The local economy hasn't reached its potential since the 2008 global economic recession, which has led to the economy not creating enough jobs to stem the tide of unemployment. To add to our economic woes, earlier this month, the International Monetary Fund (IMF) in its World Economic Outlook report lowered SA’s projected GDP growth rate for this year from 1.4% to 1.2%.
The IMF also lowered the country's projected GDP expansion for 2020 from 1.7% to 1.5%.
Molopyane said the lack of growth the economy has been experiencing, compared to the broader global economy, has significantly contributed to our current unemployment figures.
Post-1994, she said, the structural makeup of the South African economy that the African National Congress government inherited from the apartheid government hasn't fully transformed to be inclusive of more black representation.
Molopyane said SA before the dawn of democracy in 1994 struggled with creating jobs for a majority of black people and this continued to be the case today.
Another challenge facing the local economy was the dependency on natural resources over the years, particularly the mining sector and related industries that are now in decline. Molopyane said the economy needed to be diversified to kickstart growth over the long term to create more jobs.
“We are an economy that is highly dependent on resources, and as such we are affected by the drop in demand of resources or commodities ... As the world market changes and repositions itself, we know what happens in other countries tends to affect other countries. SA is not unique in that, the demand in China at the moment and other resource consuming economies will have a direct impact on us," she said.
Molopyane added that the gap between the distribution of skills from potential job seekers and the demands of the economy needed to be bridged. But she hastened to state that the mismatch could not be solely relied on as contributing to the unemployment rate.
“To say there’s a mismatch in skills and the economy will not hold for long anymore, as such our economy has to be diversified in terms of the skills that are required but of course that is in line with the educational outcomes.
“Because of this mismatch in terms of education outcomes and what is out there, it entrenches further the wage inequality that exists in SA’s labour market. That is why you would have a graduate that earns far less in SA compared to graduates in an economy of the same characteristics as SA,” she said.
SO, SHOULD WE REFORM OUR EDUCATION SYSTEM?
According to Molopyane, this is a complex and loaded question as reforming the state of our education system meant that SA needed to take into account that “we live in the economy that is going to be affected by so many changes and technology", such as the fourth industrial revolution.
“To simply say the education system must change is not enough … Those are known facts and realities [that we need to change the system]. However, there is perhaps more that needs to be done," she said.
CEO of Business Leadership South Africa Bonang Mohale, whose organisation has largely participated in both the inaugural Presidential Jobs Summit and Investment Summit held in 2018, agreed that unemployment in SA was a crisis.
President Cyril Ramaphosa announced last year that agreements coming out of the jobs summit would lead to 275‚000 jobs a year.
This is over and above the jobs that would have been created without these interventions, which was on average about 300,000 a year over the past four years.
But Mohale warned that the initiatives and agreements stemming from both summits risked remaining commitments and ideas only due to uncertainty over the outcome of the elections.
“Unfortunately, with the 8 May elections, paralysis has set in in all sectors of government, especially at ministerial level, and some of these initiatives have had their momentum reduced somewhat which is sad, tragic and regrettable,” he said. “Nonetheless, as business, we are forging ahead with confidence."
BUT CAN GOVERNMENT CREATE JOBS OR JUST A CONDUCIVE ENVIRONMENT FOR ECONOMIC GROWTH?
Molopyane said she doesn’t think government should be at the forefront of creating jobs but rather at the centre of creating policies that enable business to create jobs and strive.
“I don’t think it is government’s position to create jobs. It’s a known fact that our government is the biggest employer [and] it’s unsustainable given the tax base. It is also a known fact that it cannot continue to be the biggest employer.
"I argue that government must enable an environment where the private sector can create jobs by some of its policies, including the changes in some of its policies. And at the same time, government must ensure that while it changes its policies, it does not turn the ordinary worker into a victim of those policies. As we have seen in the private sector, we cannot fire as we please," she said.
Molopyane emphasised the need for initiatives such as the Jobs and Investment Summits between government and business to create more jobs in the economy and provide support to small and medium-sized businesses as key propellers of growth.
“All the actors in the labour market should work with government on possible solutions that are implementable and replicable in all sectors of the economy compared to the current complains by business that government is not doing enough to create an environment that is business friendly,” she said.
But in spite of which political party is elected into power after the elections, Mohale said BLSA would continue to support initiatives aimed at job creation and stimulating economic growth in the country.
“Our role is irrespective of who is in power and characterised by three things; we want to continue to be a trusted adviser, a partner of choice, and to do everything possible to ensure that this government is indeed a capable government,” he said.
What is clear is that South Africa urgently needs to create more job in the labour market, and not just any jobs but decent work and wages to tackle the related challenges of social inequality and poverty. But, this can only happen with economic growth.
As Ramaphosa said in his address at the Jobs Summit, the low levels of growth in our economy in recent years have undermined SA’s efforts to overcome the economic legacy of apartheid and contributes to social problems like poor health, poor education outcomes, substance abuse, and crime.