The stark reality facing SA in 2010 can be
summarised in one word:
unemployment. I rate that by far
the most critical issue facing the nation right now. SA cannot build the social capital it needs
if unemployment is not reduced substantially.
What has changed to move this to the top of
the priority list? Two things have
radically altered the landscape.
The destruction of 2009
2009 saw 870 000 job losses for the
year. The total number of people
employed in the economy dropped from 13,844 million at the end of December 2008
to 12,974 million at the end of December 2009.
This change can also be conveyed in three
other numbers: 44%; 39% and 41%. 13,8 million people employed means that 44%
of the working-age population, i.e. everyone between 15 and 64, were
working. In 1995 that was 39%. After the one million job losses in the first
nine months of last year we regressed to 41%.
The fall from 44% to 41% means that about
half the progress made since 1995 was reversed during 2009. It was truly a terrible year.
(Doing the numbers this way – employment as
a percentage of the working-age population – enables us to allow for the impact
of population growth. The cohort of
people between 15 and 64 keeps growing.)
Slower economic growth
The second thing that has changed is the
growth in the economy. In the golden
years of 2004 to 2007 the economy grew at 5% p.a. and we created 500 000 jobs
per year.
However, in 2009 the economy contracted
(probably by around -1.8%) and we lost one million jobs in nine months.
For 2010 most economists expect growth of
around 3%.
In the current uncertain environment it is
very hard to forecast growth for one year, let alone for five years. But let us assume 3% growth p.a. and a labour
market co-efficient of 0,75, meaning the labour market grows at
0,75% for every 1% growth in the economy.
Then we can create 300 000 jobs per annum.
So the other big change has been a move
from a 5% economy to a 3% economy. That
is sufficient to keep pace with population growth, but insufficient to bring
down unemployment.
Political response to unemployment
Government has responded to the
unemployment crisis with the following:
·
A huge increase in
infrastructure investment – now running at 9% of GDP and budgeted to go to
10%. Long after the World Cup is gone
infrastructure upgrades will still continue and that will help with growth and
job creation.
·
The Expanded Public Works
Programme, which aims to create 4,5 million “job opportunities” over the five
years to 2014. This is where Pres Zuma
promised 500 000 job opportunities by Dec 2009. We must wait for the data to be
released to determine whether that was achieved. These job opportunities are generally of low
pay and temporary should not be confused with “normal” jobs created in the
economy.
·
An industrial policy aimed at
assisting the establishment of new industries (or expansion of existing ones)
and thus creating jobs. Suffice it to
say this policy has so far not delivered on the expectations and the promises
made.
·
A number of cross-cutting areas
are attended to like skills development, telecommunication costs and some red
tape.
The missing element
All the above is necessary and good, but
there is only one effective response to unemployment and that is a higher rate
of growth. Our own recent history has
confirmed that: at 5% growth we created
500 000 jobs a year.
However, higher growth requires on-going
structural reform to enhance competitiveness and productivity; strong political
will to implement such reforms; and clarity of purpose to convince citizens of
what we want to achieve.
First and foremost, you need political
will. That can make the difference
between 3% and 5% growth. And that is
currently lacking.
Since last May we have been alerting
clients to the fact that we do not fear a swing to the left so much as a swing to stagnation – policy gridlock. Is that not more or less what we are seeing
in our current politics?
Somewhat in defence of the politicians, I
must confess that I remain absolutely amazed at the range of people that do not
subscribe to the view that high growth is a pre-condition for progress. In numerous discussions I encounter a “yes, but” attitude. There is always the suspicion that only the
haves will benefit from growth, and therefore to pursue it is not
sufficient. If that is the opinion of
the body politic, one can understand politicians not focusing. But it is also the duty of ministers to lead
and shape public opinion.
So What?
·
When we combine figures from
the labour market, economic growth and demography it is quite clear that 3%
growth is just not enough to dent unemployment.
At 3% we create enough jobs to absorb the growth in the 15 to 64 age
cohort – the so-called working age population.
But we do not make progress with unemployment.
·
3% economic growth is more than
our current 1% population growth. So it
is enough to create more wealth, lift per capita incomes and create more
resources for social spending. But we
will not dent unemployment.
·
Failure to reduce unemployment
will also undermine the country’s social capital with consequences for crime
and social cohesion.