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South Africa will not make a difference in tackling the unemployment crisis until the country’s main actors take “a different view of the emergency South Africa is in”.
This is according to Centre for Development Enterprise executive director Ann Bernstein, who on Wednesday released the think-tank’s latest report on solutions to the unemployment crisis.
Titled Ten Million Rising: What it would take to address South Africa’s jobs bloodbath, the report says “politically difficult decisions will have to be taken” in order to put the country on a faster economic and employment growth trajectory.
Painting a picture of the unemployment crisis, Bernstein said South Africa had “one of the deepest and most persistent unemployment crises” in the world.
Between 2008 and 2019 the number of people without work or had given up looking for work had gone from 6.5 million to 10.3 million.
During the same period the youth population had grown by 2.2 million, while the number of employed people in this demographic had fallen by 500 000.
“We have to grasp the depth and scale of the crisis and understand the main causes,” Bernstein said.
Among the factors affecting South Africa’s low growth rate and stubbornly high unemployment was the pre-1994 apartheid policies that excluded the majority and “imprisoned many in poverty traps and retarded urban growth”.
The post-2008 climate of corruption and state capture as well as “increased antagonism towards business” over the past decade played a major role in constraining economic development.
South Africa had also failed over generations to produce an educated workforce.
A big growth-constraining factor – and one that can be rectified – was the history of making bad policy choices.
These policy choices, Bernstein said, had resulted in an economy that requires less and less unskilled labour.
“The one resource that South Africa has in abundance,” she said.
The country’s industrial policy was geared towards high-skills capital intensive sectors which, in the case of the motor vehicle industry, have been generously subsidised.
Over-regulation of employment relations had pushed up non-wage costs.
Among the CDE’s recommendations for tackling unemployment is dealing with the country’s energy crisis and getting state finances in order.
On the reform front it recommends the introduction of policies that support urban densification and better urban management, refining the basic education and training system to deal with the skills crisis, ditching policies that undermine property rights and encouraging skilled migration.
The political establishment’s attitude towards business and competitive markets would also have to change. There will also need to be reforms of the labour regime to reduce disincentives to employment.
These, the CDE said, should be “calibrated to minimise the impact on the rights and living standards of existing workers without making it difficult for firms to adjust to competition and a changing economy”.
Other recommendations encouraging labour intensive economic activity include:
- Exempting small and new enterprises from collective bargaining agreements to which they are not party;
- Shifting industrial policy towards encouraging investment in employment supporting growth, especially for unskilled workers;
- Extending the employment taxing incentive to a wider range of workers for longer periods;
- Making it easier for firms to terminate workers’ employment, particularly during probation;
- Treading carefully on the annual review of the national minimum wage and making it easier for smaller companies to be exempted from paying the minimum wage and;
- Establishing a labour intensive and globally competitive export processing zone at Coega in the Eastern Cape.
Bernstein said the time had come for tough decisions as two decades of presidential summits, government initiatives, Nedlac consultations and private sector projects were not moving the needle.
A focused reform programme would need a focused strategy and strong leadership from the top.
“Reformers need a strategy and you need an A-Team around the reformer,” she said.
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