Growth in SA is going to require targeted strategies in collaboration with business, rather than government focusing on gross domestic product growth.
This is according to David Fine, a director at McKinsey South Africa and co-author of Africa at Work: Job Creation and Inclusive Growth, a report based on interviews with 1373 African business leaders.
He said the secret to job creation lies in African countries focusing on three "labour-intensive" sectors, namely agriculture, manufacturing and retail and hospitality.
"Job creation requires that governments identify one or more labour-intensive subsectors in which the country has a global competitive advantage and enjoys strong domestic demand, and then provide access to finance and suitable infrastructure and skills for those subsectors.
"What we are saying in the report is that a job strategy is different from a GDP strategy. When you look at successes in Africa, it's about being precise about where you can be competitive and then investing in those opportunities."
He said the government in Morocco looked at the automotive parts industry and identified just 100 parts with which to compete.
In Mali, where mangoes were rotting on trees because they could not be transported to the market in time, the government looked at establishing infrastructure and then financing and skills to get them to market. "The Mali government identified specific opportunities for growth and built on those, rather than looking at providing finance, infrastructure and skills for all."
Fine said the key to job creation is not about promoting growth because, although 25% of GDP for Africa comes from resources, the mining, oil and gas sectors employ only 1% of Africans. "South Africa needs the resource sector, but for it to be beneficial for job creation, it needs to be more competitive and at this point this is unlikely. So, while it's essential for growth, it cannot be part of a job strategy."
The research found that South African businesses face many of the same barriers to growth as their African counterparts. These include macroeconomic conditions that are not conducive to growth, concerns about potential political instability, limited access to financing and the high cost of operations, excluding wages.
But in some ways South Africa, as a diversified economy, faces a different set of challenges. It was found that South Africa was above the regional average for wage-paying jobs, at 68%, but business leaders battled with a shortage of skills required for a diversified economy, Fine said.
Manufacturing in Africa is expected to generate at least eight million jobs by 2020, but labour costs could slow job creation in this sector in South Africa. "Labour costs are already relatively high and so business will need to move into higher-value production. This will require developing infrastructure and skills needed."
Fine said job creation also requires governments to remove those regulations that have been identified as obstacles to growth, and for there to be co-operation between the public and private sectors. "The government and business need to work together to make projects work and to ensure there are sufficient skills available in the targeted sectors to support job creation and growth," he said.
The McKinsey Global Institute is positive about the growth potential in Africa. The report says that, given prevailing trends and following the guidelines of targeted growth, the continent should be able to generate 54-million stable jobs by 2020. Africa can use its young workforce to its advantage, and concentrate on educating its citizens.
By 2035, Africa's labour force will be larger than any other nation but the number of children and retired people supported by a worker will fall from the highest level in the world today to a level on a par with the United States and Europe by 2035.