If Gear fails it could lead to political mobilisation against the government, writes Johann Nel
Unemployment is undeniably a national crisis. The Reserve Bank estimated that five million people were without formal jobs at the end of 1995, an unemployment rate of 33% of economically active South Africans. In 1996, when the economy registered relatively strong growth of 3%, employment increased a mere 0,2%, according to the Central Statistical Services. By April 1997, unemployment was estimated at 40% and had risen for three successive years.
The growth, employment and redistribution programme (Gear) aims to create 400 000 jobs a year by 2000; 126 000 jobs should have been created in 1996. An estimated 25% of that figure was reached. The 1997 target of 252 000 jobs is also unlikely to be met.
When reviewing the unemployment situation, it is easy to forget that the 1994 election manifesto of the ANC gave top priority to job creation: “The millions of people without jobs will be at the top of the African National Congress government’s agenda … A new trade and industry policy will focus mainly on job creation, strengthening our manufacturing capacity and industries that export goods.”
Although delivery of Reconstruction and Development Programme (RDP) projects got off to a slow start, it was with the adoption of Gear that priority shifted from job creation to curtailing inflation and encouraging investment. This is not to say that Gear is inherently undesirable.
In his critical discussion of Gear, Pieter le Roux, director of the Institute of Social Development at the University of the Western Cape, maintained that all those countries that have made successful economic readjustments in the past 30 years have done so within a macro-economic framework similar to Gear. But whether Gear, as it is at present being implemented, is the best version of this model is another issue.
Gear is being applied conservatively as a redistribution through growth, or “trickle- down”, strategy in the belief that if a country grows for a sustained period, it can deliver on redistribution. South Africa cannot wait for the rising tide of economic growth to trickle down to those in poverty. Economic and labour-market policies must ensure that South Africa follows a more labour-absorbing growth path, which narrows the gap between the haves and the have- nots.
While the increasingly globalised economy demands high levels of flexibility on the part of the labour market, South Africa’s commitment to democracy requires that this must be compatible with labour-market security. An over-reliance on market forces is incompatible with labour market security and may result in increased inequality.
The history of those countries that have successfully transformed their economies shows that the appropriate macro-economic policy is only a necessary, and not a sufficient, condition for economic success. In Gear, the specific promise that South Africa can – through export-led growth – deliver an economic growth rate of 6% by the turn of the century and create an additional 400 000 jobs a year, has been heavily criticised. Econometric models cannot provide certainty regarding growth rates. At best, Gear provides a facilitating framework within which growth can take place.
Policies impacting on interest rates, the Budget deficit, the exchange rate and inflation should be formulated with regard to their impact on employment creation. Macro-economic policy dominated by a single-minded imperative to drive down inflation may backfire by undermining the incentive for domestic investment. Contractionary economic policies are unlikely to lead to employment growth.
Overall, the impact of a rapid reduction in government expenditure could be very disruptive. Gear may turn out to be no different from a number of failed structural adjustment programmes. This could lead to a situation where a swelling stratum in society will become disillusioned with Gear and mobilise politically against it. In this event, there is a real risk that social and political instability may result.
The short-term gains in financial markets may be offset by very high long-term costs, particularly if the eventual outcome is a swing to a populist programme.
Neither buoyant private investment nor monetary stability – key indicators of successful macroeconomic policies – will survive the social unrest and personal insecurity of a sharply divided and embattled society. Nor is a highly unequal economy consistent with strong internal markets into which the vast majority of domestically produced output must be sold.
Macro-economic policy must be consistent, co-ordinated, and oriented towards the sustainable growth of output and employment.
The question then is how to stimulate employment while also becoming more competitive on the global stage – and the extent to which government must play a role in redirecting resources.
Several measures to create jobs were suggested by the South African labour movement in its report Social Equity and Job Creation and by the Labour Market Commission. These measures should be urgently reconsidered, namely: provision of public housing; public expenditure on infrastructure; reduction in overtime; review of tariff reductions; encouragement of labour intensive industries; and land reform.
International evidence has shown that well- managed public works programmes can indeed create significant amounts of employment for the poorest members of society, at extremely low cost, and in so doing generate productive infrastructure and prevent environmental deterioration.
The RDP called for a co-ordinated public works programme to create jobs. Since the election, there has been little evidence of a substantial public works programme on the scale envisaged.
The housing shortage is in excess of two million units. The immediate provision of public housing, on a rental and a purchase basis, should be considered. In total, 350000 to 550000 jobs can be created over a three-year period through implementing such a policy.
An accelerated programme of public works in the provision of electricity, piped water supply, sanitation, child-care facilities and health-care clinics is needed.
Programmes to provide roads and major dam and canal works, and to address telecommunication inadequacies, should be put into place. This entails a major upgrade of urban infrastructure, and provision of rural infrastructure.
Labour-based construction methods must be used to ensure that employment on the projects is maximised. The trade liberalisation programme should be reviewed, and where job losses may result, South Africa should not liberalise faster than required under the terms of the General Agreement on Tariffs and Trade. In addition, where employment is seriously affected by Gatt, South Africa needs to call for an urgent review of the programme.
Given the imperative for rapid employment creation, it is inappropriate to continue providing public support at historical levels for capital-intensive activities.
South Africa’s industrial strategy must shift from one that has devoted considerable resources to supporting the capital-intensive end of the South African economy.
Policy support and public resources must turn decisively towards those sectors and processes that employ large numbers of relatively unskilled workers and semi- skilled operatives and machinists per rand of fixed investment.
There are real opportunities in South Africa for a major programme of land reform, combined with the promotion of small-scale farming, which can promote economic activity and employment very substantially. The World Bank has calculated that two million full-time jobs would be created in agriculture and related activities through land reform.
The South African National Defence Force should be used to absorb large numbers of unemployed by implementing a voluntary intake. The old South African Defence Force had the facilities to handle an intake of hundreds of thousands.
These facilities present an opportunity to provide order, discipline and skills to the unemployed youth while using their services in crime prevention and provision of infrastructure.
Funding such a major programme is within our capacity. Job creation must, however, be reinstated as the top priority it was in the ANC election manifesto, because the primary source of finance entails a major re-allocation of the existing Budget. Every state department and provincial government must make sacrifices to provide funds to reduce unemployment.
The second source of finance is individual and corporate taxation. In this regard, the warning by Deputy President Thabo Mbeki should be heeded: South Africans, and the business community in particular, should ask themselves whether they do not have the responsibility to consciously and voluntarily make certain sacrifices for the sake of stability in the country.
Dr Johann Nel is senior marketing lecturer in the faculty of commerce and governmental studies at the Port Elizabeth Technikon
BLURB: International evidence has shown that well-managed public works programmes can create significant employment
BLURB: Every state department and provincial government must make sacrifices to provide funds to reduce unemployment