South Africa will need to create 3,5-million new jobs and lift some six million people out of poverty if it wants to reverse the tide of unemployment, according to Rand Merchant Bank Group (RMH) chief economist JP Landman.
While somewhat intimidating, this is not an impossible target, says Landman, citing China’s example of lifting some 100-million people out of poverty.
But this would require economic growth of about 3% per annum over the next 10 years. If the country can grow its economy at only 3% per annum over the next 15 years, it could lift per capita income by a whopping 45%, he states, adding that education and skills remain the biggest stumbling block to reducing unemployment.
One of the problems, he points out, is that large companies contribute 65% of gross domestic product (GDP), but only 46% of employment and are actually cutting jobs.
Ideally, he says, small business should contribute 60% of GDP and 80% of employment. Another problem is that only 3,7% of South Africans are entrepreneurs as opposed to the international benchmark of 10%.
According to Landman, the real problem, however, is that for a period of some 20 years, South Africa had more people than wealth.
“For about 20 years the population grew faster than the economy. We created more people than wealth.”
Urbanisation has also added more work seekers, with some 55% of the population now living in urban areas and the number still rising, while compounding the issue further is the fact that a large number of under-age job seekers are also moving into the labour market.
“It’s like a huge wave hitting and hitting against the beach — in this case, the labour market,” Landman says.
Nevertheless, he believes South Africa is “busy turning the corner on the unemployment story” and that the country is not giving itself enough credit for the “remarkable” achievements over the past few years.
The country, Landman says, has moved from being a sub-optimal economy. “We have moved from being a 1,5% economy to a 3% economy.”
Labour productivity in South Africa has also improved at a better rate than in countries like the US and Australia. And last year, the country created jobs for the first time.
“This tells us that we’re doing something right. It’s clear we’re moving in the right direction and the restructuring is coming through,” Landman asserts.
“But time is of the essence. We can’t just sit back and say ‘let the problem sort itself out’.” – I-Net Bridge