The most vital of the government’s growth initiative Asgisa’s aims is job creation as it has pledged to cut joblessness in half by 2014.
The Mail & Guardian sought to find out from South Africa’s leading labour market economists if Asgisa is on track to live up to its pledge.
While public officials point to the Statistics South Africa finding that 1,5-million more jobs have been created in the past three years, the overriding analysis is that even this is not enough to meet the goal of slashing joblessness, though it does reverse the pattern of jobless growth.
Miriam Altman, the executive director of the employment, growth and development initiative at the Human Sciences Research Council (HSRC) this week said that while non-agricultural private sector employment creation has been positive since 1997, the backlog of unemployment was too large for private market growth to take care of it.
She said key findings of large programmes conducted by the HSRC on employment and unemployment showed that the economy was creating large numbers of low skilled and poorly-paid jobs.
‘Most of these jobs are created in the services economy. This has implications for poverty, since it appears that the long-term trajectory in South Africa, as in many other countries, will be one where a large majority of people work, but also live in poverty.â€
A recent study of unemployment conducted by Altman argues that to bring the jobless rate to 15% by 2014, the private sector will have to create an average of 500 000 jobs each year, with the public sector contributing a further 600 000 jobs. To achieve this, a job growth rate of 4% is needed, or 6% economic growth sustained over 10 years. Currently the economy is creating between 100 000 and 300 000 jobs a year.
Professor Haroon Bhorat, director of the development policy research unit at the University of Cape Town said that while job creation has been consistently positive since 1995 the problem was that the labour force growth rate has been much higher than the employment rate, resulting in rising unemployment levels.
‘This is despite the fact that the output-employment elasticity is close to one,†said Bhorat. ‘Job creation has, on average, been increasing by 1%. With the population growing at about 2,8%, the country needs to create a far greater number of jobs than we have managed this far,†said Rudi Dicks, trade union federation Cosatu’s policy coordinator.
Dicks said job growth should be looked at in the context of the number of people who enter the labour market.
‘There are approximately 300 000 to 350 000 new entrants to the labour market each year, thus job creation will fall far short of our overall objectives of halving unemployment by 2015.
Oupa Bodibe, executive director of labour research NGO Naledi, said that although unemployment dropped by just under one percentage point in terms of the official definition, the expanded definition (which includes discouraged job-seekers), shows that 7,1-million people were unemployed in 2001 compared with about 8million in 2006, a decrease of about 849 000 individuals.
Deputy President Phumzile Mlambo-Ngcuka acknowledged that while the prospects for economic growth looked brighter, the challenge was to create more job opportunities for South Africans.
‘Tests of Asgisa’s assumptions indicate that it is largely sound, but sufficient employment creation remains the most crucial and most difficult of the Asgisa objectives.
‘The economic benefits of having a higher number of South Africans employed can be distributed as better social services and other social transfers,†said Mlambo-Ngcuka.
Allan Hirsch, the chief economic adviser in the presidency, said he believed the government’s target to halve unemployment was achievable if Asgisa successfully removed constraints, including those relating to the second economy.
An Asgisa report-card
The level and volatility of the rand:
It is hard to see what the government can do that will genuinely make the rand more competitive: allowing more inflation, would only be a short term fix, as higher costs would quickly erode the benefits of a weaker currency.
In any event, the yawning current account deficit and higher global interest rates have already lent some help, which is how it is supposed to work.
Volatility can be limited to a degree by stable, credible economic policies, like the ones we have, but there is no eliminating it — that horse has bolted and loose talk about state intervention in the currency isn’t going to help matters.
The cost, capacity and efficiency of the national logistics system:
Transnet has begun improving its rail freight operations, and buying impressive quantities of new kit, but that process began before the advent of Asgisa. And elsewhere there are worrying signs that the parastatal logistics giant is prepared to protect its own position at the expense of a more efficient, competitive supply chain — privatisation in the ports has stalled and Transnet is baulking at the appointment of a ports regulator to crack open its monopoly of crucial services. Asgisa could provide the political push to force change through, but so far has not done so.
Eskom is investing in power capacity, but that too began before Asgisa, and again, the planned private component is nowhere to be seen.
The belated realisation that public transport is part of economic infrastructure is welcome, but the backlogs are so severe, and the taxi industry so intractable that it will take years to show an impact; this is another area where the Asgisa rubric offers the potential for stronger political impetus.
The shortage of skilled labour:
The shortage of skills is arguably one of the most crucial elements of the success of Asgisa as the implementation of the government’s multi-billion-rand programme depends on highly skilled personnel to carry it out. Although government has invested hugely in training in areas such as engineering and science, there have been delays with regard to the importation of scarce skills.
Barriers to market entry, including competition:
The importance of competition is hotly disputed among those debating the details of Asgisa, and the current stress on industrial policy measures to support nascent industries suggests that its dominant policy wonks aren’t particularly convinced of the importance of more internal competition in the economy.
It would be very unfortunate if that view won out. Asgisa is an opportunity for the government to lend more financial support to regulatory bodies such as the competition commission and the Independent Communications Authority of South Africa, and to become much more aggressive about seeking legal remedies to remedy anti-competitive behaviour.
The regulatory burden on small and medium business:
Small business is getting some help from the national treasury in the form of a simpler and cheaper tax regime — again outside the Asgisa framework — but nothing truly substantive has been done to lighten the regulatory burden. Labour reform — which would probably have the biggest impact — remains politically impossible for a divided ruling party and it remains to be seen whether revisions to the Companies Act will make life easier for entrepreneurs.
Deficiencies in state organisation, capacity and leadership:
There are probably two primary causes for the lack of progress: One is that the state capacity that Asgisa identifies as a constraint to growth is a constraint on the pursuit of Asgisa objectives. The ‘developmental state†thinking behind much of Asgisa relies on a highly skilled bureaucratic elite for its implementation.
One needs only to look at the failures and internal strife at the department of public enterprises, and the weakness of the department of trade and industry to realise that crucial Asgisa agencies are beset with internal problems.
The other is that there is still ideological and theoretical debate, even confusion, within government over Asgisa. Profound resistance to a more competitive, open, business driven economic development path is evident in the persistent stress on the importance of government intervention to support industry, to build new infrastructure and to manage outcomes. — Nic Dawes