Veering off jobless growth path

We often hear that we need a new vision. In fact, South Africa has had a national vision since the transition to democracy, one of a non-racial, non-sexist, prosperous country. The challenge is how to realise that vision.

Since 1994, South Africa has made great progress in overcoming the segregation and inequality in government services that formed a pillar of apartheid.
Today we all assume race, gender and geography (as opposed to class) will not in themselves dictate access to healthcare, education or social grants, or constrain the right to vote or to choose where to live.

Government has vastly improved housing, roads, electricity and water in communities deprived under apartheid. But it has become clear that these efforts will never be enough while the economy marginalises so many individuals and communities. Government services and grants simply can’t compensate for the lack of earned income in so many families.

They can’t overcome the extraordinary inequality and division rooted, above all, in joblessness.

It is a measure of persistent social division that the loss of more than a million jobs since the onset of the global economic crisis did not cause shock waves in the public discourse.

We were still losing jobs during the third quarter of 2010, though the economy grew about 3% over the previous year. Hardest hit were informal and low-level formal workers, hammering those who could least afford to lose out and have little voice in the economic discourse.

The statistics
These job losses came on top of a more enduring crisis that began in the 1980s. The data is problematic, because censuses did not count many Africans before 1994.

Still, it suggests that in the late 1970s about three in five South African adults were employed—near the international norm. That figure dropped precipitously as apartheid entered a state of political and economic crisis. By 1994 it was only two out of five, far below the international average.

The unemployment crisis, then, isn’t a product of democracy. But we haven’t found a real solution either.

Economic growth averaged 3,5% a year from 1994 to 2008, virtually identical to other middle-income countries if we exclude outliers India and China. Between 2002 and 2008 the share of adults with a job climbed from 41% to 45%. But it fell back to 40% in the recession.

Deep inequality has accompanied this long-term jobs crisis, partly because profits rose faster than pay and partly because apartheid left unusually steep wage gaps. The share of remuneration in the national income dropped from 51% to 45% after 1994, whereas profits rose from 40% to 45%.

Moreover, most studies find a far higher ratio between managerial and low-skilled pay in South Africa than in the rest of the world. In consequence, a tiny share of households still enjoys the lion’s share of the national income.

The 2005-06 Income and Expenditure Survey found that the richest 10% of the population got more than half of all household income. The poorest 50% received just a tenth.

Poverty
This inequality underpins unacceptable levels of poverty. It affects every South African by means of deep social division, violence and crime. It makes it far more difficult to agree on national priorities and stick to long-term developmental policies.

The reaction to the Fifa World Cup pointed to widespread longing for greater social cohesion. But that requires greater economic equity. We won’t get there just through slogans and feel-good campaigns.

The new growth path essentially posits a set of compromises to achieve that aim. On the one hand, it proposes priority interventions for growth. These interventions largely centre on restructuring government’s core economic functions, providing a sound regulatory framework with reliable and cost-effective infrastructure and skills development, and ensuring efficient markets.

On the other hand, it seeks to encourage new investment in areas that can generate large-scale employment. A central challenge is to overcome path dependency.

Every economy has developed around specific production structures. For existing industries, infrastructure, training and regulatory frameworks have been set up over decades.

To initiate new industries, in contrast, requires fast-tracking these inputs. In effect, then, the challenge is to identify where employment-generating growth is possible and anticipate what activities it requires.

For instance, the new growth path sets an ambitious target for smallholder schemes, which, as experienced in sugar and forestry, can generate rural livelihoods on a large scale. But such schemes require adequate roads, land and water, links to processing companies or retailers, and extension services. Government can facilitate in all these areas.

In short, the challenge is not to take over the economy, but to ­redirect government services to support employment rather than the jobless status quo. There’s an old slogan: “If you want peace, fight for justice.” In many ways, that philosophy lies at the heart of the new growth path’s ­proposals.

Admittedly, the targets are ambitious and require considerable effort. But, to paraphrase another slogan: A vitória continua—a luta é certa (The victory continues, the struggle is certain).

Neva Seidman Makgetla is deputy director general in the department of economic development

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