South Africa’s disciplined fiscal policies have helped it weather turmoil in the global economy, but reforms are needed to tackle the country’s key challenge of unemployment, Finance Minister Pravin Gordhan said on Monday.
South African markets had a turbulent time last week as investors worried about the implications of debt crises in the United States and Europe dumped their holdings in emerging markets for safe-haven assets.
“The developments we have witnessed in the US, Europe and also the large emerging economies over the past few weeks will have the effect of dampening growth and creating greater uncertainty,” Gordhan told an auditors conference.
He said emerging economies had not had the same fiscal problems as those in some developed states, and that their deficits and public debt levels were much lower.
“The traditional perception of emerging markets as a risky investment destination is changing, meaning that we are likely to see investment flowing south over the coming years and decades.”
But South Africa needed to restructure and reform its economy in order to achieve growth levels sufficient to reduce unemployment, currently close to 26%.
The Treasury sees growth at 3.4% this year, far below the level it says is needed to create jobs. Some analysts say the global crisis might whittle down the rate further.
“Given our current growth projections, South Africa may only create four million jobs by 2025, not enough to make a significant dent in unemployment,” Gordhan said.
He singled out corruption as a “cancer” undermining the economy.
According to Statistics South Africa, South Africa’s official unemployment rate currently stands at 25.7%.
Under the expanded definition of unemployment — which refers to people of working age without work and available to start work that week, but who had not looked for work in the four weeks before the Stats SA interview — 7 678 000 South Africans were unemployed.
The new growth path envisages the creation of five million jobs by 2020.
Gordhan suggested that South Africa might have to relax its labour laws in certain cases to grow jobs.
“We may have to change the way we see the labour dispensation in South Africa,” he said.
Gordhan, by way of example, said a balance needed to be found to retain the jobs of the 10 000 people working at clothing factories in Newcastle, KwaZulu-Natal, while still allowing them to earn a reasonable wage and keeping the factories open.
Factories in the area had threatened to close down and relocate to Lesotho or Botswana if they were forced to pay minimum wages.
Gordhan said laws might also have to be relaxed to allow young people to enter the workplace and gain skills and experience at lower wages, but not at the expense of people who already had jobs.
Unless such changes were made, “we will not be able to make the breakthrough we need to create jobs in South Africa”, Gordhan said.
However, this would be done in the awareness of the bitter struggle fought against apartheid for human rights, decent work and decent wages, he said.
” … we are not going to lose what we have gained through hard struggles”. – Sapa