In 1994, when South Africa embarked on the transition to democracy, about 39 percent of all working-age adults said they were employed. In early 2015, the figure was 43 percent.
Those numbers reflect substantial social and economic progress, with some 6 million more people employed or self-employed today than in 1994.
Internationally, however, about 60 percent of working-age adults have some kind of income-generating employment. In other words, where two out of five adult South Africans are employed, in almost all other countries the figure is three out of five.
South Africa ranks among the 10 countries in the world with the lowest employment rate.
Despite the recovery in job creation from 1994 compared to the previous 20 years, at this rate the country will only reach the levels of employment found in the rest of the world in about 80 years.
In short, South Africa still has a jobs deficit, and we have to do more to deal with it.
The persistent jobs deficit spells poverty, inequality and dependence for too many South Africans. It means many young people never get a chance at a job, while households must eke out a living from social grants, charity and remittances.
The roots of the jobs deficit lie above all in the way apartheid laws explicitly limited economic participation by barring millions of people from economic centres, access to capital and land, and quality education. Transforming the resulting institutions and the associated dichotomisation in access to resources will take a consistent, long-term effort.
There are no silver bullets.
Moreover, an effective jobs strategy will not be a top-down process supplying ready-made solutions. Rather, it requires that the state support collective and individual agency for historically marginalised communities, workers and producers.
A few figures from the World Bank’s World Development Indicators point to the peculiarities of the South African economy that give rise to the jobs deficit.
In South Africa, 30 percent of the population lives in the “rural areas” – mostly the former “homeland” areas – but only about one worker in 20 is in agriculture. In stark contrast, in other upper-middle-income economies, where 40 percent of the population lives in rural areas, some three quarters of employed people work in agriculture. Today, despite some improvements only one in four adults in the former “homelands” is employed, compared to half of those in the rest of the country.
Furthermore, in major upper-middle-income economies such as Brazil and China, about 35 percent of employed people are self-employed. Here the figure is just 15 percent.
In large part this situation resulted from the historic destruction of African agriculture.
The vast majority of the self-employed in other developing economies are in farming and retail. In South Africa, agriculture accounts for only 2 percent of entrepreneurs. Just 350 000 say agricultural production is their main source of income or food.
Low self-employment also results from the way apartheid laws explicitly prevented black people from establishing their own businesses. In other developing economies, people inherit established enterprises. Over generations, families have built up skills, a customer base, some assets, and supportive market and financial institutions.
In contrast, most South African enterprises must start from scratch.
Even in 2013, half of all non-farm informal enterprises had no electricity or water on site, and three quarters did not keep any accounts at all. Even in manufacturing, three quarters of informal producers operated from the owner’s home, and one in seven had no fixed location or operated in an open market.
The level of economic and social inequality is the third major difference between South Africa and other developing economies. In virtually all studies, South Africa ranks as one of the two or three most inequitable countries in the world. The richest 10 percent of households get over half the national income.
Inequality results from high joblessness, unusually inequitable pay scales and comparatively limited ownership of assets.
Also, apartheid shaped a deeply dichotomised education system. For younger workers, years in school are equal to those in other middle-income economies. But the quality of basic education for the 80 percent of pupils outside of private and model-C schools persistently ranks at the bottom in international tests. These structural factors that underpin the jobs deficit arise from apartheid laws.
A further challenge is that the economy is dominated by mining and finance – mining as the main source of exports, and finance as the fastest growing major industry. But neither sector generates much in the way of jobs, at least directly.
In mining, rapid expansion in platinum jobs over the past decade was offset by losses in gold. Today, mining employs about 500 000 workers, fewer than in 1997.
The financial sector grew 8 percent a year from 1994 to 2008, and 3 percent a year since. But employment in the industry grew 2 percent slower than in the rest of the economy, rising from 320 000 to 440 000 from September 2002 to March 2015.
From 2002 to 2015, the largest employment growth occurred not in the core productive sectors, but in retail, construction, security guards and cleaners, and in health and education. That pattern underscores the need for innovative thinking about industrial policy and jobs.
We often hear that the main way to accelerate job creation is a single-minded focus on growth, without directly dealing with the distortions left by apartheid. This approach has two core weaknesses.
On the one hand, relatively few upper-middle-income economies have achieved more than 5 percent growth rates for extended periods – just 16 of them since 2010. The end of the commodity boom from 2011 adds to the difficulties. From late 2013 to early 2015, the prices of South Africa’s top commodity exports dropped on average 40 percent.
In dollar terms, our exports fell by a quarter from 2011 to 2014. Slow growth in Europe and China suggests that these trends are unlikely to reverse any time soon.
On the other hand, profound inequalities in themselves militate against faster growth.
They fuel sharp contestation over policies and ownership that in turn deters investment.
Inequality also limits demand for mass-produced goods, which is needed for sustainable jobs growth. The richest 10 percent of households account for half of all demand, but are more likely to buy services and imported goods. In 2011 food, clothing and household furnishings accounted for almost half of spending by the poorest 60 percent of households, but only a seventh of expenditure by the richest 10 percent.
The Reconstruction and Development Programme (RDP) essentially saw measures to redress backlogs and inequalities in government investment as the main way to address the jobs deficit. There can be no doubt that improved government services since 1994 have qualitatively reduced poverty and hardship. But that has not overcome the joblessness left by apartheid.
Accelerating job creation requires additional strategies.
One is a more systematic and realistic approach to the spatial challenges left by apartheid.
Schemes that promote small-scale cash cropping would help raise rural employment. They would have to bring about major institutional changes to ensure that new farmers have access to technical support and markets as well as water and land.
But it is probably impossible to create employment on the requisite scale in the former “homeland” regions. Large-scale migration to the cities is likely to be a fact of life for the foreseeable future.
A second strategy is to link support for economic diversification more consistently to job creation. Classic industrial policies originated in countries with full employment, so they focused on raising productivity and exports. Often that meant focusing on capital-intensive hi-tech industries that cannot generate much employment. Sectoral policies to promote job creation in conditions of high unemployment should look to increasing the scale of production rather than its intensity, often through products for domestic and regional use.
In this context, government measures are often needed to sustain effective demand for necessities that poor households cannot otherwise afford. In the past few years, for instance, government assistance has led to the re-establishment of taxi assembly plants, turning out over 30 000 in the past two years.
A state subsidy has rolled out close to half a million solar water heaters, mostly to poor households, with increasing local production.
A third strategy is to support self-employment linked to the formal sector. Effective measures in South Africa can’t simply replicate programmes in other countries, which largely support existing enterprises. Just extending finance often fails as many small producers also need marketing and technical support, basic infrastructure and appropriate technologies.
Any job-creation programme will also have to fix education for most South Africans. The reproduction of inequality through the schooling system remains a blot on our democracy, and a critical factor limiting job creation.
To lay out broad strategies is easy. The sticking point is implementation. The state owns and controls its services and most infrastructure. But it accounts for just 20 percent of production and employment. That means economic policy has to shape the decisions of private actors by identifying key constraints and incentives and coming up with innovative ways to address them.
Success requires ongoing communication with economic stakeholders and communities, consistency, and real accountability and responsiveness across the state.
* Neva Makgetla is a senior researcher at Trade & Industrial Policy Strategies (TIPS)
THE STAR