Unemployment likely to grow, even with predictions of growth

Time of article published Feb 19, 2000

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Johannesburg - South Africa would probably end 2000 with more unemployed people on the streets, even if President Thabo Mbeki`s dream of robust growth was achieved this year, economists and political observers said last week.

The most important action the government could take to stimulate sustainable employment would be to establish an employment coordinating committee reporting to Cabinet or even an employment ministry, they said.

Tony Twine, an economist at Econometrix, said it was crucial to bring together the divided ministries of finance, labour and trade and industry.

Twine said it was "becoming more and more apparent to everyone, barring those who choose not to recognise it, quite how badly the economy was structured before 1994.

"The economy was inward-oriented, producing for its own market at any cost, and it had concealed employment in the public sector, including the homeland governments," Twine said.

"As a result of trying to introduce efficiency and effectiveness, we have gone through a huge job loss cycle. Any jobs created have been swamped by job destruction and now government and para-statals are set to join the spiral."

"This has happened in industrialised nations too. The European Union has had growth in output without any growth in employment. But these countries have an accumulated wealth of centuries to provide a social security net which we don`t have.

"Quite frankly, there`s nothing on the horizon which points to more people being employed by the end of 2002 than there are now, even if we have growth of 3,5 percent. The best we can hope for is that increase in the rate of unemployment will decline - in other words that things get worse slower," he concluded.

Twine said relying heavily on one or two sectors like tourism or the small, medium and micro-size (SMME) sector would also not be enough.

Haroon Bhorat, of the development policy research centre at UCT, agreed. Initial studies, he said, suggested the sector was doing poorly, contrary to its public image.

"The numbers show 1,5 million people employed in the SMME sector, the majority of whom are Africans earning very low, in fact, survivalist wages. SMMEs are not dynamic, cutting-edge enterprises which can be relied on to provide employment. As a result, building a sustainable strategy around SMMEs is misplaced."

Twine said the challenge lay not just with the government, but with business too. Managers would have to realise that to compete effectively in a global environment, increased productivity was not enough. They also had to hone their marketing, retail and exporting skills.

Pieter Botha, the founder of 3Prep, an economic think-tank, said South Africa`s consumer base was unable to play any meaningful support role because it was too heavily indebted.

This structural distortion also resulted in capital concentration distortions, where South Africans spent about 17,5 percent of their gross domestic product on life insurance - the highest concentration in the world.

Twine said the lack of consumer support meant South Africa`s research and development bodies should concentrate on unique developments, rather than on how to copy and displace imports, which had been their focus for many years.

Klaus Bauknecht, a BoE economist, this week highlighted the government`s poor performance in education as being a major problem area in government efficiency. It was not enough for the government to exhibit fiscal discipline; it had to deliver too.

Human capital development was vital to economic progress, particularly with respect to education.

"Sustainable wealth creation necessitates the development of all untapped human capital E successful government policy stretches beyond the department of finance," he said.

Bhorat said an analysis of South Africa`s 4 million unemployed showed most had less than a matric, resulting in a complete mismatch between labour demand and labour supply.

Labour demand trends showed most growth occurring in the financial sector, business services, retail and tourism, where most jobs were at a higher skills level.

The new skills levy held the potential to retrain retrenched workers, but its success would depend on the attitudes of skills transferees and transferers.

Twine said: "One hopes there is transfer and that it`s the correct kind of skills - some skills are not appropriate for the economy. At the end of the day, it`s is not about job creation, it`s about work creation."

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