Whatever our differences, economic growth must be our collective mantra
Opinion / 11 August 2019, 08:59am / Shannon Ebrahim
South Africa’s staggering unemployment, which has hit 29%, is arguably one of our greatest challenges.
The jump in unemployment is not caused so much by jobs lost, but by the increase in the number of people entering the job market. Year on year there are approximately 25000 new jobs being created, but 698000 people are entering the job market.
It is no secret that our level of youth unemployment is among the highest in the world.
According to Statistics SA, youth unemployment is sitting at 55%, which is shocking when you consider that youth unemployment in the Occupied Palestinian territories and in Bosnia is significantly lower at 47%.
The only panacea for the massive challenge is to boost economic growth, and no matter what the political divisions are, we need to make economic growth our collective mantra.
If we take Ireland as an example, it took them two decades to reduce its unemployment by 12%, and it did this through growing foreign investment and targeted upskilling of the workforce. Ireland and South Africa might be two different countries, but the strategy Ireland pursued to reverse the scourge of unemployment could be useful in our case.
Ireland invested significantly in technology and educated its youth in IT, preparing the way for the Fourth Industrial Revolution.
Given the relatively cheap English-speaking workforce, Ireland was able to attract multinational companies in the IT sector such as HP, Google, and Dell to set up their European operations in the country.
South Africa probably has an even cheaper English-speaking workforce, and there is no reason why we cannot try to attract such IT companies, as well as the Asian giants like Huawei, to set up their Africa operations in South Africa. We will need to continue improving our transportation and infrastructure grid so that we can attract investment and improve trade with other major economies in Africa.
To replicate a strategy similar to that of Ireland will require the government to pour more resources into improving IT skills in the education sector, and even offer bursaries for students specialising in IT and financial services skills.
But more than that, South Africa needs to invest far more in the education sector in order to produce matriculants capable of filling the jobs required in the Fourth Industrial Revolution. According to the National Advisory Council on Innovation of the Department of Science and Technology, matriculants who achieve 60% or more in their results comprise only 7% of the total, and those who achieve 40% or more comprise 22% of the total. This suggests that the education sector needs vast improvement to prepare our learners for the knowledge economy that lies ahead.
To attract the major multinationals we also need to reduce the red tape involved in establishing operations in South Africa, and offer a variety of financial and other incentives to foreign companies. We have been warned time and again that investors will stay away for as long as physical security is not improved, and this is an area the government needs to pay urgent attention to.
When we compare our level of unemployment with that in the other BRICS countries, the reality is sobering. While South Africa’s unemployment has reached 29%, Brazil’s unemployment is 13%, Russia’s 6%, India’s 7.6% and China’s 5%.
In Brazil, four out of every 10 Brazilians work in informal jobs with no benefits or protection. Brazilian President Jair Bolsonaro’s promise to deliver 10 million new jobs in four years seems unrealistic, unless there is significant economic growth. Growth projections in Brazil are not looking that promising, given that last year the Brazilian economy grew at 1.1%. South Africa’s growth was even lower than Brazil’s last year, at 0.8%. For us to reach the level of economic growth that will spur job creation means there needs to be massive injections of investment into the economy.
India might have a far lower unemployment rate than South Africa, but it is nevertheless experiencing a severe unemployment crisis. Unemployment in India reached a 45-year high of 7.17% in May.
Critics say the Indian government is in denial and underplaying the extent of the crisis. There are around 2.4 million vacant positions in central government ministries, which is to the detriment of public service delivery.
India has not figured out how to effectively address its unemployment challenge and, in real terms, the number of people unemployed in India far exceed those in South Africa, given India’s population of 1.37 billion.
The International Monetary Fund and World Bank policy recommendations for reducing unemployment have tended to focus on fighting corruption, improving governance, diversifying economies, and promoting the private sector. The IMF’s market-oriented approach holds that stimulating economic growth requires privatising state-owned enterprises, devaluing currencies and opening markets to free trade. But the approach has failed to boost growth and create large-scale quality jobs.
What South Africa and other developing countries need to do is identify what types of employment are relevant and sustainable in the age of the knowledge economy. Ideally we should stimulate productivity by bridging the technology gap, and improve our competitiveness through knowledge, innovation and technology.
It is not only the southern part of Africa that’s struggling with high unemployment levels. North Africa also has significantly high unemployment rates, with youth unemployment in Tunisia averaging 36.27% and Egypt 34.33%.
In Tunisia the manufacturing and agricultural sectors do not yield enough income to provide jobs for the people, and the country relies on the low-wage, low-skilled tourist sector for much of its employment.
Egypt has a declining industrial sector with low competitiveness, high indebtedness and soaring inflation.
Unlike many other regions, unemployment rates in north Africa are highest among the more educated youth, with university graduates making up 30% of the region’s unemployed. This shows the lack of relevance of the education and training systems to the reality of the work environment. University curricula in north Africa are often obsolete and not relevant to the new economy.
South Africa can learn from the challenges faced by the youth of north Africa and ensure our universities and technical colleges prepare our graduates with the necessary skills to join the labour market. The consequences of not doing so will result in a burgeoning youth population that is politicised yet unable to take part in the formal economy, which will lead to high levels of political instability.
* Shannon Ebrahim is Independent Media's Foreign Editor.