Ramaphosa's big jobs headache as outlook remains bleak
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Johannesburg - As the country commemorates Youth Day, President Cyril Ramaphosa will be praying for the right words to convince the nation through the State of the Nation Address scheduled for Thursday, June 20, that he has a solid plan to significantly reduce youth unemployment.
The youth are a key constituency and comprise just more than 40% of South Africa’s population.
Weighing heavily on Ramaphosa’s mind on the eve of his first address as an elected head of state will be the staggering number of jobless youth: 55.2% for those aged between 15 and 24 years, as reported by Stats SA.
To put it mildly, the president and his Cabinet need to deliver a near-miraculous economic growth of 7%-10% in order to halve youth employment in the country.
Economist and director of the Centre for Economic Development and Transformation (CEDT) Duma Gqubule reckons about 6% to even 10% of sustained economic growth is needed to absorb up to 700 000 new entrants into the labour market per year.
Gqubule said: “What the youth need more than anything else is jobs. It is very disturbing that we have a new president, a new dawn, but there isn’t a plan for the economy. The collection of projects that they are talking about is too small to make a difference.”
“There is a relationship between economic growth and employment. We need a much higher level of economic growth. 650 000 young people have been entering the labour market every year since 2014. We are creating jobs for about 40% of those people,” said Gqubule.
As a way of running a lean government, Ramaphosa slashed his new Cabinet from 36 to 28 ministers in a bid to reduce costs and boost economic growth. Gqubule sees this move as a “gimmick” that has “no vision” or relevance to the performance of the economy.
“The ANC wants to halve the unemployment rate. That requires you to create 7.7 million jobs in the next five years and have an annual average of 1.5 million jobs created. They (ANC) are just throwing around numbers. They don’t have a clue how they will achieve that target.
“In the last five years we’ve only created at best 270 000 to 300 000 jobs on average. They don’t explain how they are going to create the difference.
“The last time our economy created 400 000 jobs a year was 2004-2008, the strongest period of job creation in our economy. We created 1.9 million nett new jobs and the economy grew by 4.8% a year during that period.”
Gqubule said the State of the Nation Address “needs to announce a proper stimulus package to get the economy growing in the short to medium term”.
He said the ANC’s intention to introduce a three-shift economy makes “no sense whatsoever” and “sounds like work-sharing” when we need to get more people in education and training because “youth need the economy to grow”.
The three-shift model involves two to three people working on shifts around the clock, which means continuous operations, otherwise known as work-sharing. It is apparently related to the three-sector economic model that is meant to improve productivity and promote economic growth in order to increase the quality of life and reduce unemployment rates.
“The overarching thing,” said Gqubule, “is that we need the Reserve Bank to reduce the cost of capital (ie, lower interest rates) and a fiscal stimulus (government spending).”
Gqubule’s advice to Ramaphosa is that South Africa needs to change the structure of its economy.
“Steer the economy towards sectors such as construction, manufacturing, agro-processing and labour-intensive sectors. We can give incentives such as subsidies to companies that go into these sectors,” Gqubule said.
The Sunday Independent