The dramatic collapse in South Africa’s employment numbers, announced by Stats SA last week, was hardly unexpected. But that some 2.2 million people lost their jobs in the three months from April to June – a fall from 16.4 million people in employment, to 14.1 million – is a stark illustration of the dire state of the economy.

There are tragic human stories behind these numbers, and profound implications for the stability of the country. It should concern us all.

It must weigh heavily on President Cyril Ramaphosa. Approve or disapprove of his record in office, he knows that a large part of his legacy will hinge on how his administration is able to get to grips with South Africa’s employment crisis. The results were not encouraging in the first two years of his incumbency. They are now catastrophic.

In a recent statement he acknowledged as much. ‘Our success in responding to this unprecedented crisis will be measured in the speed of our labour market recovery. In addition to the relief measures we have already implemented, we must ensure that every job lost during the crisis is replaced and that more jobs are created so that we can meaningfully reduce unemployment.’

This is to be applauded. Jobs provide livelihoods and signify inclusion in an economy. There is also abundant research evidence that jobs are the central demand of South Africa’s people. This is the case even where the employment on offer is low-wage. Polling and analysis group Afrobarometer has found that around two thirds of South Africans would prefer an economy in which low-wage jobs were plentiful to one in which high-wage employment was accompanied by extensive unemployment.

Government policy has, however, put the country on a different track. Rhetoric to the contrary notwithstanding, an environment in which jobs would be generated in sufficient number to ‘meaningfully’ tackle unemployment has never been in place. In the first instance, it would demand higher rates of fixed investment and growth – the National Development Plan of almost a decade ago envisioned 11 million jobs being produced off the back of sustained GDP growth of some 5.4% per annum, with fixed investment hitting 30% as a proportion of GDP by 2030. The country is nowhere near that, and was making no headway even before the ravages of Covid-19. In 2019, GDP grew by only 0.2%, and investment [JE1] stood at just under 18% of GDP.

South Africa’s labour absorption rate – a measure of the proportion of the working-age population that is employed – meanwhile stood at a little over 42% in 2019. It has been edging down for years. It stood at close to 46% in 2001. This year, Stats SA puts the rate at 36%.

Restrictive labour legislation

Yet under these circumstances, the government has insisted on a raft of policies that have disincentivised the very things that the country desperately needs. Restrictive labour legislation has been a major concern, particularly insofar as employment creation is concerned and especially for small firms – supposedly the engine of job creation. The SME Growth Index – a detailed longitudinal study produced by SBP for a number of years – showed compellingly that the labour regulatory environment was fatally undermining the job-creation potential of small firms. Sadly, SBP’s work also showed that SMEs were more inclined than their larger counterparts to hire precisely those people most excluded from the current job market: young, unemployed, unskilled work seekers.

As SBP phrased it: ‘As a community, SMEs are not taking on staff in large numbers as they are elsewhere in the world, depriving those least competitive in the job market of the opportunities to earn an income and the dignity of work. In a country where unemployment levels have reached global highs, the sustainability and growth of our SMEs should be of utmost importance to government. Labour laws that allow SMEs to enlarge, and reduce, their workforces faster and less expensively need to be considered, as do tax incentives that reward SMEs showing growth and employment in real terms.’

Little has been done to attempt to remedy this. If anything, pending revisions to the Employment Equity Act bespeak a willingness to come down hard on employers failing to meet racial targets. The result will be a predictable reluctance to take on staff.

Administrative burden

Indeed, racial policy has probably done more than most other initiatives to undermine the dynamism of the economy. SBP’s work bears this out, with small firms bemoaning the administrative burden that empowerment demands have created for scant advantage.

The pandemic thrust the issue into view when the Department of Tourism declared that relief would be made available using empowerment as a key criterion. The reaction of journalist Ferial Haffajee (who counts herself in favour of the policy in general) was apposite: ‘All Covid-19 relief is being given on BBBEE lines with applications scored by race, gender, disability ownership instead of by how many people employed, size of business etc for max impact. BBEEE is a vital policy but in an emergency, you have to look at the greater good.’

Note that all of this signifies choices and trade-offs that the government has made. Rhetoric aside, it has chosen to sacrifice employment for ideology. Nor is there any sense of an end to this. President Ramaphosa has indicated that empowerment should ‘if anything’ be more aggressively driven.

‘Now is the time for all South Africans to pull together and grow South Africa,’ the President says. One cannot fault this sentiment except to say that it is way past time to do so. But until the government makes different choices, there is scant chance of this happening. ‘Meaningful’ job creation will remain elusive.

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Terence Corrigan
Terence Corrigan is the Project Manager at the Institute, where he specialises in work on property rights, as well as land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature – as well as having taught English in Taiwan. He is a regular commentator in the South African media and his interests include African governance, land and agrarian issues, political culture and political thought, corporate governance, enterprise and business policy.

11 COMMENTS

  1. When this regime is replaced with a a more competent leadership, only then will South Africa begin to recover.
    Coming from decades of Communist ideology and strong links to dictatorships, this authoritarian dictatorship doesn’t understand democracy and progress and never will. It’s all about control and black power.

  2. I’m a retired guy living on a humble income (humble means different things to different folk of course). But to our middle-aged part-time domestic/garden woman who is helping support three grandchildren, the Dept of Labour hoops I am having to jump through and minimum wage threats, she and her family are due to suffer enormously. I am simply having to say “thank-you, goodbye, my wife and I shall take over your duties.” Sad but serious.

      • Yes, that is unfortunately true. I have heard stories of that countless times!
        Try sending them off with a gift, and much well wishes. We had to do the same thing, but happily no one seemed cross. But one never knows.

  3. Terence is correct except he is discussing in broad terms but greater focus on the problem is needed.

    I wrote in detailed terms to the DG at the DTI, the mayor City of Jo’ burg, the Chief Justice and the President showing how the dti, Housing and DAFF lead South Africa in creating poverty, human degradation, unemployment and economic decline. Pointing out as economists and sociologists they cannot make the technically informed decision’s needed to create suitable policies that could support major job creation industries through loans not grants. This would be through engineers developing and sustaining the project for at least five years in order to provide successful crop farming and manufacturing skills to create production in jobless communities.

    Consequently, there are no policies in government supporting engineers creating the jobs and industries needed. With engineers, excluded poverty is inevitable.

    In 26 years DAFF has not learnt how to manage and control the implementation of crop farming in black communities where up to 90% of their projects fail, wasting R4bil by 2012 and still wasting. Housing by 2012 had wasted R50 bill and still wasting. This is because no one at Housing knows how to manage quality control and no one at Housing knows how to use the implementation of RDP housing to transfer skills into communities so that communities can begin to lift themselves out of poverty. The manufacture of Housing is the only product that has the capacity to transfer many skills into low skilled communities, and could act as the catalyst to create general manufacturing in most of SA’s 2700 squatter camps. Instead, Sisulu boasted spending R124 bill on housing without creating one sustainable job. In other words, as housing does not create sustainable jobs, housing cannot pay the bills and actually sinks people deeper into poverty. this enables them to suffer poverty in slightly better comfort in poor quality RDP homes..

    So RDP housing supports the unlawful practice of using housing to buy votes at election time

    Initially, the plan to create industries and jobs in squatter camps so that they can be brought into the formal economic was killed off by Jay Naidoo in 1994 when a donor from Detroit offered to provide $1mill to start plans to lift squatter camps out of poverty through manufacturing and farming. His office claimed that as engineers, we were elitist with no part to play in SA future. This is still the case today. Then in the mid 90’s the dti issued and instruction not to support engineers providing, the industrial means to enable squatter camps to create jobs and wealth. This still appears to be the case

    Next Week I will be lodging with the Human Rights Commission a complaint concerning governments deliberately disregarding the human right of millions of people in terms of their definitions of Human Rights. We will also argue that even though SA has not ratified the UN decree concerning the Rights to Jobs, denying the rights to jobs to millions of people knowing that engineers know how to create the jobs and industries needed, goes beyond Human Rights, and becomes criminal.

    We are also petitioning Parliament to investigate the dti, Housing and DAFF in terms of the letters below to the President, Chief Justice, DG October, the Mayor of Jo’burg and the Trade and Industry Portfolio Committee. The letters (access below) clearly shows that the rise in poverty, unemployment and economic stagnation was either intentional, or technical incompetence or a combination of both..

    1. Letter to President Ramaphosa and Chief Justice concerning the dti and Sisulu driving poverty and economic stagnation https://bit.ly/3iKHeZZ
    2. GWD High Technology Solutions to economically empower squatter camps and rural communities https://bit.ly/3dOM1aY Registered at the NRF and later presented to SWOP
    3. Thirteen one pagers detailing the GWD plan https://bit.ly/2XFMkQf
    4. What the factory will provide and product evolution https://bit.ly/2VwNzhY
    5. Project Description and reasons behind choosing the engineering elements to include in the plan to lift squatter camps out of poverty https://bit.ly/3bfx9B9
    6. Plan to lift 7 squatter camps out of poverty from Diepsloot to Zandspruit presented to the City of Jo’burg https://bit.ly/3a9nTNG
    7. Executive Summary manufacturing Short https://bit.ly/34BBY5X
    8. Executive Summary Long – Manufacturing http://bit.ly/GWDMFGplan38voaJR
    9. Executive Summary Long – Farming http://bit.ly/GWDfarmPlan2TKMmCM
    10. Letter to Chief Justice- how government forced millions into poverty https://bit.ly/3bnNzs1
    11. Letter to the Chief Justice – how business leadership collaborated https://bit.ly/2FyeIxf
    12. Letter to the mayor of Jo’burg – Why does he wants to keep squatter camps poor https://bit.ly/3itrzyX
    13. Letter to Ford, Siemens, and Goodyear concerning their involvement in developing a plan to lift squatter camps out of poverty https://bit.ly/2SltoCm
    14. Black Women in manufacturing https://bit.ly/2XGyBIP
    15. Lessening Chinas hold on SA’s textile industry an engineering discussion paper step by step https://bit.ly/3d6iwAg
    16. The Rev Dale White to Sisulu on using housing to create jobs and industries http://bit.ly/DaleS2IwmENi
    17. No policy in government enabling engineers to create the industries and jobs needed https://bit.ly/32j8OqV
    18. Chief Director Thatcher, Housing Legislation, Department of Housing asks me to take Sisulu to the Cons Court for crimes against the jobless people. https://bit.ly/30NJ9Xu

    • Mr. Wood, before you go to all the trouble of compiling, sending these letters, and going to court. First, just ask these bafoons trying to run this country, especially the head honcho, DOES BLACK LIVES MATTER? Then no matter what the answer, tell them their boss is lucifer the master of the lie, and that they will follow him to his finale destination.

      • I fully understand and appreciate your sentiments. However manufacturing development is my business and this useless government soon has to prepare for an election. So I am preparing the way to expose them not so much to the white people but get the jobless people.
        Therefore, I am petitioning Parliament to discuss the fitness of prominent officials and ministers to hold office as I can show that they are the main drivers of rising unemployment and inequality. I and submitting to the Human Right Commission showing how for 26 years government has violated the human rights of black people and finally I am preparing to take a prominent minister to the Cons Court for crimes against the jobless
        So it anyone has anything to offer you can contact me at gwd@vox.co.za

  4. The ANC’s racist policies, especially their ridiculous labour and wage policies, are strangling South Africa, especially small businesses. Covid-19 will simply be the final knockout blow for our economy – unless Cyril and co wake up and smell the coffee, and soon. But sadly, don’t hold your breathe…😢

  5. The sooner the house is destroyed the sooner a new structure can be errected. A minority is trying to keep the walls up instead of stepping away and letting it crumble and collapse.

  6. Yeah if government pushes ahead with nationalisation oops I mean Expropriation Without Compensation, then you can kiss the Rainbow Nation goodbye. Nevermind without policy change, with policy changes like that for the worst, it’s over.

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