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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