Sudden geological wealth threatening investments in worker productivity is termed Dutch disease. Does our entrenched youth unemployment crisis stem from a sudden and unexpected spate of political advances?
‘Dutch Disease’ refers to how 1970s North Sea oil discoveries sharply increased the value of that country’s currency thus undermining the competitiveness of its manufacturing and other sectors. Unemployment ratcheted steadily higher, leading to many young adults with advanced degrees driving taxis and working in restaurants.
The ‘resource curse’ highlights why so many poor countries are primarily exporters of agricultural, mineral or hydrocarbon commodities. Their currencies become stronger and more volatile and this undermines the competitiveness of manufacturing and other value-adding sectors. ‘Dutch disease’ is a version of the ‘resource curse’ where commodity wealth is discovered suddenly.
As commodity-exporting countries require a modest number of skilled workers, their ruling elites are not motivated to create a broadly well-educated workforce. Such workers are less reliant on the state and they want policies consistent with creating a large middle class economy. Such policies are wholly inconsistent with the patronage-based political structures which are common among commodity-exporting economies.
South Africa’s 1990 political transition was sudden in the sense that nothing could be presumed. Then genuine political progress happened. Mandela was globally feted and the negotiated constitution has proven formidable.
Somehow a residual effect lingers: expectations presume political progress must precede economic progress. This probably reflects the desire for some sort of social justice endorsement prior to advocating for how the economy should be restructured. After all, the ANC’s branding continually seeks to position the party as championing social justice by seeking to redress racial inequality.
Yet the situation has deteriorated such that we don’t acknowledge the unaffordable damage caused by sustaining ultra-elevated youth unemployment. Nor do any of our various leaders offer a credible plan to swiftly create millions of jobs.
Sanctions to localisation
We might as well have gone straight from sanctions to localisation. Mbeki and Manuel tried to balance growth versus redistribution but pro-patronage and Marxist forces within the party prevailed. The party needed to fully pivot, suppressing its Marxist and patronage instincts, to copy the era’s high-flying emerging countries and pursue fast-tracked, genuine upliftment through prioritising value-added exporting.
Exporting commodities while investing in domestic production for domestic consumption was an option, 150 years ago, for those countries early to industrialise. South Africa’s pre-1994 progress at making this work for a small subset of the population created the false impression that this model could uplift the far larger general population. This was always hopeless, as now evidenced by twelve million unemployed.
It was not easy for the Dutch to constrain new-found resource wealth from undermining their economic potential. That their commodity exports were sabotaging existing investments in education and fixed assets no doubt made the political and commercial decisions more manageable than for less developed commodity-exporting nations.
Our situation since the 1990s transition has been similar in that we also have had significant investments that needed to be expanded upon, not sacrificed. However, among the key differences, first, our investments in non-geological production were inwardly focused. Second, our unexpected windfall was not economic but political.
It should surprise no one that the ANC has sought to frame our youth unemployment crisis, not as a result of horrific economic stewardship, but rather as a values-based trade-off between fiscal rectitude and a moral responsibility to provide subsistence payments. This very much coincides with both the ANC’s electoral strategy of building patronage dependency and its destructive economic ideology, as depicted in its various manifesto-styled documents. But how are we to explain this framing having been widely accepted by those otherwise critical of ANC policies and practices?
Unnecessarily defeatist
The short answer is that the belief is widely shared that if we can’t employ our school leavers, then they are not employable. This view is unnecessarily defeatist. Though our low growth and persistently high unemployment have become mutually reinforcing, the well-trodden path to breaking this vicious cycle is to increase exports.
Increasing commodity exports creates few jobs, therefore value-added jobs must expand. The Asian model did this through manufacturing. There is still some scope for this but such jobs are declining globally. Those that are ‘friend-shored’ aren’t likely to be moved to South Africa.
The economic sectors which are expected to grow the fastest in the medium to long term are in services, particularly digitally enabled positions. To overcome our youth unemployment crisis we should be focused on integrating within these segments of global supply chains. Instead, the issue has been framed within a morality based context: fiscal rectitude versus the responsibility to provide subsistence payments.
A substantial portion of our school leavers are employable internationally for reasons that are routinely ignored. Demand for digital skills in all shapes and sizes is growing, while employers are vastly more location agnostic. The premium on youth has probably never been higher as many of the world’s most dynamic economies are seeing their workforces contract. Being able to work in teams is a top priority and that is easier for those who have long been speaking English. Proficiency in English among lower paid workers is a particular plus.
The minimum wages in Europe or North America do not attract the type of workers that dynamic teams want to invest in. They can scrape the bottom of their local labour barrels versus attracting eager young South Africans. Not all such opportunities require high literacy and numeracy. Others require strong interpersonal skills and a willingness to learn and adapt.
Some of these jobs will require exceptional intelligence and advanced credentials. Companies will also need to fill jobs where initial skill requirements are modest but where youthful exuberance is highly valued. As Artificial Intelligence increasingly substitutes for much book learning, consumers will favour companies that know when to interject human touch points.
High emotional quotients
It has been asserted that many South African black women have particularly high emotional quotients. People who live in difficult environments can also have a high tolerance for tedium. Old-school ideas about credentials are out of synch with how tomorrow’s opportunities are developing. Having a quarter of school leavers integrated into the global economy would greatly improve our economic trajectory.
Our benchmark competitor for creating jobs is probably India. But we aren’t competing. A significant factor is that, as the successes reward labour more than capital, school leavers are left to fend for themselves – and modest, but growing, numbers are discovering promising paths.
Many countries combine healthy economies and chaotic politics. Our 1990s transition produced a constitution that has withstood many stresses. Yet designing economic solutions mustn’t be conditioned on political progress.
[Image: https://pixabay.com/photos/container-van-export-travel-cargo-2568197/]
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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