I have been predicting this moment for a few years — that the number of unemployed South Africans will increase to 10-million people — if the government does not change its economic policies.
Will it take 11-million or 12-million unemployed people for the government to feel the pain of each person who cannot find work, and chart a new path beyond its failed orthodoxies?
According to Statistics SA’s more realistic expanded definition, the unemployment rate for black Africans is 42.5%. The figure for black African females is 45.9%. The unemployment rate in the Eastern Cape is 48.3%. The youth unemployment rate is 69.1%.
Meanwhile, the economy is collapsing. GDP declined during the first quarter of 2019. It will be the third quarterly decline since the start of 2018. There is a 50-50 chance that there will be another recession in 2019 , according to Old Mutual economist Johann Els.
President Cyril Ramaphoria is not working. SA is in its worst post-apartheid economic crisis. But the three members of the Reserve Bank’s monetary policy committee who voted against a rate cut last week confirmed that they are among the few remaining inflation nutters in the world. In 1997, Mervyn King, former governor of the Bank of England, said: “An inflation nutter is a governor who places weight only on inflation and none at all on other variables, including economic performance.”
Two decades later, such governors are an almost extinct species.
There have been three phases in terms of economic policy and employment during the post-apartheid era. Between 1995 and 2003, under the orthodox slash-and-burn growth, employment and redistribution policy (Gear), the number of unemployed people using the expanded definition more than doubled to 8.3-million from 4-million, according to a paper by Geeta Kingdon and John Knight.
There were expansionary monetary and fiscal policies after the end of Gear. Between 2004 and 2008 the economy grew by an annual average of 4.8% a year. It created 1.9-million net new jobs between September 2003 and September 2008, an annual average of 380,000. This absorbed almost all new entrants into the labour market. The unemployment rate declined.
Some say the higher growth rates were due to the commodity boom. There are four reasons why this is not true. First, the Minerals Council SA published numerous documents at the time that showed SA did not benefit from the boom. Former council president Mzolisi Diliza wrote that during the 2001 to 2008 boom the world’s top 20 mining countries achieved an average mining GDP growth rate of 5% a year, while SA’s mining GDP shrank by 1% a year.
Second, between 2004 and 2007 gross domestic expenditure (GDE), a measure of the performance of the domestic economy, grew much faster than GDP, which takes into account the impact of the external sector or net exports. GDE grew 7.2% a year during this period compared with annual GDP growth of 5.1% a year. The external sector was a drag on GDP growth. The strong rand contributed towards the poor external sector situation.
Third, mining shed 81,000 jobs between September 2003 and September 2008. Almost 80% of the jobs created during this period were in sectors such as finance (486,000), construction (431,000), trade (411,000) and services (291,000), which mostly serve the domestic economy. Fourth, there was a sharp increase in mining investment between 2004 and 2008. But it accounted for an average of only 8.4% of total investment during this period.
Between 2009 and 2018 the economy registered its worst performance during the post-apartheid period, partly due to contractionary economic policies after 2014. GDP grew by an annual average of 1.5%. The number of unemployed people has soared by 4.1-million to 10-million since December 2008. During the mini-boom a 4.8% GDP growth rate created 380,000 jobs a year.
Over the past five years there has been an annual average of 650,000 people entering the labour force. SA probably needs a growth rate of 7% a year to absorb these new entrants. It will require an even higher growth rate to reduce the 10-million unemployed people.
SA cannot achieve such growth rates with orthodox economic policies.
• Gqubule is founding director at the Centre for Economic Development and Transformation
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