It was supposed to be the state of the nation address that would see President Cyril Ramaphosa move beyond the public relations gimmicks on the economy that have taken us nowhere and delivered three out of five quarters of declining GDP since the start of 2018.
With the electoral mandate he wanted — the lack of which had constrained him, according to his supporters — the president was expected to finally show us umqolo wakhe, his backbone in Xhosa. He would deliver a plan to fix state-owned companies and revive an economy that collapsed by 3.2% and shed 237,000 jobs during the first quarter of 2019.
Instead, the country got an Eskom announcement that was not an announcement. Like pastor Alph Lukau, the president resurrected the National Development Plan, a seven-year-old document that does not have a single recommendation that can address the country’s current economic crisis.
The speech was all over the place — it had little bits taken from everyone, from Ebrahim Patel (the masterplans) to McKinsey (the smart city), but there was no economic plan. The economic targets made no sense.
The president said the government had allocated R100bn to an infrastructure fund. But his speechwriters did not know the Treasury had only allocated R1bn to the fund this year and nothing during the following year. The ANC will spend the next decade debating where the smart city should be located. There will be delegations to Abuja and Brasilia. The smart city is another gimmick, a diversion like the World Cup, to get us all excited and deflect attention from the lack of a plan to grow the economy.
Ramaphosa said the economy will grow at a much faster rate than the population within the next 10 years. But that could mean anything above the 1.5% a year achieved over the past decade. It is such a low bar. Why would anyone put such a lame target in a speech that wants us to dream? “Two million more young people will be in employment,” he continued. Yet 200,000 jobs a year is only 23.6% of the people who entered the labour market last year. Over the next three years there will be more than 2-million new entrants into the labour market. And that does not even address the 2.6-million young people who are already unemployed.
The labour force increased by an annual average of 2.7% over the five years to the end of 2018, using the expanded definition. An annual average of 650,000 people entered the labour force during this period. The economy created 270,000 jobs a year. If we assume the labour force will grow at the same rate and create the same number of jobs over the next five years, the number of unemployed people will increase to 12-million from 10-million by the end of the president’s first term.
To halve the unemployment rate over the next five years, as the ANC lekgotla said, the economy will have to create 7.5-million jobs, an annual average of 1.5-million using the expanded definition. This will require a much higher GDP growth rate. But in 2019 there will be a lower GDP growth rate of 0.5%, according to Nedbank.
Each year the government fails to come up with a plan to grow the economy at a faster rate, the target GDP growth rate and number of jobs that have to be created will increase. According to Statistics SA’s labour force survey, the expanded unemployment rate for young people aged 15 to 24 is 69.1%. Since December 2008 the number of employed young people has declined to 1.1-million from 1.6-million. We have destroyed 500,000 jobs for young people.
We should all be terrified if we understand the scale of the economic crisis. We can’t confront it using only conventional economic policy tools. SA does not have a sovereign debt problem, though it has an Eskom debt problem. If the economy grows, the so-called debt problem will disappear. But if the low GDP growth continues, we could end up having to implement an IMF structural adjustment programme. Under such conditions, will Ramaphosa get to serve a second term?
• Gqubule is founding director at the Centre for Economic Development and Transformation.
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