SHAWN HAGEDORN: Prioritise young adults as jobless crisis deepens

SA’s unemployment plight resembles the early phase of our Aids crisis. It primarily afflicts young people, with the damage compounding quietly. Also, both crises provoked domestic responses that distracted from international solutions.

The connections between HIV and Aids were not directly observable. Tests detecting the antibodies for HIV were developed in the mid-1980s, long before the virus was identified. From there it was necessary to conclude that people, mostly gay men, were dying from opportunistic diseases exploiting their compromised immune systems.

An outbreak of hepatitis C among gay men in San Francisco in the late 1970s led to blood samples being collected and preserved. This later showed that many of them had contracted HIV and remained asymptomatic for about seven years. That is, a high prevalence of HIV went undetected in that community for several years before harsh symptoms and many deaths ignited a public health crisis. 

Those who remain unemployed long after leaving school eventually join the ranks of the “permanently unemployed”. This takes about seven years. If such unemployment was rare it would be less threatening to society and more manageable for those lacking work experience. Rather, unemployment is the norm for most young South African adults.

We have not yet assessed the damage that has been caused from entrenching the world’s most severe youth unemployment crisis. Quantifying the costs mostly in terms of grant payments ignores much lost productivity and social degradation. Countries go to great lengths to avoid youth unemployment levels half as elevated as ours.

Our governing party’s policies were sidelining a majority of the next generation and this triggered an electoral backlash. With voters highlighting jobs as their top concern, the ANC, which has relied heavily on a patronage-based electoral strategy, lost its majority. As a result, our government of national unity (GNU), primarily a coalition between the two largest parties, should prioritise job creation. This is particularly important as the third- and fourth-largest parties, among others, are eager to test the limits of patronage’s appeal.

Yet our economic debates have advanced haltingly. Before the GNU the mutually agreed goal among the incumbent major powers, the ANC and big business, had been the pursuit of investment-led growth. The general idea is that an inflow of investments will spur much growth and that this is the only way to create sustainable jobs.

Such thinking echoes the pre-1994 era, when politically motivated sanctions were the binding constraint acting on our economy. Today, investment capital crosses borders readily, so long as there are good prospects for reasonable returns. 

Investments following on performance upgrades at Eskom and Transnet beget further performance upgrades and additional investments. This is encouraging and should be further encouraged. Yet we lack plausible scenarios where investment-led growth adequately mitigates our unemployment crisis by mid-century.

It will take many years for investment-led growth to noticeably reduce the roughly 200,000 young long-term unemployed who each year join the millions of slightly older South Africans who have become permanently marginalised. Similarly, stopping the transmission of HIV wasn’t an adequate response as so many were already infected. 

Theoretically speaking, SA’s Aids epidemic could have been contained without relying on internationally developed pharmacological solutions if we could have achieved universal lifelong monogamy. Conversely, there are no mathematically plausible scenarios where importing much capital will spur sufficient domestic growth to create many millions of jobs within a generation. 

Our ultra-elevated unemployment is entrenched by weak domestic consumption. Our potential to increase domestic consumption is constrained by low workforce productivity, high capital costs, localisation policies and high consumer indebtedness. 

ANC policymakers mixed a patronage-focused electoral strategy with isolationist economic policies. This has failed politically and economically. The GNU must prioritise investment-led growth initiatives but averaging even 3% annual GDP growth through 2029 looks unlikely. The impact on employment would be meagre.

Health systems operate within a global context where people, pathogens and public responses circulate brusquely. Nor is isolationism an option commercially. Our young people will long be paying for today’s misguided policies.

• Hagedorn (@shawnhagedorn) is an independent strategy adviser.