The tragedy of unemployment in SA continues, with the country topping the wrong charts.
With the jobless rate rising to 34.4% in the second quarter, Bloomberg reported that SA has the highest rate of the 82 countries it tracks.
There has not been a shortage of warnings about how the country cannot continue on this path. There is debate on the specific causes of the riots in July, but they point to where SA society is headed.
The numbers are depressing enough without one having to point out how the official rate, which excludes those who are not actively looking for work, is misleading. Those who live in the real world see it daily in the faces of desperate people begging at traffic lights.
Amid a crisis of such proportions, there will always be people offering easy solutions. The answer, they will say, is for SA to expand its social welfare system, with no care about how to fund it. So one can expect that calls for a basic income grant will grow louder. However, experience in every other country shows that production, not just consumption, is the route to sustainable wealth creation.
How to fund more grants? There are supposed easy solutions there too with the suggestion that more can be extracted out of the country’s already overburdened and narrow tax base. If that does not work, just get the SA Reserve Bank to print money and fund government spending. This playbook has been seen from Zimbabwe to Venezuela.
Barely grew
But one thing we do know is that the countries that have made inroads against unemployment and inequality have done so with sustained GDP growth. Even before the shocks due to Covid-19 and more recently the riots that engulfed KwaZulu-Natal and Gauteng, SA was badly lagging behind its peers.
The reason is that the economy barely grew in the decade after the outbreak of the global financial crisis from about 2007, even while others recovered. The jobless rate climbed back towards 30%, where it had been in the early days of democracy in the mid-1990s.
In his Twitter conversation with former Business Day editor Songezo Zibi, governor Lesetja Kganyago disputed the charge that Thabo Mbeki’s time in office was one of jobless growth, which would raise the question of whether the pursuit of growth is of any use.
Kganyago first made the point that while it is possible for a country to grow its economy without creating jobs, it is unheard of to have job creation without an expansion in GDP. He further pointed out that in the period of so-called jobless growth, unemployment fell to 21%, before the gains started to reverse from about 2008.
Obvious answers
President Cyril Ramaphosa set himself the task of reversing the losses of the so-called wasted years under Jacob Zuma, and he might do well to reacquaint himself with what preceded that period and look at what the Mbeki government was doing to reform the economy and open it to the world.
His luck is that the answers are obvious, and are in many reports that he would have encountered over the years.
In SA, it seems to be a case of one step forward and two steps back. One day we are celebrating a key step of progress in opening the energy market while also embracing the worldwide move towards renewable energy; the next day you have minerals & energy minister Gwede Mantashe saying the green transition is akin to economic suicide, as if staying still is an option.
After every dismal jobs report there will be economists talking about the need for structural reforms, and yet SA ministers will be advocating localisation policies that even countries that are supposed to be communist have long jettisoned.
Private sector fixed investment is at multidecade lows, pointing to a lack of business confidence that means the cycle of low or no growth and rising unemployment will not be broken soon. There is no doubt that deputy finance minister David Masondo and others in Operation Vulindlela mean well. They need to be backed with action and the dinosaurs let go.
SA cannot afford another wasted year, let alone a decade.
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