Fixed investment is how SA will solve its unemployment crisis
SA is one of the few countries in the world where there are more adults not at work than adults at work, Mike Schussler says
The government has to aim for a fixed investment target of 8% of GDP to reduce SA’s high unemployment rate to the international average, an employment study has found.
The 17th South African Employment Report, sponsored by trade union Uasa, shows SA’s unemployment rate of 27.2% to be almost five times the international average of 5.5%.
Economist Mike Schussler, who undertook the research and presented the study on Monday, said that setting a fixed investment target should be a necessary outcome of the government’s planned jobs summit later in 2018. However, getting to the international unemployment average would take 17 years of annual growth of about 8.7% annually, the study also found.
“Fixed investment is part of growth and it’s the part of growth that has the strongest relationship with employment,” Schussler said adding that private sector, apart from banks and agriculture, were not making sufficient profits to embark on significant fixed investment.
“Their return on the assets they have employed is below that of the bank rate in very many cases. The private corporations are not going to come in very strongly.”
However, the public sector was in a better position, although this type of investment by this sector had declined in the past few years, since investment into building the Medupi and Kusile power plants for Eskom and the procurement of new trains, he said.
Schussler said provincial and municipal government had not made much investment in a “long time”.
“Fixed investment is very important, particularly from the government. Government must set a goal to itself how much they are going to spend on fixed investment, how efficient that fixed investment [will be], what returns that fixed investment it is going to have."
He said setting a measurable goal rather than a target was critical. “Look at the fixed investment problems we have in SA right now. The drought in the Western Cape shows we don’t have the dams to carry us over.”
SA’s gross fixed capital formation dipped 3.2% in the first quarter of 2018 resulting in it contributing -0.6 of a percentage point to GDP, according Statistics SA.
SA’s expanded unemployment rate had risen to 9.6-million from 6-million between 2001 and 2018. The expanded definition includes people who have given up looking for work.
The narrow unemployment rate is 6.1-million people — that is equivalent to 3.2% of the world’s unemployed, despite SA’s total population being just less than 0.8% of the global population.
There are 190-million unemployed people worldwide — 95% of the world’s population tracked by the International Labour Organisation.
SA is the only country that has had an unemployment rate in excess of 20% for more than two decades, the Uasa study found.
How unlikely are you to have a job in SA?
"SA is one of the few countries in the world where there are more adults not at work than adults at work. Along with other factors‚ such as single female-headed households‚ this low number of employed results in much of SA’s poverty and inequality," Schussler said.
Working-age South Africans are six times more likely to be unemployed than the average adult worldwide‚ he said.
"The unemployment rate in SA is higher than that of the US during the Great Depression, when unemployment reached 25%."
A 5.5% average unemployment rate in SA in 2043 would still mean that about 1.8-million adults would be unemployed then‚ Schussler said.