SHAWN HAGEDORN: Unemployment, exporting and politics

Rampant inflation, rickety infrastructure and sovereign debt defaults are severe yet common and manageable risks.

Our entrenched youth unemployment crisis is starkly more unusual and menacing. If it persists through 2029 it will probably provoke an entrenched form of “failed state” status through discarding desperately needed economic potential while compounding crime and emboldening political opportunism, such as inciting large-scale unrest. 

Union and SACP members, alongside grant recipients and BEE (BEE) beneficiaries, vote ANC as the party privileges their economic interests. If this untenable arrangement doesn’t deliver 50% of the 2024 national vote, the ANC need only form a coalition with another patronage-friendly party. 

The former liberation movement struggles to even pretend it is serious about reforms, despite the party’s long-term viability being steadily diminished by the patronage metastasised throughout its ranks, along with destructive ideological indulgences. A competent coalition national government could fix the likes of Eskom and Transnet, and this would greatly benefit businesses and taxpayers. Yet such progress would leave our unemployment crisis little changed. Subsistence payments are the grimmest form of trickle-down economics. 

Expanding entry-level patronage through basic income grants would likely reinforce voting — and non-voting — habits unless it is challenged by opposition parties advancing workable plans to surge job creation. Such plans don’t feature prominently among our political debates. Rather, would-be reformers blame the ANC (justifiably) for horrific education outcomes while presuming (unjustifiably) that this must be corrected to tame our youth unemployment crisis.

Inequality is politically exploitable, whereas growth is economically enabling. Former president Thabo Mbeki likened SA to a two-storey house without a connecting stairway. The ANC’s policies have fixated on how those living upstairs are so much better off. Elsewhere over the past three decades many hundreds of millions of previously poor people graduated to middle class as their countries’ policymakers used value-added exporting to create high-volume “up” escalators. 

The ANC’s practice of prioritising redistribution and localisation to feed widespread patronage is irreconcilable with the value-added exporting model associated with East Asian manufacturing. As their upliftment prospects were hijacked, most “born free” SA adults now confront perpetual poverty.

Our stagnating domestic purchasing power is woefully insufficient to remedy our unemployment crisis — regardless of education outcomes. Nor has the recent spike in commodity export income noticeably spurred job creation. Adding value to exports is the only option. 

The ANC isn’t going to pivot from its localisation and redistribution policy focus, and it’s too late to create millions of manufacturing jobs. The global economy has been striding decisively towards services-led growth, with digitisation playing a central role.

Covid-19 didn’t create working from home, rather it helped highlight how “location agnostic working” is a natural consequence of an digital global economy. The nature of work is rapidly changing, as are the circumstances and location of workers.

By mid-century Africa will be home to 40% of the world’s young children, and within a decade it will account for nearly 90% of the world’s extreme poverty. Despite many leading economies being constrained by labour shortages while two thirds of SA’s young adults are unemployed, the Cyril Ramaphosa-Ebrahim Patel version of rejecting reforms is to double-down on localisation.

As China’s remarkable four decades of high growth has been supported by tremendous investment flows, Ramaphosa has sought investment-led growth. But China, like other high-growth countries, focused on creating wealth through teaming capital, knowledge and labour to compete effectively as a value-added exporter to affluent markets. Its government encouraged high household savings alongside rising productivity, supported by enormous infrastructure investments. 

The ANC has framed our youth unemployment crisis as a trade-off between fiscal rectitude and a moral obligation to provide subsistence payments. Viable solutions are not debated. An unnecessary — and unaffordable — hindrance is an outdated sense of credentialism. We routinely presume that only the scholastically exceptional are worthy of international employment. Such thinking presumes our national government must upgrade its service delivery for those upstairs who will then hire those downstairs — but only after education outcomes are sharply upgraded.

The alternative, which some school leavers are independently pursuing, is to earn online qualifications, leading to online employment. They are proving that determination can offset both a lousy education and horrific governance. What is required is not an industrial model reliant upon a competent national government supporting a multitude of business models hoping to attract foreign capital.

A truly enormous geographical misalignment in the global supply and demand for labour is set to compound for decades. Market forces will create a huge number of international jobs for African school leavers. The “who, what, when and where” questions will be answered by market responsive matchmaking. Provincial trade and development agencies sponsor events to showcase what their provinces offer distant businesses and consumers. That is, they promote matchmaking. 

Regardless of whether it gets a majority of the votes, the ANC is likely to call the shots from the Union Buildings post the 2024 election. But it is likely to be absent from provincial governments in places like Gauteng and the Western Cape. The development agencies of those provinces must expand their focus from attracting capital to providing labour.

Provincial development agencies, think-tanks, impact investment managers and business leaders must acknowledge that the greatest threat to SA’s stability is our youth unemployment crisis. By working together they — not the national government — can create high-volume job creation escalators by matching those school leavers whose determination has not been extinguished with the expanding global demand for young workers.

• Hagedorn is an independent strategy adviser.