NEVA MAKGETLA: Towards an industrial policy for job creation

Since the 1980s only about 40% of SA adults have been employed. The global norm is 60%. To reach an employment ratio of 50% by 2035 — still well behind the international average — employment would have to climb 3.5% a year. In the 2010s, before the pandemic downturn, it grew almost 2% a year.   

Given these realities the current industrial policy is not fit for purpose. Opening economic opportunities on the necessary scale requires vastly expanded support for new, more labour-intensive activities, supported by innovative, decentralised production systems. The established industries and companies that have long formed the backbone of the economy still need support. But in itself, that will not overcome SA’s employment deficit.   

The most jobs-friendly industries are the services, now a driving force in modern economies and trade. The sector involves a vast diversity of activities, including engineering, programming and other professional business activities; the cultural industries and tourism; the public services; and cleaning and security work. Other job-rich industries include light manufacturing, such as food processing, clothing and other consumer goods, as well as forestry, agriculture and construction.

All of these industries already enjoy some state support. But the big industrial policy interventions have gone to heavy manufacturing, above all vehicle production, metals and mining. These industries are critical for SA’s exports and technological capacity, but cannot significantly expand employment. The mining value chain and vehicles together generate almost two-thirds of SA’s exports but only 5% of total employment (and just 1% of women’s jobs).   

Prioritising employment creation demands new kinds of support for new kinds of producers. Family businesses in particular were largely destroyed under apartheid. That also devastated their support systems, which are needed to secure access to markets and inputs as well as infrastructure, finance, experience and training. 

Moreover, many potential new enterprises would provide only  sufficient returns to support a family. From the standpoint of society and the economy that is better than unemployment, but it won’t attract established private investors. In other cases, new activities may meet critical socioeconomic needs, for instance those around education, healthcare and access to energy and water, but their customers cannot afford to pay for them without government assistance. 

Current industrial policy initiatives almost entirely ignore these kinds of activities. In contrast, a jobs-centred strategy would have to start by setting up and supporting ecosystems that enable and encourage new producers.

Some examples already exist in the private sector. Established private businesses often provide extensive technical and financial support to small contractors who supply inputs or processing, for instance in sugar, forestry, clothing, food and cosmetics. Similarly, franchise models could support new retailers, restaurants, after-sale service providers, cleaning, gardening and tutoring. The government could provide incentives or subsidies to extend facilities and opportunities in working-class communities.   

The government itself could also develop ecosystems that support small business, for instance multiplying retail and commercial sites in townships linked to financing for new ventures. It could vastly scale up its investments in social intermediaries that assist new producers. It could explore platforms to improve information on opportunities as well as employment standards in occupations that depend on temporary work, like domestic and farm labour.

Finally, the government could increase labour intensity in the public services. Models already exist in the community health workers and teacher assistant schemes, which bring in less qualified people to support scarce professionals.

SA’s bureaucracy was not designed to perform any of these functions. Units responsible for labour-intensive activities are generally small. They originated to regulate markets, not to support sustainable growth or work with local governments or other intermediaries.

Encouraging decentralised support systems would require officials to play better with stakeholders, as well as payment systems more suited to private, nonprofit or local government intermediaries. Hardest of all for any bureaucracy, a job-centred industrial policy requires an appetite for innovation and the ability to manage risk, rather than just avoiding it.   

• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.