EDITORIAL: The statistic that matters most
Stats SA confirms we are not making progress on unemployment rates
If ever a wake-up call was needed, Statistics SA delivered it on Tuesday. Understandably, the country has been in a celebratory mood after avoiding an extension of the Zuma era’s slide towards a full-blown kleptocracy.
The relief of investors is shown by the performance of the rand, which, despite some losses since the last Reserve Bank rates decision, has largely maintained its gains from December.
Since President Cyril Ramaphosa defeated Nkosazana Dlamini-Zuma by a wafer-thin majority at the ANC’s December conference, the rand is up almost 2% against the dollar. South African assets have generally performed well relative to their peers in emerging markets and some of the rich countries.
That is even after we have seen US 10-year bond yields surge past 3% on expectations that the Federal Reserve will raise interest rates at a faster pace, while SA’s Reserve Bank actually cut them the last time.
The Middle East is in flames again and, not surprisingly, the oil price is rising, with Brent crude approaching $80 a barrel on Tuesday and hitting its strongest level in more than three years.
Ramaphosa has made all the right noises about fighting corruption and maladministration and Public Enterprises Minister Pravin Gordhan is going ahead with a clean-up of state-owned enterprises, sources of much of the rot.
Even as later data on business and consumer confidence signalled that Ramaphoria was losing steam, this has not been enough to shake the feeling that the country has turned a corner.
Barely three months ago, the talk was of potential downgrades to junk and the country being locked out of international markets, or at least having to pay punitive borrowing costs, meaning less money available to fund social services.
Contrast that with Bloomberg’s report on Tuesday that SA is looking to tap international bond markets for the first time since Ramaphosa was elected. That is a testament to what has been achieved in a relatively short period of time.
Ramaphosa has made all the right noises about fighting corruption and maladministration and Public Enterprises Minister Pravin Gordhan is going ahead with a clean-up of state-owned enterprises, sources of much of the rot. Less than 24 hours after the appointment of a new board for Transnet, Denel confirmed that its CEO had resigned.
These are all steps in the right direction and international investors are obviously noticing and are ready to reward us.
Sadly, despite all this, Stats SA has confirmed that we are not making progress on the statistic that should matter most.
Unemployment rates much lower than our 27% have brought down governments and threatened social cohesion elsewhere. As the numbers hardly change, there might be a temptation to gloss over them as if this does not matter. We must resist that.
A youth unemployment rate of about 50% is not something we should tolerate.
In the light of these numbers, the debate about a minimum wage cannot help but sound like a distraction. Not that there is anything wrong with advocating that workers be fairly compensated for their labour. But reversing the cycle of unemployment has to be the first priority.
It is positive that Ramaphosa has placed unemployment, especially among the youth, at the centre of his government’s agenda. But could any president say anything different?
What the data demonstrate is the need for action, sooner rather than later. With the monetary policy committee meeting next week, there may be some noise that the Reserve Bank should do something — like perhaps cutting interest rates again to reflect the recovery in the rand.
But that would not be wise, not only because the rand has weakened somewhat since the last monetary policy committee meeting when the Bank cut rates and said the currency was overvalued.
One of the lessons from Europe’s debt crisis is that central bank action alone is not a substitute for decisive action and much-needed policy reforms to create an environment conducive to hiring.