EDITORIAL: Jobs summit no panacea without reform
The reality is that there is little scope for compromises that can shift the investment environment
While SA has a structural unemployment problem — the economy has never been large or labour-absorbing enough to employ all those seeking a livelihood — it is worsening. The unemployment rate at the end of the second quarter edged up to 27.2% and the situation is even more dire, at 37.2%, when those who have given up looking for work are counted. Of those jobless people, close to 70% are in long-term unemployment, defined as 12 months or longer.
Unemployment is worsening because since 2015 economic growth has failed to keep pace with population growth. This will continue until at least 2020, when there is, at most, a prospect of stronger growth. Added to that, the rate at which labour is absorbed when the economy grows has been falling since 2008. South Africans might not catch up to their previous level of per capita wealth for at least another five years.
As the government lacks additional resources to invest, it needs to make sure its investments have a greater impact.
To change this dynamic, the economy needs a range of structural reforms that can drive investment, both public and private. As the government lacks additional resources to invest, it needs to make sure its investments have a greater impact. To attract private investment it needs to fix governance; get departments functioning properly, especially at municipal level; repair network services such as electricity and rail transport; and improve education and skills training, to name only a few. It needs to pay a lot more attention to improving the environment for doing business, which includes dealing with a range of factors, from administered prices (those set by the government for services such as electricity and ports) to safety and security.
Can the jobs summit, which starts in Johannesburg on Thursday, tackle these problems? While we can hope that the final agreement acknowledges their importance, the summit itself can do little to fix the fundamentals. We also know from experience that the problem with the government is not with the thinking and talking about what should be done, but in the actual doing.
This is not to say that an event like this cannot play a constructive role. It is an important part of structural reform that investment be channelled towards areas of high employment growth. Project-based or sector-based initiatives that can encourage investment into potentially employment-rich areas of the economy are to be welcomed. The potential of tourism for growth and employment, for instance, is an obvious area. Yet, year after year, SA fails to attract those tourists we know are out there, through inappropriate regulation or not tailoring tourism offerings and facilities to new growth markets.
Similarly, agreements among social partners reached through compacting can help to promote a more efficient business environment and are also to be welcomed. Third, the process of a roundtable discussion among social partners is valuable in and of itself and should contribute to a better understanding of SA’s constraints and how to deal with them.
But the reality about the social compacting process in SA at present is that there is little scope for compromises that can shift the investment environment. Even though we are up against it as a society, social partners remain locked into their own sectional and embedded interests.
Ask labour to compromise on wage increases or jobs at a troubled state-owned enterprises such as Eskom, or to consider subsidised jobs for new entrants or in special economic zones, and you will not make much progress. Ask business not to retrench when the economy is contracting or to invest in an environment where returns are too uncertain, and you are unlikely to get much traction.
And then ask the government to do anything that might harm its short-term electoral prospects — such as take on public sector trade unions over myriad issues or act against the corrupt in its own ranks — and again you will not make much headway.
For these reasons and because our unemployment problem is deep and structural, the jobs summit will have profound limitations.