Frontline Africa Advisory

Should Government Create Jobs?

Should Government Create Jobs?

With the already fragile South African economy further crippled by Covid-19, the increasing burden of unemployment is getting weightier and government is seemingly out of ideas.

While unveiling his economic recovery plan, President Cyril Ramaphosa recommitted his government to addressing unemployment by creating 800,000 job opportunities through a ‘public employment’ programme. This happens hardly two years after social partners committed to accelerated job creation  at the 2018 Jobs Summit. Yet, even before the outbreak of Covid-19, the partners had failed to live up to the Summit commitments.  

On the contrary, unemployment had reached an alarming 30.1% by the end of 2019. The latest employment survey by Statistics South Africa showed that unemployment had risen from 39.7% to 42.0% on the expanded unemployment definition. Government job creation plan is a reiteration of government’s previous commitments, only with new figures. It remains to be seen how this will achieve different results to all other plans that have come before it, given the even worse circumstances for its implementation.

The private sector has the primary responsibility to create jobs. With a stagnating economy, it is unclear how government will unlock job creation in this sector. For years now, business has raised concerns about the slow pace of structural reforms that are necessary to boost economic activity. Yet, government has failed to act with the necessary urgency to effect these reforms.

Both the economic recovery plan and the Medium-Term Budget Policy Statement (MTBPS) delivered by the Finance Minister on 28 October 2020 do not delve into structural reforms. Bold initiatives to turn State Owned Entities (SOEs) around have not been forthcoming. Piecemeal initiatives such as the long-planned spectrum allocation by ICASA and liberalizing energy generation seem to be the preferred approach.   

The 800,000 job opportunities that government aims to create through public works projects are a mere drop in the ocean given the unemployment epidemic in South Africa. Thus, even if these materialized, they would hardly make a dent to the unemployment crisis facing the country. South Africa’s famed penchant for plans without implementation is likely to rear its ugly head once more, unless urgent measures are taken to scale up the capacity of the state to deliver on government promises. Further, unless more is done to plug leakages in state finances, the state will soon not have enough money to invest in the creation of any job opportunities.   In the end, this plan will not solve South Africa’s decades-old problem of unemployment. Job creation initiatives by the state should always be accompanied by a solid implementation plan. Anything to the contrary is likely to miss the target.

Instead of quick fix solutions, the government’s employment programmes and the infrastructure programme must open lifelong career opportunities for participants. The reality is that South Africa’s skills base is mostly incompatible with the needs of the modern economy. Universities and other institutions of higher education continue to produce skilled graduates that cannot find jobs in the labour market. Sadly, not much has been done over the past two and a half decades practically to address this mismatch. Therefore, any economic recovery plan that does not place at its centre intensive skilling will most likely fail to extricate South Africa out of its economic quagmire.  

There is also an urgent need to refocus energies on the rural and township economy, with particular emphasis on entrepreneurship. The marginalised should have more access to enabling financial instruments for them to start and grow their own businesses. These should be particularly targeted at increasing the participation of women and young people, not only as employees but as independent suppliers of various products that are manufactured locally. The net effect thereof would be practical meaning to localisation. It will take more than just the President urging young people to start businesses for this to happen. Rather, a concerted effort is required from government and business to actively invest in localisation and unlock funding and other enabling assistance for Small, Medium and Micro Enterprises (SMMEs).

Written by Neo Tsotetsi

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