Over the past year or two, politicians have promised a "development state", "paradigm change", a "new growth path", and "decent work". These forceful words demonstrate a desire by government to ease SA's widespread poverty and unemployment.
The national budget is the clearest expression of government's policy intentions. Government committed to halving poverty and unemployment between 2004 and 2014. Its ability to achieve these objectives seemed possible before the economic downturn. More creative thinking will be needed.
Any government strategy now needs to consider the short-term imperatives and the longer-term requirement to generate sustainable, inclusive growth.
The 2007 Human Sciences Research Council employment scenarios showed that about 500 000 new jobs a year were needed to halve unemployment between 2004 and 2014. With the downturn, about 700 000 jobs need to be created each year until 2014.
The revised 2009 HSRC employment scenarios show the market could potentially generate about 250 000 jobs a year between 2010 and 2014 without special interventions. This would leave the state with the responsibility of generating 450 000 jobs a year.
Alternatively, more creative solutions are needed to promote deeper market-based employment.
Youth unemployment should be an immediate concern. Before the downturn, there were about 2,5m people aged 15-24 who were out of work and not studying. This problem is now worse. Almost 800 000 jobs were lost in 2009. Three-quarters of these were felt by 15-34-year-olds. Interventions need to ensure sufficient numbers of young people are participating in positive activities that build their capabilities and smooth their transition into the labour market.
The Expanded Public Works Programme (EPWP) will surely be one to watch. Its targets and budgets for 2009/2010 were aimed at creating about 200 000 full-time equivalent jobs, mainly in infrastructure projects. This is set to expand to 1,5m opportunities annually by 2014, divided between infrastructure projects and the employment incentive to non profit organisations (NPOs) and the Community Works Programme.
The EPWP budget has risen from R158m in 2006 to a more meaningful R2,68bn by 2012. There are some creative elements in the new programme which encourage wider participation. Employment in community services will overtake infrastructure as the major source of opportunity. The employment incentive to NPOs will stabilise employment in often cash-strapped organisations.
The Community Works Programme will offer a guaranteed two days' work a week on projects identified by communities. Unemployed youth will also benefit from easier access to post-school training. There are about 84 000 under-24s with a university endorsement who are not studying. There are 558 000 unemployed matriculants under the age of 24 who should pursue further education & training (FET). The expanded budget for FET is most welcome in this regard.
Public employment and internships are another option. To hire greater numbers, government will need to look at expanding youth opportunities in learnerships, internships and hiring in lower grades. The youth employment subsidy just announced by treasury will be an interesting intervention to monitor.
Concern for those living in rural areas was clearly demonstrated with the creation of a rural development department. Approximately 2,5m households are involved in subsistence farming. With some support such as extension, seeds, land access, water, implements and market access, some of these producers could produce a surplus.
The private sector must devote meaningful attention to building globally competitive industries that have strong employment linkages in the domestic economy. These industries need to pull SA out of its "resource curse" funk.
There should be a dramatic improvement in the efficiency and productivity of the economy in a way that drives down costs but also stimulates jobs. Improved governance and delivery in network industries such as telecoms, energy, water and transport logistics will be central to this. Strengthened human resource development is another requirement. Greater investment in research, development and innovation is essential.
The economy is bound to shift to lower energy intensity as a result of higher electricity prices. Government could soften this and promote faster adjustment with industrial incentives, whether the accelerated depreciation allowance or the cash incentives offered through departments like trade & industry which are already funded to about R3bn/year. Most highly energy-intensive businesses are relatively capital-intensive, so a faster move to energy efficiency will encourage the absorption of labour.
Trade & industry minister Rob Davies has stated that procurement is going to play a critical role in stimulating a capital goods industry. The R864bn infrastructure programme should be used strategically to promote supplier industries.
In fact, this principle could be applied through out government, given that its non personnel, non interest expenditure accounts for 23% of the economy. Japan, Brazil and Korea have implemented such programmes with a substantial impact on industrial outcomes.
But there is a catch. The first step towards success would involve strengthening government's core procurement capability. The second would be to commit to long-term strategic arrangements to give confidence to new suppliers. Short-term contracts with uncertain future commitment are too commonplace. This is an excellent idea that could have a real impact on value creation and jobs.
