Tackling unemployment in SA South Africa needs to focus on developing technical skills and become competitive at attracting investments that utilise unskilled labour.
south Africa may have escaped a credit downgrade by a whisker but the country is not out of the woods yet. The long battle to quell rising unemployment, income inequality and poverty, continues. SA has slipped from being Africa’s largest economy to third-biggest behind Nigeria and Egypt. It has also struggled to attain high growth rates since its political transition in 1994.
There are two recent revelations that indicate SA is regressing instead of progressing. In April, Stats SA published information that revealed that black youths aged between 25 and 34 were less skilled than their parents and white contemporaries. The second revelation paints a disturbing picture of an increase in South Africans who are dependent on the state for a living – according to the General Household Survey, released by Stats SA on 2 June, the percentage of people that received social grants leapt from 12.7% in 2003 to 30.1% in 2015.
The first revelation explains why unemployment and income inequality are stubbornly high, and sadly the black youth bear the brunt of these social ills. The second implies that government has been reduced to a redistributor of wealth and an encourager of dependence on welfare handouts instead of being a stimulator of wealth creation and jobs.
Let me deal with the revelation that young black South Africans are less skilled than their parents. To put it bluntly, this regression means that apartheid governments did a better job training black people than the current democratic state.
We are spending more money on education than any other country in Africa, but the graduates that the system produces lack the skills the private sector needs. Part of the reversal was caused by the reduction, after 1994, in investment in technical and vocational training and a disproportionally greater focus on academic education. This has led to the problem of unemployed university graduates who cannot find work anywhere.
The leaders of the ANC should hang their heads in shame. They have presided over the dangerous reversal that is causing anger and frustration amongst the young black South Africans who are being rejected by the labour market. The private sector, which continues to exclude black people from its upper echelons and black-owned businesses from its supply chains, should also share the blame for what is happening.
The reduction in technical and vocational training coincided with the de-industrialisation of the economy, where we have seen the rise of consumption-driven sectors such as banking and consumer retailing and the decline of productive sectors like mining and manufacturing.
Shopping malls have proliferated in big cities, small towns and townships across SA while mines and factories have been closing down. As a result, the country’s citizens are facing massive unemployment and inequality. Between 1994 and 2013, the manufacturing sector’s share of GDP declined from 20.9% to 12.4%.
The drive to re-industrialise the economy presents us with an opportunity to develop technical skills (engineers, technicians, and artisans) by encouraging young people to enrol at vocational colleges, instead of solely focusing on enrolling at universities. These skills are not only specific to manufacturing and can easily be transferred to hightech mining and the construction and maintenance of infrastructure. Countries with literate workers that are skilled at operating machines attract investors.
In SA we are known for poor education and labour unrest, hence we are struggling to attract investors to our manufacturing sector, which is crucial to growing our sluggish economy. On top of this, we are not competitive in attracting investments that seek to utilise unskilled labour.
The other source of concern is the growing number of people who are living on social grants. An estimated 2.6m people received social grants in 1994, but the recipients have ballooned to 16.9m people in 2015. At some point, this will become unaffordable.
While the government must be commended for widening the welfare net to protect the poor from slipping into abject poverty, this also represents a massive failure to intervene in the economy in a manner that creates a climate that is conducive to attracting investment and generating employment.
Corporates continue to hoard about R1tr in cash because they don’t feel comfortable investing in SA due to legislative uncertainty, labour instability, and the high cost of doing business. The concerns over state capture by politically influential individuals to curry favour with cabinet ministers will not help to build trust between business and government to ensure the release of these funds into productive investment in the economy.
While jobs remain scarce, particularly for the youth, the political risk is building up and SA may find itself facing its own Arab Spring. Or the poor and disenchanted may find themselves in the arms of the EFF, which is promising to seize mines, farms, and banks without compensation if voted into power.