Short-term jobs plan ‘ignores private sector’
President’s recovery package emphasises public employment schemes -- economists
President Cyril Ramaphosa’s economic recovery and reconstruction plan is overly focused on short-term public employment creation, with not enough to stimulate job creation by the private sector, economists and business leaders have cautioned.
And while the long-awaited plan’s commitments to fast-track growth-boosting economic reforms have been welcomed, critics say it provides few clues on how the government plans to deliver on its commitment to curb soaring public debt levels — or to turn around its poor record on implementation.
The plan reiterated several reform promises and initiatives previously announced, such as a huge infrastructure investment drive and a promise to auction digital spectrum by March 2021, and set ambitious new targets to achieve energy security within two years.
But it also extended the Covid special social grants by three months, affirmed a “buy local” plan to re-industrialise SA that had already been agreed at Nedlac, and provided some detail on the first year of a R100bn three-year public employment package.
Ramaphosa had promised the employment package as part of the R500bn Covid relief package he announced in April, and finance minister Tito Mboweni had allocated R19.6bn to it in his June emergency budget.
But it was only with this week’s announcement that government officials for the first time provided details that will see R13.8bn spent in the current fiscal year to create 800,000 short-termjob opportunities as the labour market recovers from a crisis that saw 2.2-million jobs lost in the second quarter, figures from Stats SA showed recently. New data this week shows the formal, non-farm sector shed more than 600,000 jobs in the second quarter.
Each of the new public employment opportunities “is fully funded and ready for implementation”, Ramaphosa told parliament on Thursday.
The job opportunities, many of which it is understood will last no more than four or five months, include an expansion of existing public works programmes and new programmes that Ramaphosa said would respond to local community priorities. Among these are plans to deploy 300,000 matriculants as school assistants as well as 60,000 jobs maintaining and constructing municipal infrastructure and rural roads.
Also on the list are plans to support hundreds of thousands of work opportunities in early childhood development, small-scale farming and the culture and sports sectors as well as create temporary posts for community health workers and nursing assistants.
Business Leadership SA (BLSA) said Ramaphosa’s mass employment package would be important to provide rapid temporary relief to those unemployed.
However, BLSA also said: “It is not in itself a long-term solution that will create sustainable employment … It is only through economic growth and policies to stimulate employment in the private sector that quality, sustainable jobs can be created.”
BLSA also warned it would be hugely challenging to roll out the mass employment plans at local level.
Said Absa economist Peter Worthington: “There was virtually nothing said on what the government would do to help the private sector create jobs, nor any clarity on how an expanded public employment programme would dovetail with the need to sharply cut overall public spending.”
Ramaphosa’s plan comes just two weeks before Mboweni presents his medium-term budget on October 28, which was postponed this week from October 21. The president warned that SA could not sustain its current debt level and promised a budget framework which “balances the need to restore fiscal sustainability with economic growth” but offered few clues on exactly how the government would find this balance.
Nor did he respond to recommendations from his own Presidential Economic Advisory Council (PEAC), which last week warned that fiscal consolidation to stabilise the public debt level was imperative but that the “active” scenario to achieve this, which Mboweni set out in June, would be too drastic in its effect on the economy.
“It is patently not possible to stabilise the debt over the medium term despite the minister of finance’s commitments in this regard — it will take much longer,” the PEAC said in a report that was presented to the president at a meeting after the cabinet lekgotla on October 9. The cabinet lekgotla followed an ANC lekgotla which came after extensive negotiations at Nedlac yielded a plan that business, labour, the government and the community agreed to.
Ramaphosa emphasised the government’s commitment to implementation and announced the creation of new bodies to this end, including a National Economic Recovery Council comprising cabinet members, to provide oversight and “enable rapid decision-making”, as well as a Presidential Working Committee and an Economic Recovery Leadership Team.
But Worthington said: “South Africa’s action on reform has long fallen shorter and slower than its talk. Investors will be somewhat buoyed by [Ramaphosa’s] speech but for the most part will likely want to see real implementation.”
SA’s action on reform has long fallen shorter … than its talk [but] investors will be somewhat buoyed
What is the government’s strategy to lift the economy out of stagnation and create the jobs SA needs, in a world profoundly changed by the Covid pandemic? The Ramaphosa economic recovery and reconstruction plan hinges on two or three big components that are supposed to drive job creation. But it’s not clear that any of these will live up to the high hopes of their promoters. First is the mass public employment programme that aims to provide temporary “work opportunities” for hundreds of thousands of people in the shorter term, while other initiatives supposedly come together to get the economy back on track and get businesses hiring again in the longer term.
Community-based public works projects can and do make a real difference to communities, as well as providing youngsters with at least some experience to equip them for the world of work. Some of the programmes detailed on Thursday do look creative and laudable, and could provide much-needed incomes and services. And if the government really can make the promised 800,000 hires happen between now and the end of the fiscal year, it will be a sign it can indeed implement ambitious plans.
But almost R14bn is a lot to spend on very short-term jobs, and even that is far short of the R100bn total that’s been promised. We will want to watch that the money is better spent than it would be if, say, it were just added to the existing employment tax scheme that incentivises businesses to hire new workers, or just paid over in equity or grants to small and medium companies that promise to expand and hire. We will want to see too that the government gets it that the private sector is by far the economy’s largest employer — and that unless it creates an environment that encourages private sector companies to invest and grow, there can be no durable solution to the job-creation conundrum.
The second plank of the plan is the infrastructure investment drive, which now has an elaborate new institutional structure, with a potential 55 new projects on the drawing boards worth R340bn. So far the projects being implemented are primarily low-income residential housing, which does contribute to economic activity. We will have to see if the infrastructure drive “crowds in” the massive private sector money the government hopes for. But it’s no quick fix for the jobs problem, and the investment won’t be a sustainable job creator unless it puts in the kind of infrastructure — in digital, energy, roads, rail, water — that makes the economy more efficient and cost-competitive and able to attract more investment.
But the third big hope on which the plan is pinned is industrialisation and localisation. This will supposedly be driven by big “buy local” commitments by labour, government and business, as well as by sector master plans. There’s something dispiriting about the 1950s import substitution economics that suggests we can get more jobs if we just take existing items and make them at home instead of importing them — and then put the pressure on public and private sector organisations to buy them. It feels like a lack of imagination to aspire to substitute local manufacture for imports instead of seeing what new items SA’s entrepreneurs might dream up if they just had the support to do so. Nor in a postpandemic world should we be stuck on manufactured goods — if ever there was a time for services and cultural exports that could take advantage of the explosion of the online world, this is surely it.
“Local is lekker” would create some jobs. But ensuring SA becomes a much more competitive, easy and attractive environment in which to invest and be an entrepreneur and do business will create a lot more, and more sustainably. Which is why the government would achieve more to reconstruct the economy and reduce unemployment if it would just make haste with that long, and long-promised, list of structural reforms, instead of seeking constantly for showpiece grand plans and elusive silver bullets.
Almost R14bn is a lot to spend on very short-term jobs