Lofty job schemes and broken dreams
The latest R23.8bn Uif-funded plan announced by Employment and Labour Minister Thulas Nxesi won’t move the needle on joblessness
In May 2019, following the ANC’S victory in that year’s election, President Cyril Ramaphosa announced changes to the national executive. Among these changes was that “employment” would be tacked onto the labour ministry. Thulas Nxesi was charged with carrying out this expanded mandate.
Given that South Africa’s official unemployment rate had already surpassed 27% — and that one of Ramaphosa’s big election promises was to save the country’s already ailing economy — the move appeared to be more political than practical. It wasn’t immediately clear how Nxesi’s department would help turn the tide on unemployment.
Not a year later, the country’s economy was left reeling by the Covid-19 pandemic. Despite the employment and labour department’s best efforts to save jobs, millions were lost.
The unemployment rate climbed to record levels — making jobs an even more hot-button issue in this year’s election than it was five years ago when the ANC’S vote share slipped to the lowest level since 1994.
In the intervening years, there have been a number of employment schemes. Considering that there are 7.9 million unemployed people (about 1.3 million more than at the time of Nxesi’s appointment), these job plans have barely made a dent.
Nxesi announced another plan last week, aimed at creating 700 000 new “employment opportunities” using R23.8 billion from the Unemployment Insurance Fund.
But even the minister conceded that schemes like these are only tinkering on the edges of a major crisis. Save for stimulating substantial economic growth, the government’s job aspirations will always be insufficient.
One of the other major setbacks of these government schemes is that they tend to offer opportunities rather than gainful employment. In doing so, they are almost always preoccupied with training as a pathway towards employment. This seems to be the case with Nxesi’s new plan.
Even the World Bank has found this to be an imperfect approach.
In a paper published in September 2023, the World Bank analysed the effectiveness of employment generation schemes in developing economies — noting that governments in these countries face considerable pressure to help job seekers.
The paper noted that the main reason people struggle to find jobs seems to be that there is a lack of demand for workers.
This is the most straightforward explanation for a country having a lower labour absorption rate, though there are other reasons, such as unequal access to job opportunities and labour discrimination.
Without also addressing the binding constraint of inadequate economic demand, governments such as our own will continue to struggle to inspire job creation.
One way that governments are often asked to spur job creation is by getting rid of what some view as constraints on employers, such as racial equity targets and minimum wage requirements.
Certain opposition parties, including the Democratic Alliance and Action SA, have suggested that South Africa’s supposedly restrictive labour market regime is at the heart of its unemployment crisis in the lead-up to next month’s election. Their manifestos propose ways of circumventing these apparent restrictions.
However, these types of interventions stand to sharpen already severe inequalities, create precarious jobs and ultimately add to labour market weakness.
Meanwhile, a number of policy mechanisms for stimulating economic growth — such as enhanced public spending — appear to be off the table.
In 2022, Ramaphosa repeated a long-held ANC view: “We all know that the government does not create jobs,” he said in his State of the Nation Address that February. “Business creates jobs.” At the time, various commentators pointed out that former finance minister Trevor Manuel had made a similar statement in 2000.
“I want someone to tell me how the government is going to create jobs. It’s a terrible admission, but governments around the world are impotent when it comes to creating jobs,” Manuel said.
While it is true that the private sector plays an important role in growing the economy and creating jobs, in the absence of functioning infrastructure and public services it has struggled to do so.
A 2019 Applied Development Research Solutions report considered a set of economic policies and their ability to bring about the economic growth needed to pull back unemployment. Included in these was microeconomic policy reform, aimed at removing perceived inefficiencies in the operation of the free market.
By itself, microeconomic policy reform yielded disappointing results, adding only 0.3% to the average annual growth rate.
The report found that a combination of policies is needed to inspire growth — including a reoriented public works programme, increased government investment and trade and industry reforms.
All this to say that job creation programmes, such as the one Nxesi announced last week, won’t move the needle on unemployment on their own. To do so, they have to be accompanied by measures to stimulate economic demand.
So long as macroeconomic policy remains off limits, these schemes will be little more than election grabs.
Another major setback of these government schemes is that they tend to offer opportunities and not gainful employment