It will take skills to cut unemployment
THERE is an urgent need for economic reform if economic growth is to be achieved. The South African economy cannot grow if we do not tackle the high unemployment rate. This may seem obvious, but the unemployment rate is increasing and growth is slowing.
The National Development Plan — the supposed blueprint for our economic growth — states that we need to create 11 million jobs by 2030 to reduce unemployment to 6%. To hit the jobs target, we need output growth of above 5%.
Unemployment, at almost 27%, remains our most pressing challenge. The broad unemployment rate, which includes those wanting work but not actively seeking it, is now closer to 40%.
The increase in unemployment began in the ’90s with an unprecedented influx of workers into the labour market that was not matched by demand — especially in the mining and manufacturing sectors. These workers, mainly women, were relatively unskilled.
And when the demand for technical skills increased domestically and globally, the mining and manufacturing sectors continued to employ relatively less-skilled labour.
The shrinking demand for and huge influx of relatively unskilled labour created a “perfect storm”, and unemployment among lessskilled workers ballooned.
What we now have is a widening gap between the skills levels of employed and unemployed people.
Why does the most industrialised economy in Africa have one of the highest unemployment rates?
Although many don’t track employment, African countries in general boast burgeoning informal sectors.
In South Africa, the spirit of entrepreneurship was actively discouraged under apartheid, which explains why the informal sector has not grown as quickly as one might expect.
Spatial separation, a legacy of apartheid, is still a problem. The geographical distance between where the unemployed reside and where business is located is a contributing factor to the high rate of discouraged workers. This is because searching for employment is expensive and difficult.
In the past, there were more jobs in the homelands, and the loss of these jobs has left people in these areas residing further away from new jobs. The less-skilled tend to lack the networks that might connect them to job opportunities.
Discrimination has also been a contributor to persistent unemployment. Studies have found that the remnants of decades of institutionalised racial discrimination persist.
The poor quality of education during apartheid, low investment in education and earnings differences in the labour market based on race are all contributing factors to our high unemployment rate.
Changing the growth and
Getting basic schooling right is the first step
jobs dynamics requires urgent action on several fronts.
Low-cost, labour-intensive production is unlikely to be the main engine for job creation, since sectors such as manufacturing are shrinking.
Policies need to focus on developing services, small and medium-size firms, and household enterprises, including in the informal economy, as engines for job creation.
Getting basic schooling right is the first step to ensuring that school leavers are prepared for the workplace.
Promoting skills, especially of the long-term unemployed, calls for complementary efforts. There should be financial support for job seekers to help them over the hurdle of high transport costs.
Leoka is an economist at Argon Asset Management