“Nelson Mandela is dead. Long live the struggle,” might have read the epitaph to the first 20 years of non-racial democracy in South Africa.
While the end of apartheid in April 1994 brought about political rights for the excluded black majority, their economic enfranchisement over the subsequent two decades has proven to be exceptionally difficult.
The fundamental claim of this book is that the overwhelming challenge that South Africa faces, and has to date failed to address, is unemployment. The current unemployment statistics are appalling and fall especially on young African youths who were promised a better future in 1994. As the premier of KwaZulu-Natal, Senzo Mchunu, put it to us, “The pain in our stomachs is the rate of unemployment, the pain of poverty, the pain of the gap between the rural and urban areas, the pain of underdevelopment.” This challenge, he said, “is threatening our future”.
If the unemployment crisis is not addressed, it will be impossible to lift many millions of people out of poverty. Especially in light of the Arab Spring – fuelled in good part by youths who believed that they had no future – the stability of South Africa cannot be assured given compounding issues of insecurity, unemployment and lack of investment.
The prospects of the ANC will also be challenged if it cannot deliver jobs to the “born-free” generation. Equally, the ANC’s trade union partner, the Congress of South African Trade Unions (Cosatu), with an ageing cohort of members, requires economic and employment growth to refresh their membership.
Government has long recognised the need to create jobs. President Nelson Mandela said at the opening of parliament in 1996, “Despite the welcome rate of growth, very few jobs have been created. In fact, against the backdrop of new entrants into the job market, there has been a shrinkage of opportunities.”
Yet, two decades on, the crisis remains. This situation has made many business and other leaders we have spoken to “nervous” about South Africa’s direction of change and growth, especially when compared to the positive changes elsewhere in sub-Saharan Africa.
Yet, many firms have succeeded in becoming competitive and generating jobs despite all the barriers to commerce in today’s South Africa. However, much more could be done if business’ and government’s interests and actions were better aligned.
Two decades and five “new” strategic economic plans into its democratic transition, South Africa does not have the luxury of too many more chances.
We also do not believe that South Africa can solve the unemployment problem solely through redistribution.
The most dramatic redistributive steps that South Africa has taken are Broad-Based Black Economic Empowerment (BBBEE) and the social grant.
BBBEE, like its predecessor, Black Economic Empowerment (BEE), has succeeded in creating a small class of African businesspeople who have wealth on the same order of magnitude as very rich whites – 10% of the Top 100 companies on the Johannesburg Stock Exchange are held directly by black investors largely through BEE schemes – but it has had, as will be shown, no perceptible impact on unemployment.
As a project of elite transformation, BEE has been successful, but it is more a burden for employers than a transformative agent for the unemployed.
The social grant has been a great success in keeping an increasing number of people out of absolute poverty, but it pays far less than the salaries of even those with unskilled jobs.
Simply put, South Africa is not sufficiently rich to redistribute enough resources to address unemployment. It must expand the economic pie and increase the number of jobs if the poorest are to benefit.
As we have observed throughout the course of this study, constraints on growth and business cut across racial boundaries in South Africa. Equally their success will ensure job creation across the economy – or as Deng Xiaoping famously observed: “It doesn’t matter whether a cat is black or white, so long as it catches mice.”
If South Africa is to break out of the two societies it is building – one rich and employed, the other unemployed and on welfare – and act as an inclusive, high-growth African exemplar, it will need to have a plan matched by priorities and sufficient will to execute it.
Such a change is also necessary if the ANC is to survive. This plan has to entail a liberation from the politics of the past, towards economic freedom, reduced dogma, an emphasis on jobs, prosperity and competitiveness, and where the animus to business not only disappears but is replaced by the celebration of business leaders who create jobs and globally competitive firms.
With big corporates, private- or state-owned, unlikely to provide the jobs required, an energised job market also needs to support vibrant small- and medium-sized enterprises. This stance, and the specific recommendations we make will allow the government to avoid the bureaucratic and regulatory strictures of the current conception of the ‘developmental state’ in favour of creating an environment that promotes growth and job development.
These are edited extracts from the newly released economic review How South Africa Works And Must Do Better (Macmillan) by Greg Mills and Jeffrey Herbst. The authors will be in conversation with the Deputy Finance Minister Mcebisi Jonas at a Dispatch Dialogue in East London on July 21.
Redistribution alone will not solve unemployment
While the end of apartheid in April 1994 brought about political rights for the excluded black majority, their economic enfranchisement over the subsequent two decades has proven to be exceptionally difficult.
The fundamental claim of this book is that the overwhelming challenge that South Africa faces, and has to date failed to address, is unemployment. The current unemployment statistics are appalling and fall especially on young African youths who were promised a better future in 1994. As the premier of KwaZulu-Natal, Senzo Mchunu, put it to us, “The pain in our stomachs is the rate of unemployment, the pain of poverty, the pain of the gap between the rural and urban areas, the pain of underdevelopment.” This challenge, he said, “is threatening our future”.
If the unemployment crisis is not addressed, it will be impossible to lift many millions of people out of poverty. Especially in light of the Arab Spring – fuelled in good part by youths who believed that they had no future – the stability of South Africa cannot be assured given compounding issues of insecurity, unemployment and lack of investment.
The prospects of the ANC will also be challenged if it cannot deliver jobs to the “born-free” generation. Equally, the ANC’s trade union partner, the Congress of South African Trade Unions (Cosatu), with an ageing cohort of members, requires economic and employment growth to refresh their membership.
Government has long recognised the need to create jobs. President Nelson Mandela said at the opening of parliament in 1996, “Despite the welcome rate of growth, very few jobs have been created. In fact, against the backdrop of new entrants into the job market, there has been a shrinkage of opportunities.”
Yet, two decades on, the crisis remains. This situation has made many business and other leaders we have spoken to “nervous” about South Africa’s direction of change and growth, especially when compared to the positive changes elsewhere in sub-Saharan Africa.
Yet, many firms have succeeded in becoming competitive and generating jobs despite all the barriers to commerce in today’s South Africa. However, much more could be done if business’ and government’s interests and actions were better aligned.
Two decades and five “new” strategic economic plans into its democratic transition, South Africa does not have the luxury of too many more chances.
We also do not believe that South Africa can solve the unemployment problem solely through redistribution.
The most dramatic redistributive steps that South Africa has taken are Broad-Based Black Economic Empowerment (BBBEE) and the social grant.
BBBEE, like its predecessor, Black Economic Empowerment (BEE), has succeeded in creating a small class of African businesspeople who have wealth on the same order of magnitude as very rich whites – 10% of the Top 100 companies on the Johannesburg Stock Exchange are held directly by black investors largely through BEE schemes – but it has had, as will be shown, no perceptible impact on unemployment.
As a project of elite transformation, BEE has been successful, but it is more a burden for employers than a transformative agent for the unemployed.
The social grant has been a great success in keeping an increasing number of people out of absolute poverty, but it pays far less than the salaries of even those with unskilled jobs.
Simply put, South Africa is not sufficiently rich to redistribute enough resources to address unemployment. It must expand the economic pie and increase the number of jobs if the poorest are to benefit.
As we have observed throughout the course of this study, constraints on growth and business cut across racial boundaries in South Africa. Equally their success will ensure job creation across the economy – or as Deng Xiaoping famously observed: “It doesn’t matter whether a cat is black or white, so long as it catches mice.”
If South Africa is to break out of the two societies it is building – one rich and employed, the other unemployed and on welfare – and act as an inclusive, high-growth African exemplar, it will need to have a plan matched by priorities and sufficient will to execute it.
Such a change is also necessary if the ANC is to survive. This plan has to entail a liberation from the politics of the past, towards economic freedom, reduced dogma, an emphasis on jobs, prosperity and competitiveness, and where the animus to business not only disappears but is replaced by the celebration of business leaders who create jobs and globally competitive firms.
With big corporates, private- or state-owned, unlikely to provide the jobs required, an energised job market also needs to support vibrant small- and medium-sized enterprises. This stance, and the specific recommendations we make will allow the government to avoid the bureaucratic and regulatory strictures of the current conception of the ‘developmental state’ in favour of creating an environment that promotes growth and job development.
These are edited extracts from the newly released economic review How South Africa Works And Must Do Better (Macmillan) by Greg Mills and Jeffrey Herbst. The authors will be in conversation with the Deputy Finance Minister Mcebisi Jonas at a Dispatch Dialogue in East London on July 21.
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