South African President, Cyril Ramaphosa recently called on top public and private companies at the opening of Presidential jobs Summit to take necessary actions to reduce the high levels of unemployment in the country. South Africa is an upper-middle-income economy and…
South African President, Cyril Ramaphosa recently called on top public and private companies at the opening of Presidential jobs Summit to take necessary actions to reduce the high levels of unemployment in the country.
Background
South Africa is an upper-middle-income economy and a newly industrialised country. Its the second largest economy in Africa, and the 34th-largest in the world. Concerning purchasing power parity, South Africa has the seventh-highest per capita income in Africa. However, poverty and inequality remain widespread, with about a quarter of the population unemployed and living on less than US$1.25 a day.
The African National Congress (ANC), which has ruled South Africa since the fall of apartheid, promised reforms to redress racial disparities in land ownership. Despite more than 20 years of ANC rule, whites still own most of South Africa’s land. President Ramaphosa said expropriation without compensation will be one of the measures used by the government to speed up redistribution.
South Africa’s economy has entered a recession for the first time in nearly a decade. Gross domestic product fell 0.7% in the second quarter, dragged down by a weak performance in the agricultural sector. Analysts blame ineffective reforms and a sluggish agrarian industry for the deceleration of the economy. The country’s First Quarter performance of this year was negatively impacted by Jacob Zuma’s resignation from being President. The last time South Africa fell into a recession was during the Global Financial Crisis in 2009, and it had recovered well. It had been classified as an ‘Emerging market economy’ with a robust agricultural base.
Analysis
President Cyril Ramaphosa, while addressing businessmen, trade unionists and government technocrats at the much-anticipated Jobs Summit highlighted the need to reduce unemployment levels in the country. He announced that deals between the government and the private sector would create 275,000 more jobs.
At present, the unemployment rate in South Africa is more than 27 per cent which is one of the highest in the world’s major economies. Ramaphosa said, “Extreme unemployment in this country is the product of an economy that for several decades has been starved of any meaningful investment in its human capital, where most people have been denied the opportunity to own assets.” The President also acknowledged that “Unemployment is the greatest challenge facing our country.”
To rescue the country’s economy from recession, the President had outlined details – stimulus packages which planned to build a $400 billion-rand infrastructure project, make changes to immigration policies and boost agriculture in the country. A key objective for improving infrastructure is that it will encourage tourism. Making immigration easier will allow more highly skilled workers to enter the country. Boosting agriculture is necessary for an economy that is highly dependent on agriculture, and one that has been besieged by drought recently.
The government aims at boosting local procurement and government-led export drive for manufactured and processed goods. Some aims announced were – to explore all possible options before laying off staff, cutting executive salaries and preceding dividend payments. Besides, interventions aimed at raising the quality of training, an extension of tax incentives for companies creating jobs for youth.
Furthermore, the financial sector will invest 100 billion rand ($6.8 billion) over five years in black-owned industrial enterprises, and the country will aim to expand its horticultural trade from 54 billion rand to 90 billion rand by 2030.
Recent data from StatsSA show that South Africa’s non-agricultural formal sector bled 69,000 jobs between March and June 2018. The unemployment rate for youth (aged between 15 and 34) was 38.8%, compared with 17.9% for adults (aged between 35 and 64). The unemployment rate among women, compared with 25.3% for men. Consistently since 2011, the rate of unemployment among women outweighed the rate of unemployment among men. The unemployment rate for black, female youth, is the highest among all population groups. It is followed by a rate of 37.1% for black, male youth; 36.3% for Indian/Asian female youth; and 36.1% for coloured, female youth.
Counterpoint
Unemployment is an urgent problem that the country needs to solve, as nearly a third of the population is unemployed. Though the Jobs Summit promised and highlighted effective policy measures, it is the 4th summit in 20 years. Thus, it questions the success rate of these summits.
Assessment
Our assessment is that intense regulatory pressures, rising input cost, corruption, higher administrative cost all contribute to higher unemployment in South Africa. We feel that while the government has invested in programmes such as the Youth Employment Service (YES), it has an urban focus and excluded the agricultural sector.
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