FURTHER POLICY ANALYSIS

The aim of the NGP is to increase economic growth to sustainable rates of between 6% and 7% per year in order to create five million jobs by 2020, thereby reducing the unemployment rate to 15%. Against this background, the Bureau of Market Research (BMR) at the University of South

Africa (Unisa) undertook research to determine whether the targets are indeed feasible. The research focused on the following:

• whether other countries were able to achieve similar targets;

• establishing whether higher economic growth will automatically translate into higher job creation;

• whether the sectors identified in the NGP (utilities, transport and communication, construction, agriculture, mining, manufacturing) are labour absorptive (high or low employment elasticity); and

• the number of businesses that need to be created to in turn create the five million jobs. The research found that it was indeed possible for a country to achieve similar types of targets. However, the research also revealed that compared to other countries with similar features, South Africa performed poorly on both employment creation and economic growth fronts between 1994 and 2009. In addition, it became clear that the conditions created by government do not favour the achievement of the stated targets. For instance, for higher economic growth to translate into increasing job creation, economic growth should ideally be of a labour absorptive nature.

However, analysis regarding the relationship between Gross Value Added (GVA) and employment per sector showed that employment growth was negative in five of the 10 years between 2001 and 2010, whilst only one year of negative economic growth occurred.

Employment in especially the agricultural and mining sectors suffered, each registering seven negative employment growth years. Moreover, analyses revealed that a very weak relationship prevails between GVA and employment creation in most of the sectors. This implies that factors other than economic growth have a major impact on both job creation and job destruction in South Africa.

One reason for the weak translation of economic growth into employment creation can be

attributed to employers developing a preference for capital over labour in the production process. Higher economic growth, for example, of 7%, will thus not automatically translate into the

creation of five million jobs. Should this preference for capital persist, economic growth rates of more than 10% per year might be necessary to create the five million jobs.

To determine whether the focus of the NGP is on the correct sectors, a capital-worker ratio was calculated. The results of such analyses indicate a major shift away from workers to capital in nine of the 10 economic sectors. Interestingly, in all the sectors identified by the NGP to be or become labour absorptive, a preference for capital over labour has developed since 2000. In fact, only in the financial sector did the capital-worker ratio decrease.

Furthermore, as businesses/entrepreneurs create jobs, conditions should favour business creation or expansion. However, the research found that it is more difficult, time-consuming and

expensive to establish businesses in South Africa compared to countries with, for example, low unemployment rates. As such, the current number of businesses needed to create the five million jobs may have to increase by between 50% and 70% over the period to 2020 (Ligthelm and van Tonder Aardt, 2011: 1-2).

The NGP, which like the now defunct Growth, Employment and Redistribution (GEAR) program, encourages tight fiscal control and the targeting of several key sectors to drive economic growth. While GEAR was effective in enforcing strict financial controls, triggering moderate levels of economic growth and checking the country’s budget deficit, the policy was in direct conflict with the some of the country’s more immediate problems; the reduction of poverty and a more equal division of wealth. The fear held by some critics is that the NGP may

experience the same fate at the expense of those that need economic growth the most; the poor.

Some view the government’s target of five million jobs by 2020 to be unrealistic, especially considering the statistical data. In order to achieve five million jobs by 2020, South Africa would have needed a growth rate of 9% in 2011, and a constant growth rate of 7.6% until the year 2020. According to the International Monetary Fund, South Africa’s GDP is projected to stay under 4% until 2016, highlighting the unrealistic optimism of the government’s target (Analysis South Africa, 2012: 1).

The more one broadens the comparison between the NGP and ASGISA, the greater the overlap becomes. In addition to offering very little new when compared to ASGISA, the Framework is furthermore a collection of policy ideas from across the full spectrum of government, some of which have been in the public domain for years. In the Framework’s own words, “The document knits together the Industrial Policy Action Plan (IPAP) 2 as well as policies and programmes in rural development, agriculture, science and technology, education and skills development, labour, mining and beneficiation, tourism, social development and other areas.” In fact, there is hardly a policy initiative, whether current or under discussion, that is not incorporated in the NGP, positioning the latter as the umbrella under which ALL of government operates (Sanlam, 2010: 2).

The job creation programme has met some opposition from both business and labour

representatives, who claim the programme lacks the concrete measures required to fight soaring unemployment and create decent jobs. While employers complained about too much state intervention, unions rejected a possible wage freeze in the private sector. The debate about whether South Africa needs jobs or decent work has been going on for a long time. Labour brokering, systemic unemployment, especially among the young people, labour laws loopholes, vulnerable workers and working poor are just a few of the problems the country had to tackle even before the 2008 crisis hit (Stiglitz, 2011: 1).

While Chabane and Economic Development Minister Ibrahim Patel agreed that it would probably take more than the government and the business sector for the country to achieve the new growth plan (BuaNews, 2010: 1).

5.10. GOVERNMENT NEW GROWTH PATH’S SKILLS POLICY

To focus more generally on skills training, governments can appeal, plead and threaten. What they cannot do is make a private employer train skilled workers if such investment is judged unprofitable or does not lead to full cost recovery. This hard fact is an unpalatable truth for the South African government, for trade unions and for all South African groups wishing to use political power to pursue economic objectives.

A skill, no matter at what level, is different from a fixed asset like a building or machine or mining shaft. Ownership of any skill, once acquired, rests with the worker and not the employer who usually pays for it. Skills are mobile assets. The investing employer has difficulty tying the newly skilled worker to a minimum employment period during which the investment is paid back when both the skilled worker and the employer are benefiting.

There are ways, however, by which employers can try to keep newly skilled workers attached, but these can conflict with social objectives. For instance, after training, formal accreditation is often not completed because it provides the worker with a certificate and therefore higher mobility to go to another employer. For this reason, in Australia, for example, much training is “informal”. Accreditation is purposely incomplete, although in the workplace the acquired skills are accepted as completely adequate.

What institutions will create the trust and the information flows between employers that will raise skills investment? The market for skills training fails because of real and perceived skills poaching. The solution is either that employers act collectively to discipline member companies against attracting workers from producers who train in the industry, as in Germany; or

government must step in to stop poaching as best it can, as in France. One large gap in our knowledge of the present South African system is that we do not know whether Setas perform any inhibiting role against poaching. This and the other questions raised above must become official priorities if the national production of skills is to increase at all (Archer, 2011: 3-5).