Whither Job Creation? Structural Reasons for Unemployment and the Local Solution

By Glenn Ashton
South Africa continues to haemorrhage jobs. This in a country that by the kindest description is already beset by unemployment, with estimates of unemployment varying between an optimistic 23% to a more realistic 35%. What factors underlie our failure to open up employment to more people?

Despite improved levels of education and huge resources being poured into job training schemes through the controversial SETA programmes, opportunities for matriculants – and even graduates – to obtain meaningful employment remain poor. The Extended Public Works Programme is desperately attempting to plug gaps and create euphemistically termed ‘job opportunities’.

South African President Jacob Zuma

The situation remains dismal with 400 000 jobs lost last year, despite government promises to create half a million. This alone is around one percent of our total population, more than two percent of the employable workforce. Our problem is profound and systemic.

We are not alone. The global job market has changed beyond recognition over the past three decades. As part of the globalised world, South Africa reflects these changes.

Jobs for life, with a nice retirement package and a gold watch when you hit 60 or 65, are an anachronism. The only place where that remains possible is in government employment; even that depends on political patronage and stability.

Few industries even pretend to aspire to job security. Older workers become redundant, cheaper youngsters are taken on as contractors and dumped in downturns. The aspirational dreams of the middle classes were crushed by the exploitative conservatism of Thatcherism and Reganism, where the triumph of corporatism trumped individual rights. Purging the unions enabled the boardroom barbarians to exploit at will.

The ascendency of neo-liberalism, globalisation, market deregulation and the ultimate supremacy of the derivative fuelled global casino economy ushered in the spectre of jobless growth. Modern economic growth, measured purely in GDP, is not measured in real goods but in the illusion of production, fuelled by derivative linked financial instruments.
Markets churn out vast sums of virtual money that outstrip the trade of physical goods at the rate of at least three to one. For every widget produced, three times more money is created and traded in a multiverse of financial fandangles.

The new South Africa was birthed into the high tide of this trend. The edicts of neo-liberalism were writ large in the acceptance of a transfer of power to the majority. The triumphalism of the collapse of Soviet communism as a business doctrine heralded the victory of capitalist excess.

This manifested in South Africa when the people and poverty-centred Reconstruction and Development (RDP) paradigm was swept aside by the Mbeki led vision of the Growth, Employment and Redistribution (GEAR) model. For a short time the illusion of GDP fuelled growth did produce some financial dividends: The reality is that that it ushered in an era of job market shrinkage along with no real redistribution to where it was most required.
The employment part of the GEAR model never materialised. The privatisation of crown jewels like Telkom, Iscor and Transnet led to significant job losses as state imposed restructuring – South Africa’s own, voluntarily self imposed structural adjustment programme – lost jobs in a Washington consensus-inspired vision of market driven efficiency.

This perpetuated inequality. A stagnant gold price, long a foundation of the economy, led to further job losses, exacerbated by constant tremors in the global markets. When economic uncertainty rumbles through the marketplace, employment is the first victim and the last to be reinstated.

Compounding these policy and structural problems, South Africa’s conventional economy was dominated by very few major holding companies. Anglo American controlled nearly 80% of the wealth of the Johannesburg stock exchange with the Rupert family held Rembrandt and life assurance giant Old Mutual controlling most of the rest.

This centralised control of the economy has impeded outsiders from entering the marketplace. Our corporate behemoths have long filled the back pockets of political power – BEE was simply business as usual for these already entrenched economic powers.
Perhaps one of the most bizarre decisions by our new government was the decision to permit two apartheid giants – Anglo American and Old Mutual – to divest offshore, taking their head offices to London. There remains a profound bitterness at this decision.
Then there is the Gordian knot of red tape which restricts entry into the market. This is also largely the consequence of the cosy historical relationships between state and corporate power.

Reversing the excesses of labour exploitation has seen the pendulum swing towards some of the more inflexible labour regulations in the world, which many blame for poor job growth. However, this is simplistic. Our lack of employment opportunities is more structural and entrenched. For instance we are beset by sharp increases in basic inputs like power and infrastructure costs. New entry into our market is almost being set up to fail.

The impacts of globalisation of labour, with off shoring of work and a rapid race to the bottom has seen our manufacturing and service industries take some hard knocks. South Africans compete directly against the cheap labour of the emerging economic powers.
At a personal level, the legacy of the apartheid education system is an unhealed scar. While most education systems are two tier – with an elite layer aimed at producing the leaders and entrepreneurs, the rest inculcated into the tacit acceptance of wage slavery – the legacy of boycotts and poor training continue to dog us.

By far the greatest proportion of new jobs have come from within the state sector. The growth of massive capital projects and state sponsored job creation like the Extended Public Works Programme (EPWP) have seen significant growth in state linked work. The dangers inherent in following this path are fiscal over-reach, the rise of tenderpreneurism, the emergence of demagoguery over democracy and rhetoric over reason.

Businesses are loath to employ people in a global market beset by uncertainty and bail-out indebtedness. Everyone is taking strain. The reality is South Africa is geographically isolated from world markets, victim to high labour, communication and infrastructure costs and increasingly uncompetitive. State failure to liberalise our communication networks illustrate the shortcomings of our piecemeal privatisation in monopolistic entities like Telkom.

Government responses have at best had limited impacts. The widely touted Extended Public Works Programme (EPWP) has poor reporting mechanisms and is prey to short-termism. To date it has provided make-work projects at inordinately high costs, for insufficient numbers of unemployed. These deliver insufficient training most of which is not usually suitably certified or SETA accredited. Massive implementation costs result in only the crumbs reaching the target population – less than R1 in every R4 spent on the EPWP gets to the poor, desperate unemployed.

A more successful example of work creation are the projects spun out of the EPWP, called the Community Works Programme (CWP). These have far more rigid payment structures of at least 60% of total project finance reaching target groups. There have been some heartening successes and projects such as water catchment improvement, recycling and food security projects have demonstrated far greater success than most of the EPWP projects. The success of the CWP appears to rest on the fact that they are decentralised and run in conjunction with municipalities.

The reality is that the global economy will in all likelihood remain in crisis mode for a while yet. Developed economies are busy dealing with the risks to their own systems after the bank bailouts. While our government does wish to do the right thing for its people and provide work, it remains constrained by distance, capacity, imagination and the ability to implement its wishes.

In order to address our omnipresent unemployment problem, along with the associated inequality, we must replicate successful programmes and create sustainable work. Green jobs have not been properly pursued – reclaimed and recycled materials, local agriculture and food projects, localised energy supplies that are competitive with the inflationary Eskom model, co-operative shelter and finance models, must each take their rightful place in the new economy.
We cannot rely on assistance from central government, nor can we rely on overseas aid. If we are to address inequality and unemployment we need to rely on ourselves. Especially in times of economic upheaval we must first and foremost look at enhancing our local communities and our local economies and only afterward look to wider solutions.

The cavalry are not going to ride in to our rescue – the fact is that they don’t even have horses!

We must shift to prioritising our fundamental requirements. The concepts of Maslow’s hierarchy are fine yet academically distant. By rather concentrating on the provision of food, shelter, clothes and the opportunity to participate in our local economy, enhancing our own communities, we can lay sustainable social foundations. By prioritising the local we can render national policy more relevant to the urgent requirements of social and economic inclusion.