Is South Africa’s New Growth Path capable of creating jobs?

By Political Analysis South Africa.

South Africa has one of the most unequal distributions of wealth in the world. The poor and unemployed are frustrated with their standard of living. Prevalent poverty, unemployment and sub-standard housing have led to people saying “enough is enough,”  prompting the government to respond with a new macroeconomic policy, the New Growth Path.

President Jacob Zuma of South Africa

The significant gap between the rich and the poor is believed to be a result of apartheid era policies. The government, as a means to alleviate this problem, created the New Growth Path (NGP) in late 2010 with the aim of creating 5 million jobs by 2020. The question now arises whether this plan will see any results, and whether such an optimistic target can be accomplished.

Two factors need to be considered: the rate of economic growth, and the rate of employment. The NGP seeks to enhance the economy and create jobs by making it the government’s responsibility to investigate and come up with areas suitable for job creation, within which the government will concentrate on the following areas; mining, agriculture, and manufacturing.

The ANC and the South African Communist Party (SACP) are pleased with the initiative and believe that it will alleviate unemployment by 2020. Some are skeptical, however, suggesting that this framework will benefit the black elite and will disempower the working class to the point of exploitation.

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.

Other similarities between the NGP and GEAR are the provision for direct foreign investment, wage restraints, and increased productivity by cutting costs in businesses. The NGP outlines how the working class of the country has suffered, but critics of the program believe it to embrace methods that further exploitation. 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.