The rise of unemployment, inequality and poverty in SA

Seventeen years into our democratic dispensation we seem to be making little progress in devising and successfully implementing growth strategies and policies that can have a sustainable impact on our structural problems of high unemployment, increased inequality and pervasive poverty. These problems are in fact a legacy of the apartheid period and the biggest challenge for the democratic government has been to create conditions that can equip all the citizens to participate effectively in, and to take advantage of, the opportunities available in a growing economy.

Effectively this means growing investment opportunities and enterprises that can provide paid employment; building quality schools and health facilities that are well-resourced, and achieving effective conditions for creating social stability and an effective and efficient public service at all spheres of government.

The president has stated, quite appropriately that jobs, jobs, jobs shall be the strategic focus of the current administration because paid employment provides the best tool for having a lasting impact on household poverty. The vision and promise of “a better life for all’ is clearly underpinned by a recognition of the critical role played by paid employment in enabling people to move out of the poverty trap.

What have we done right to deliver on this critical objective and where have we faltered?

With the real unemployment numbers (expanded unemployment) reaching highs of over 36%, we have indeed reached a crisis point and regrettably, this situation has been with us for more than a decade. Faced with a shrinking manufacturing sector and a labour market undergoing significant structural changes in terms of trends in employment, the growth of the “casualisation” factor, increase in low-wage jobs, the situation is indeed brutal for the poor and marginalised in our communities. Yet our policy responses have not demonstrated depth of concern and strategic focus needed to tackle a problem of such magnitude.

Business and government have a crucial role in the resolution of this problem but I am not convinced that enough effort has been invested in promoting cooperative effort between them. More than two job summits in the past decade should have been held to find a lasting solution. If job creation is the driving strategy, then all other strategies must be subordinated to it. Therefore, using this as a yardstick, the arms expenditure that has hobbled our investment capacity for many years to come should never have been allowed to happen. Investment in public infrastructure should have been our binding focus for the past decade if we were sensitive to the conditions of the poor. What we have done well is to implement welfare payments to the very poor and destitute as a poverty-relief mechanism. In the long term this is unsustainable.

Education and health provision are critical components of an inclusive growth and social development. The need to reverse the apartheid legacy in these areas requires particular focus and commitment to providing quality health facilities and schools especially for the poor. Our ability to deliver on these fronts will determine whether we can successfully achieve our often stated goal of building a developmental state and reach our millennium goals. The focus on quality assets should be at the centre of our efforts.

A recent research project titled “Low quality education as a poverty trap” led by Prof Servaas van der Berg and Dr Ronelle Burger has shed new light on the relationship between the quality of education and labour market outcomes in the country. It confirms that better quality education provides a better chance to exploit higher level market opportunities and the benefits that go with it. But in essence, the study also reinforces a common and intuitive perception that children from poor communities frequently attend schools that are poorly resourced and managed and consequently, at an early age, there are already stark distinctions between the prospects of children from these communities and those from the more affluent communities. The poor education outcomes that have come to define our education system sadly reflect the depth of poverty and inequality in our country.

Small-enterprise development has been shown world-wide to be the key driver for employment creation. Leadership and strategic thinking in this sector has lacked innovation and boldness to date. In fact black empowerment strategy has failed this sector. BEE was intended to achieve social justice and historical redress. But we have on the contrary increased inequality and deracialised domination as few black people have benefitted handsomely from empowerment deals. Procurement practices in the public sector have failed to achieve the intended objectives. Many new, black businesses, particularly in the construction industry, have failed because of lack of support, delayed payments and a lack of working capital. The lending practices of entities like Khula are a barrier to small-enterprise promotion in an environment of high and chronic unemployment.