SA has a war economy: report

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More South Africans are living on state welfare than are working. Economist Mike Schussler says South Africa, the continent’ largest, has the highest unemployment ratio on the continent, with almost 60% of the population of 49 million unemployed and one in four choosing not to participate in the country’s economy – asituation only matched by Gaza, Iraq and Afghanistan.

Presenting the “2010 United Association of SA (UASA) South African employment report”, Schussler said 13.8 million are currently receiving various welfare grants, while just 12.8 million people are working and a mere five million are paying the income tax that funds the payouts.
“Unless more people get jobs there won’t be enough taxpayers to pay the social grants of the future.”

The economists.co.za CE explains 40.8% of adults in South Africa are employed, compared with 83% in Uganda, 80% in Rwanda and 78% in Tanzania and Malawi. “If South Africa was just able to up its employment numbers to the average ratio in Africa of 64%, adult employment in the country would have grown with seven-million jobs,” he told a Johannesburg audience.

The Engineering News says employment growth in South Africa’s formal nonagricultural sector added a mere 2% to the employment numbers over the past decade. “We at least need a 2% growth in employment numbers every year. This is screamingly bad and shows that the country has been pussyfooting around in its aim to create additional employment,” Schussler commented.

The report showed that fewer people were currently working in South Africa than before 1994. “With around a million jobs lost over the [2009] recession, South Africa is still at a net job loss after 16 years of democracy. Government is currently only protecting older jobs and not creating new jobs, creating more inequality in process.”

Schussler said that people in the country had become so desperate for work that they had been working free for months in the hopes of getting paid at the much-shamed Aurora mines. “This desperation is a crying shame, showcasing South Africa’s failure in creating decent jobs even in an African context.”

Meanwhile, he noted that the answer did not lie with employing more people in central government and other State-owned entities, seeing that it already employed around 24%. Business Report added the problem lies with the government, according to Schussler. By increasing its work force and setting the pace in wage increases, the government is making it unaffordable for the private sector to employ more people.

Schussler said employment in the private sector had been crowded out because the public sector paid a premium for labour. Wages in the government sector rose 53% since 2006, while the private sector paid 49% more than that over that period. And he pointed out that, during this period, inflation rose 30%. “So real increases were 19% in the private sector and 23% for government employees.”

Since 2006, employment in the private sector contracted by about 2.9%, while jobs in the government sector grew by 13.6%. As a result, 20% of the work force is employed by the government, and 24% by the broader public sector. Government wages now absorb more than 12% of gross domestic product (GDP) – one of the highest ratios in the world, Business Report adds. Schussler said it was higher than the figure for the UK and the US and way above that of Japan, which was a little more than 6%. It is also higher than Greece, Italy, and Spain, as well as Ghana, Kenya, and Nigeria. In the past it was only about 5%.

Sectors in the economy that has shown some measure of growth over the past four years included government, electricity, water and gas, mining and transport, while construction and manufacturing showed a large loss in jobs over the same period, the Engineering News said.

Schussler said that government should stop supporting sectors and deploying policies for sectors that were not making it and start structuring policies for sectors that were showing potential for employment growth such as the services sector.

In the medium term, Schussler said that continued growth in fixed-capital formation might be helpful, with economic infrastructure, such as building roads and dams, being the best option.

However, he noted that in the longer term, education would be an essential tool to build South Africa’s economy and to create decent jobs. “There are no decent jobs, without decent education,” stressed Schussler.

He added that more attention should be given to pulling people through the system from lower and secondary education through to tertiary education, which was where the country was lacking.



Lastly, Schussler pointed out that South Africa could create large numbers of jobs by cutting through the red tape and dropping some of its unnecessary laws and policies. “Let’s open up our skies and make way for more freight and people to enter our country, or let’s get more people opening up radio stations and generating more advertising, these are simple ideas that will not cost a lot of money, but will generate many more jobs in the country.
“Fewer laws would mean more hiring, while concrete plans to remove red tape would make it easier for entrepreneurs to do business and create jobs,” Schussler concluded.