Finance minister Tito Mboweni’s “emergency” budget, to be presented on Wednesday, is the headline-grabbing event of the week. It’s supposed to map a way forward for how the state will help galvanise an economy bludgeoned by the effects of the lockdown since the end of March.
The economy is now groggily awakening from a necessary self-induced coma to prepare our health sector for the peak in the Covid-19 pandemic in a couple of months. The lockdown and now the crippling problem of lack of demand in the economy have economists pencilling in a double-digit GDP contraction this year. It is not unfathomable; we are in a crisis.
But as we wait for the tone of the country’s response to be set over the next two to three years in response to the devastation wreaked by the pandemic, we shouldn’t lose sight of the need to remain focused on reforms. We’ve heard much in recent years about this need for the country to take the politically difficult decisions that come with the sort of structural reforms that will breathe new confidence into the economy. That has become more pertinent today.
On structurally high unemployment, the state needs to reconsider much of its thinking of decades past, particularly with regards to creating jobs. It should play the role of enabler and not become a jobs centre in itself, as it has in recent years.
The consequences of this sort of thinking are reflected in the high public sector wage bill that the finance minister will more than likely highlight on Wednesday. It will weigh heavily on the options available once again, and it will serve to limit the length and breadth of the stimulus plans to galvanise the economy.
While it was initially believed that after the ravages of the 2008 global recession, the state had hired aggressively to offset job losses of more than 1-million people, the state in the end employed less than 200,000 additional people. What has triggered the rise in the public sector wage bill has been the rate of increase in remuneration rather than the actual number of jobs. Dealing with the rate of increases could potentially serve to save jobs in the long run while balancing the books. But the state has found it difficult over the years to manage wage negotiations because of the governing party’s alliance partner, Cosatu, whose stronghold now lies in the public sector.
If we continue down this path of reliance on the state to create jobs, we are likely to cement the country’s structural unemployment catastrophe. Alliance politics have proved and will continue to prove a hindrance to any fundamental shift in the dial when it comes to our record high unemployment levels. The National Development Plan sets out a goal of full employment by 2030. That means official unemployment falling to an unimaginable 6.5% and labour force participation rising from 54% to 65%. This sort of growth requires an average annual GDP growth rate of 5%.
Sitting in a Covid-19 world, these goals seem all the more fanciful than they were when the plan was launched with much fanfare as far back as 2011. But with or without the impact of the pandemic, the target of about 11-million net new jobs by the end of this decade was always unlikely without the sort of reforms we’ve long called for.
Employment is created as a result of rising demand for goods and services, and such an environment is fostered by confidence in policymaking, especially in areas affecting commerce. The role of actually creating employment opportunities should be left to businesses, both large and small.
The world of work is set to change in ways we don’t quite know yet. In our immediate future we are likely to see job losses in a similar manner to what we saw after the last global recession of 2008. What will come thereafter will be a new normal as businesses adapt to physical distancing and a work-at-home culture that the pandemic has unlocked. These changes are illustrated through Amazon’s good news that it plans to hire for about 3,000 new virtual customer service jobs in SA.
It was a welcome announcement for a country whose best-case scenario is the loss of a million jobs as a result of the pandemic. The jobs that one of the world’s most valuable companies will create will be made up of both permanent and “seasonal” full-time positions. And they are all remote jobs, symbolic of the changes to come in the world of work.
With the world moving in this direction, policymaking on labour will have to be disrupted. Tragically, our recent history has proved that the official policy on jobs has been more concentrated on keeping people in work than on building an environment conducive to the creation of jobs.
Mavuso is CEO of Business Leadership SA.
This column was first published in Business Day.
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