After the violent protests that led to looting of businesses, a debate emerged in South Africa on what led to that. While we heard words such as ‘insurrection’ and ‘attempted coup’ on one side, and poverty and inequality on the other, what everyone seemed to agree with is that unemployment was at the heart – regardless of whether the conditions of the poor were manipulated or not, for political battles.
As the South African economy continues to battle the devastating COVID-19 pandemic, Stats SA released the Quarterly Labour Force Survey (QLFS) for the second quarter – in which unemployment rose from 32.6% to 34.4% – confirming that South Africa is faced with two pandemics, COVID-19 and a jobs bloodbath as the unemployment rate is one of the highest in the world. In numbers: 7.8 million job seekers are unemployed, the expanded definition includes 3.3 million people (44.4%).
The World Bank states that South Africa’s unemployment rate is five times the rate of the rest of the world. 10 million jobs short of the world average for employment among the working age.
There are three pillars that must be supported as follows:
- We need to harness the informal economy
The International Labour Organisation states that the world average ratio of informal to formal jobs is 2 to 1, yet in South Africa it is 1 to 2, suggesting that the majority of the 11 million missing jobs are in the informal sector. South Africa needs to harness the second economy because it is in line with the National Development Plan, which hopes the sector to have created 2 million jobs by 2030, not just in cities and urban areas but more importantly in rural areas, the biggest employer is the informal economy.
The Department of Trade and Industry’s Industrial Park Revitalization Programme should be adapted to accommodate the informal sector and establish a traders market driven by spatial dimensions and townships, to enable businesses to sell their products more easily and for consumers to access multiple products and services in one place, more like a mall or shopping centre.
We must, however, remain cognizant of the fact that while informal micro-entrepreneurs are very large in number, the pro-rata value they represent in profits, etc. is typically low because fundamentally, they are survivalist in nature, not developmental. To make this sector more productive, for those who opt-in long term, investment is needed. The short-sighted attempt to address job creation while ignoring the informal sector is not sustainable.
- Create a fertile ground for SMMEs to grow
SMMEs play a particularly important role in developing countries and are productive drivers of inclusive economic growth; have the power to completely change the dynamics of our country’s employment rate because they drive innovation and job creation.
Small businesses must be exempted from the Bargaining Council of the Collective Agreement of big businesses to which they are not party – to stop them from incurring the costs and management requirements imposed on big businesses.
Tax breaks – to shield a portion of income from taxation: driven by a turnover based threshold – must be offered to encourage small business development and increase start-ups which are directly linked to advancing entrepreneurship – entrepreneurship is the focal point and South Africa’s recovery plan cannot exist without it. South Africa does not only have to provide incentives to SMMEs but offer some level of protection and skills enhancement programmes. Growing SMMEs would negate the muted business confidence climate and create jobs.
- Manufacturing industry
Last year, manufacturing contracted by 2.1% and stood at 12.9 instead of the recommended 25%. With inadequate resources to finance development, attracting Foreign Direct Investment (FDI) in the manufacturing sector is key. FDI into manufacturing has great potential to create jobs, alleviate poverty and enhance economic growth.
FDI into manufacturing will reinforce and raise domestic investment…this is possible because FDI in manufacturing is better targeted towards domestic suppliers, therefore increasing entrepreneurship. Why this is important is because production-oriented FDI is more likely to generate domestic spillover, which can address the mismatch in terms of skills that are required in the industry.
A soaring manufacturing sector can strengthen intra-governmental integration and coordination in order to surge industrial development and create unparalleled growth – this is also in line with the Continental Free Trade Area (CFTA) which aims to enhance competitiveness at the industry level capitalizing on the scale of manufacturing.
A growing manufacturing sector will lead to the development of a strong export strategy and the employment of the unskilled and semi-skilled which make up the majority of the unemployed job seekers. We must also create an ecosystem between government, business and academia for the purposes of a common future, to avoid discrepancies in skills mismatch in strategic sectors of the economy.
Harnessing the informal economy, promoting FDI in the manufacturing sector and championing the development of SMMEs can help address the high levels of poverty. Other issues of paramount importance include rural development and spatial integration and/or justice as there is a gulf between where many people live and where resources and opportunities are concentrated, which in turn aggravates unemployment and poverty. In addition to all of this, South Africa must upscale development programmes driven by socially perceived necessities focusing on the forgotten youth: child-headed households and learners who fall out of the education system prior to reaching and completing matric.
Vusi Gumbi is the Winner of One Day Leader Season 8 and a Masters candidate in Politics at the University of Johannesburg.