ANB-BIA SUPPLEMENT

ISSUE/EDITION Nr 389 - 1/05/2000

CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS

South Africa

Job creation is the main challenge

SOCIAL ACTION

South Africans regard job creation as the main challenge
facing the country in the first decade of the new millennium

True, there are other problems such as lack of social and welfare services, a shortage of skills, inadequate education facilities, and the increasing crime rate, but the citizens believe that job creation should be the single greatest focus for the government.

Unemployment is an immediate problem for anyone without work. It’s no good telling South Africa’s millions of unemployed to wait for a few years while the benefits of a correct market strategy are put into practice. The gulf between «the haves» and the «have-nots» in South Africa, has widened since 1994.

A study on income distribution between 1991 to 1996, carried out by South African researchers at Wharton Economic Forecasting Associates (WEFA), an international economic consultancy, found that the rich continue to become richer while the poorest members of the community, found mainly in the black community, become even poorer. The income of the poorest 40% of black households was 20% lower in 1996 than in 1991.

Trends

While the report confirms that racial inequalities of income persist, there has been a «significant redistribution of income towards previously disadvantaged populated groups». It demonstrates that the country’s economic elite is becoming significantly black, and that economic class divisions bear markedly less correlation to race than is commonly thought to be the case. The report, by Andrew Whiteford and Dirk Ernst van Seventer, say evidence suggests these trends have continued since the African National Congress government launched its growth, employment and distribution programme (GEAR) in 1996 — a fiscally prudent approach to economic management, that has yet to stimulate robust growth or significant income retribution to the poor. «The trends are more prevalent within the black community», says Andrew Whiteford. The proportion of black households in the richest 10% of households, increased from 9% in 1991, to 22% in 1996. The report, entitled: «Winners and Losers: South Africa’s Changing Income Distribution in the 1990s», shows that the white share of total income has declined from 59.5% to 51.9%, and the proportion of white households in the richest 10% of South Africans, declined dramatically from 95% to 65%.

However, the study also found that more than 90% of the rise in income of blacks and other ethnic groups, stemmed from economic growth, and that less than 10% was attributable to redistribution. In the five years to 1996, the Coloured share of all income increased from 6.8% to 7.9%, and the Indian share rose from 3.8% to 4.5%. But inequalities of income between richer and poorer segments of both the Coloured and Indian communities increased at the same time.

Whiteford and other analysts say job creation on a huge scale is the only way to reduce inequality. Zwelinzima Vavi, general-secretary of the Congress of South Africa Trade Unions (COSATU) has called for immediate measures and a national debate to tackle what he called «a ticking time bomb» of unemployment and the prospect of social instability. Between 1991 and 1996, the number of blacks employed in highly skilled occupations rose by 80%, but the total number of employed blacks fell by 2%. The unskilled and semi-skilled bore the brunt of job losses. The gold mining industry, formally the backbone of the economy, alone has cut more than 200,000 jobs. In 1987, it had 530,000 jobs. Over the next years, tens of thousands of jobs will go in the civil service and state-owned enterprises due for privatisation and other forms of restructuring. There are said to be about 54,000 excess personnel within the public sector, a large number of them in the Eastern Cape province. (South Africa is not alone in having an overstaffed and under-performing civil service whose payroll squeezes out spending on productive projects elsewhere. Some countries are credited with boldly grasping the problem — and prospering as a consequence. Others that have sought to avoid dealing with it, have suffered.)

The Unions

The ANC government has stated its commitment to spend less money on public sector wages, and more on capital investment. While the government is anxious to avoid a showdown with the unions, it will not allow them to derail its economic policies. Unions say they will continue with planned marches against job losses, and will monitor the government’s plans to amend the labour legislation, and reduce the size of the public service. Senior government officials say amendments to the Labour Relations Act, Basic Conditions of Employment Act and Insolvency Act will be introduced later this year to remove aspects seen as impeding job creation.

Charles Tromp, a labour consultant, says it is all very well for the government and unions to put in place measures for a well regulated labour market, but «with unemployment soaring and the country’s rand battling against more established currencies such as the United States dollar and British Sterling, it seems to make little sense to over-regulate our labour market and, in the process, scare away potential investors and force small businesses to close, when we should be going for flexibility in our labour laws.»

A number of local investors have raised concerns about rigid labour laws, AIDS, and an unemployment rate of about 30 per cent. The stern warning from some quarters is that none of this is going to change overnight. «Obviously we should protect the South African workforce from being exploited, but at the same time we should be sufficiently prepared to entice multinationals to open businesses here, and reduce the army of unemployed», says Tromp.

Critics believe a loosening of the labour laws will boost job creation. Companies that enjoyed state protection during the apartheid era, now find themselves exposed to global competition. Even when the economy has grown, jobs have been shed. According to the WEFA study on employment prospects in South Africa, 142,000 positions were lost in 1997 — a year in which the economy grew by 1.7%. On top of these job losses, the labour force grew by about 320,000, resulting in rapidly increasing unemployment. «Despite positive growth, the economy is still shedding jobs at an alarming rate,» notes Chez Milani, the general secretary of the Federation of South Africa Trade Unions. While wealth continued to grow, more workers became poorer.

A survey carried out by the Pretoria-based Human Sciences Research Council, reveals that up to one million jobs were lost in the past decade. COSATU estimates that, in each of the past 10 years, an average of 350,000 new jobs seekers entered the labour market and that perhaps fewer than 50,000 found jobs. Yet the economy continued to show positive growth.

This is cause for grave concern. Union leaders maintain it is vital that the economy has not only to create, but also to retain people in employment. Vavi regards unemployment as one of South Africa most pressing social problems, saying the country’s high crime rate and the increasing incidence of AIDS are inextricably linked, being signs of severe social instability. The unions see in the havoc wreaked by floods in the north and eastern parts of the country, an opportunity to put into practise what they have long advocated. Initial estimates put the rain-damage at hundreds of millions of Rands, and Vavi believed it provides an excellent, medium-term opportunity to reduce the swelling ranks of South Africa’s unemployed.