Who Is Really To Blame For SA’s Jobs Crisis?

President Cyril Ramaphosa addresses the Black Business Council Gala Dinner at the Gallagher Convention Centre in Midrand.

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President Cyril Ramaphosa’s recent admission that South Africa is facing punishing job losses is in direct contradiction with the promises he made before the elections. The lie is almost beside the point: it’s the question of blame that will determine the future of the country. Whose fault is it? If we are not careful, the economic elites and their political clients are going to ensure that the blame will lie at the feet of the youth, and the working poor, instead of where it belongs: the concentration and redistribution of wealth upwards to the elites.

Ramaphosa’s pre-election promise of more jobs has turned out to be a flight of fancy. The reality is that in spite of promises made that two million jobs will be created via the Expanded Public Works Programme, the Youth Employment Service and the National Youth Service, the economy will shed jobs, not create more. 

Speaking at the University of Johannesburg last week, he said: “Many more people are going to lose jobs. They’ll lose jobs because of technology, globalisation, climate change and a whole number of other challenges like low economic growth, as we have seen, in our own country.”

Economic growth (a problematic measure of human progress in itself) is expected to be as poor in 2019 as it was in 2018, in which it only grew by 0.7 percent. The official unemployment rate – which doesn’t count those who’ve given up looking for work altogether – was 27.6 percent in the first quarter of the year. Young people bear the brunt of unemployment, with the rate for ages 18 – 24 sat at 55.2 percent. 

So what are the pressures on growth, as it is widely assumed we need more of it to create jobs faster than the growth of the population in order to combat poverty? 

As we’ve covered in this column before, big business is blaming organised labour for slow economic growth, particularly in the vexatious matter of Eskom. Specifically, Business Leadership SA chief executive Bonang Mohale said in May this year that labour was to blame for the rolling blackouts experienced in March, an attack echoed by the organisation’s chief operating officer Busisiwe Mavuso. 

These views are not limited to the heads of big business lobby groups. You’ll hear it said more and more often, whether it is stated as labour market reform, labour legislation reform, or labour market flexibility, the intention is the same: to drive even more people either into outright unemployment, or precarious, poorly-paying work. 

In a letter to the Financial Times, Desmond Lachman of the American Enterprise Institute, a  big business think tank, states the matter starkly: “It is regrettable that in proposing economic reforms, Mr Ramaphosa fails to so much as mention the desperate need for South Africa to reform its rigid labour market. Highly centralised wage bargaining, coupled with minimum wage requirements and unwieldy labour market regulations, has reduced the attraction of the country as a place to do business, especially in a highly competitive global economy.”

In other words, kill wage growth by dissipating worker bargaining power, kill job security. Again, per the current unemployment patterns, the jobs one could reasonably expected to go are those young people typically have. 

There is tremendous pressure on the government to shed public sector jobs. In many places, this is argued as a necessary antidote to State Capture. This couldn’t be more of a grim joke: the very people who warned about State Capture long before it became a meme, are the ones who are going to carry the burden for it! But this is what is going to happen: the working class is going to pay dearly for mistakes made by a predatory bourgeoisie, in concert with the ruling party. 

The Congress of South African Trade Unions (Cosatu) argued in July before parliament that what the government had done was among other things, fail to halt the looting epidemic and recover the stolen funds and arrest those who stolen; and stop the continuous wasteful and bling expenditure that has come to characterise the state and its leadership.

“Workers are angry that instead, the government has sought to shift the burden to workers and the poor: through the VAT and other tax and tariff hikes; freezing badly needed service delivery posts; and blaming nurses, teachers, police officers, prison wardens, cleaners, etc for wanting to earn a living wage,” the federation said. 

The South African Federation of Trade Unions (Saftu) said in June that the reality was that there was actually an under-investment in service-performing jobs in the public sector, compared to other middle-income countries. 

“We call on the working class, as a whole to draw a line in the sand and refuse that even a single job is lost in the public service. Instead, the working class which rely on government services should demand the filling of the 200,000 vacancies. We need more police officials, nurses, doctors, medical specialists, correctional service officials, administrative staff, etc., not less,” said Saftu. 

What is ever hardly addressed is the fact that the South African economy is largely a collection of highly-walled monopolies which closely guard economic investment and kill competition. 

There are some vague nods at this, such as the announcement last week by trade and industry minister Ebrahim Patel that R40 billion would be made available over the next five years for black-led or owned industrial projects. Some of this funding would come from fines and competition settlements. Putting aside the idea that merely creating a class of black capitalists would solve anything for the poor and working class, this intervention, though pointed in the right direction, is far from adequate. In fact, the Competition Commission is underfunded, and cannot on its own be expected to restructure the market. 

In 2017, research by the University of Johannesburg’s Centre for Competition, Regulation and Economic Development found that the biggest companies on the Johannesburg Stock Exchange were sitting on cash reserves of R1.4 trillion in 2016, up from R242 billion in 2005. The Centre for Development and Enterprise and others insist that it is labour market rigidity that is “preventing” labour-intensive investment. The truth is, in South Africa, the United States and many other globalised markets, investors are more than happy to sit on cash, or issue stock buybacks, rather than pay wages. In fact, the lesson from America strongly suggests that crushing labour protections will not have the desired effect of widely-shared economic growth. 

This is why Ramaphosa’s strategy of going hat-in-hand to big business to beg for more labour-intensive investment is a non-starter. His rich pals will park those cash reserves for as long as they damn please. One suspects the president knows this already… 

Any suggestions or plans to deal with South Africa’s low growth which don’t place the problem squarely at the feet of big business and its cronies in government should be read as an assault on the ambitions of the working class, writ large. It should be taken as class war. 

Organised labour (and young people!) should not be afraid to use every available tool to achieve working class goals, including industrial action. The message should be very clear: either the benefits of economic growth flow to every person in the country, or we don’t have an economy. See then how nimble and agile the government will be in dealing with the real source of South Africa’s unemployment crisis. 

Featured image by Jairus Mmuitle (GCIS)