 Was this an employment-oriented budget?
The budget says that ‘reducing joblessness remains South Africa’s most critical challenge’. There are many elements in the budget that will support growth and employment, but it is not so easy to see how it comes together. The budget is one of the government’s most powerful instruments, and an important expression of its priorities. Stakeholders need to see more clearly how major budget choices contribute to the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) targets. There are many important decisions required to halve unemployment and poverty that concern social grants, public personnel, the expanded public works programme (EPWP), the proposed wage subsidy, public transport, support to the state-owned enterprises, and more. Each of these could be multi-billion rand allocations. These considerations will be central to our work on employment scenarios in the coming year. In your view, will this budget support job creation on the scale that is needed to meet AsgiSA’s aims of halving unemployment by 2014? We estimate that 500 000 net new jobs will be needed annually to achieve that. The economy only recently began creating 500 000 jobs a year. In AsgisSA, a growth target of 6% by 2010 was meant to enable the achievement of the unemployment goal. Global growth has slowed, and domestic supply constraints have come at a very bad time. It is now unlikely that the 6% growth target will be reached. Treasury projects that the average growth rate will be 4.3% p.a.until 2010. If growth recovers to 5% p.a. between 2011 and 2014, unemployment might be 2.6% higher than it would otherwise have been in 2014. That means additional special interventions could be needed for 500 000 more work-seekers than if we had reached the growth target. The budget was definitely stimulatory. Real spending grows 50% faster than GDP. Growth would have been much lower had this not been the case. So this already softens what could have been a major blow to job creation targets. Government should still aim to halve unemployment and poverty, even if the growth rate is slower than desired. This will require more forceful special interventions that can intensify job creation. What sort of interventions might make a difference? Keep in mind that only part of the job lies with the finance ministry. It is sometimes difficult to say where departmental capability ends and the budget decisions begin. There may be very important programmes but the departments might already be working to capacity. For example, much more could be gained from deepening agricultural support to South Africa’s 1.2 million small farmers and subsistence farming households. Historically, South Africa missed an opportunity in developing these producers as a result of apartheid. Small-scale farming has been an important strategy for many countries from Japan to Indonesia. Farming small properties is sub-economic, and much could be done to reduce the cost of inputs and improve yields through better information and extension services. In the budget, only R2 billion was allocated to agriculture support services, which would translate into about Rl 600 per small farmer. As an opposite example, improving the efficiency of state-owned enterprises in key sectors like energy, telecommunications and transport would have an important impact on encouraging activity in new job creating sectors. Our employment scenarios model shows that if South Africa’s rail, ports and telecommunications infrastructure were internationally competitive, the unemployment rate could be cut by up to 20%. R6 billion was budgeted for public transport infrastructure over the medium term expenditure frameworks (MTEF). Making public transport cheaper and more efficient could benefit employment hugely as it makes it cheaper to search for or to get to work. In fact, this is one of the most important labour market interventions. How do you see the role of the government in direct job creation? The government is the largest single employer. For many years, the public service was shrinking and dampening employment growth. There are large numbers of vacant posts, and there has been a commitment to expanding public service employment to address service delivery backlogs. Personnel spending will grow by R20 billion per year over the next three years – about 30% of all new non-interest spending. It will be divided between improved service conditions and new hiring. This should result in the hiring of about 60 000 new employees each year, or 12% of what is needed to halve unemployment by 2014. This can be stimulatory as long as this spending goes with intensified performance management – in other words, that it leads to better quality public health, education, policing, and so on. But the public service has become increasingly skill intensive and the lowest salary is about R38 000p.a.. Getting a first job experience is one of the greatest difficulties facing young people and it is worth investigating special interventions for special entry level jobs that offer young people their first work opportunity. In building employment scenarios we look at a youth jobs plan that would provide labour market entrants temporary work in the public service for one or two years. Such a programme could create up to 100 000 opportunities and cost up to R2 billion. In addition, the budget strongly endorsed a wage subsidy for low-wage employees and focused on first-time work-seekers, though policy is still in the design stages. At the other end of the spectrum, the budget allocated an addition R1 billion over the MTEF to the social sector Expanded Public Works Programmes (EPWP). Around R2,6 billion is spent on the EPWP per year and the programme is meeting its targets in terms of number of jobs created, but these targets are much lower than what is needed. In 2006/07, about 317 000 jobs were created, mostly in infrastructure and environmental services. This would have reached the equivalent of about 7% of the unemployed by the official definition, and about 3% of the unemployed if one includes more marginalised discouraged work-seekers. Our scenarios show that if the economy grows by 4.5% p.a. on average between 2004 and 2014, about 1.5 million public works and special employment programme opportunities will be needed by 2014. This will cost about R26 billion p.a. in current rands by 2014 and I think that government should start gearing up to that scale. The biggest job creation opportunity is in the social-sector opportunities, like early childhood development and home community-based care. There is an enormous need for highquality community-based services in these fields, as part of the general service delivery mandate. A huge expansion would be needed as there are fewer than 40 000 people participating in such programmes. The government is committed to scaling this up but while the national government is responsible for setting guidelines, implementation is the responsibility of provinces and municipalities, and there has been a tendency to reallocate job-creation funds to other programmes. Unless greater commitment can be obtained from the provinces, it will be difficult to scale up these programmes to any substantial degree. Including them in the list of conditional grants is certainly something to think about. On another tack, Eskom’s recent announcement that any new big building projects will be put on ice for at least the following six months, and even longer. The building sector has been responsible for creating thousands of new jobs. How will this decision influence the job market? This is a broader problem. My unit, is currently looking at what impact an electricity cut might have on industry and households and how this will affect growth and employment. Eskom’s communications to industry have created confusion, and one hopes this will not lead to an investment strike! That would be disastrous. But let’s take a specific example. When the mines are cut by 10%, they have to cut production by more than that. Not only are mining jobs then in the balance, but so are the supplier industries. It may seem that cutting smelters has less impact on job creation, but a cut back to mining and the smelters will also have a major impact on exports. One of the most critical threats to growth (and employment) right now is the ever expanding current account deficit, which will be further exacerbated by this situation. The Employment, Growth and Development Initiative, which you’ve headed up for the last two years, has drawn together some of the best minds available to address issues of job creation. From 1 April, the Initiative will become a permanent Centre for Poverty, Employment and Growth. How will that change what you do at the moment? We started the Initiative as an experiment at the HSRC. This experiment involved asking one big policy question facing the nation, that is, how to halve unemployment and poverty by 2014 on a sustainable basis. The experiment also involved the introduction of a ‘think tank’ model, which builds on networks and stakeholder engagement. This approach has been incredibly successful and is being affirmed by the establishment of a more permanent centre. Our work on employment scenarios will continue, but with a deeper emphasis on poverty reduction. In addition, we will establish demonstration projects in partnership with stakeholders responsible for implementation. The emphasis will be on identifying critical innovations in programmes that could potentially lead to large scale job creation, but that are not achieving that potential. The first projects will focus on job creation in early childhood development services, and on private sector procurement to small and medium enterprises. Now that our work is becoming permanent, I plan to invest more in building core research and methodological capability, including a project to develop indicators of the development path. Miriam Altman is the executive director of the Employment, Growth and Development Initiative at the Human Sciences Research Council. The papers referred to in this article can be found on www.hsrc.ac.za/egdi.phtml
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