What can we do to shorten the recession? How can we protect existing jobs? There is relatively little we can do in the short term to limit the effect of the global crisis on SA. Equally important is to keep thinking beyond the current crisis and stay focused on how we lay the foundation for achieving rapid, inclusive growth over the next decade.
SA has to avoid the tempting dead end of protectionism. Instead, we should aim to be an outstanding place to do business. We want worried entrepreneurs and investors to see SA as a place that will help their business survive the storm and grow fast when the economic climate improves.
SA’s recent growth was modest compared to other emerging economies. Despite the biggest commodity boom in history, we were not creating enough jobs to fulfil the promise of a better life for all. The primary policy priority must be to encourage the creation of more jobs. Every economic goal and policy should be tested by whether it helps to create jobs. Not “make work” jobs, but economically viable employment. If it doesn’t, we should dump it. Most of the millions who need jobs are unskilled with little experience. A job with low wages is preferable to no job at all.
Converting our huge unemployment problem into a low-wage problem would be an important step forward, especially if it was coupled with fast growth that would soon start to push wages up. We should remove all but the minimum regulatory barriers in the way of employers willing to start enterprises that need SA’s mostly unskilled workers. We should experiment with age-related subsidies and exemptions to encourage employers to hire more inexperienced young people.
Rapid growth happens in vibrant cities. The decline of economically essential urban infrastructure must be reversed. A major new wave of urban development is required in which the private sector has to play a key role.
We should establish special economic zones with excellent infrastructure and a minimum of regulations to attract investment in manufacturing and services. This strategy creates jobs for the people who need them most while giving SA much-needed investment, innovation and export earnings.
Successful businesses depend on cheap, reliable inputs. The state monopolies in electricity, rail and telecommunications provide just the opposite. They raise costs and reduce employment throughout the economy. Legislated barriers to entry into these industries should be removed and state monopolies should be exposed to competition.
Most important is to fix education and training and immediately import more skills. Increasing the supply of skilled people will remove one of the major growth constraints, help train South Africans, increase entrepreneurship and pull individuals and families out of welfare dependence and poverty. The longer-term strategy is to reform the education system so that it produces more and better graduates, especially in job-oriented vocational areas, maths, science and literacy. We must move to make teachers more accountable to learners and their families.
Our short-term priority should be to attract thousands of skilled immigrants so that they can manage projects, start new businesses and train South Africans.
After the April election the new government will face two realities. Whatever emergency measures are in place, many firms will be forced to retrench workers just to survive. SA cannot afford to carry on expanding our welfare system, least of all in times like these.
Tough times require bold leadership if we are to create opportunity for millions of South Africans over the next decade.
- This article by Ann Bernstein and Simon Dagut is based on a CDE report, Accelerating Growth in Tough Times.