Business Day, 26 May 1999
IT SHOULD come as no surprise that job creation is a top priority for voters in a country plagued by many decades of poverty and unemployment. It is also expected that opposition parties in an election campaign will try to persuade voters that the African National Congress (ANC) has done badly in this area and that, if elected, the opposition would do better.
However, extravagant claims are being made and it is important that we retain a sense of perspective.
The intended outcomes of the reconstruction and development programme (RDP) and the the growth, empowerment and redistribution macroeconomic policy (Gear) are increased and sustainable employment.
However, no one component of the economy or of economic policy is the magical key to job creation. As a result of this the ANC has made no quick-fix claims about job creation.
Our starting point must be to understand fully the magnitude and origin of the problem we are facing. As a result of changes in the world economy in the past three decades, most countries face serious unemployment. SA has additional, deep-seated structural problems emanating from its history.
By the end of the 1980s, the latter had combined to negate completely its employment-creating capacity. What is really remarkable is the short time it has taken us to correct this.
Our problems have their origin in the massive effect of the mining industry on the development of the economy. Mining required massive amounts of capital and hundreds of thousands of workers - some highly skilled but the vast majority unskilled and cheap. Both of these significantly shaped the economy and society.
The underdevelopment of black agriculture, the restriction of skills to white workers, the concentration of capital into large corporations, the limitations placed on black business, the destruction of communities and the failure to provide housing and other basic amenities all combined to create severe wealth inequality.
By the 1990s the economy had reached the end of that road. Poverty, wealth inequality and high production costs combined to limit its ability to export anything other than the traditional primary products. The domestic economy was stagnant. The suppression of small and medium enterprises limited employment creation.
The rest of the world underwent profound change in the early 1990s, but the National Party government ruled in ignorance of the implications of these developments. The ANC understood that if the economy was to grow and create sustainable jobs, it would have to be restructured. This uld not be easy and might result in job losses even as we were trying to create new, more sustainable jobs. The challenge of job creation has to be seen in that context. We have focused on four major areas in the restructuring of the economy.
First, the financial and fiscal area. The main thrust is restructuring the fiscal position to halt rising debt and the increased debt-servicing requirement. This requires an improvement in the efficacy of public expenditure by removing wasteful expenditure and reprioritising in terms of the RDP. We have introduced a system of multi-year budgeting to facilitate greater fiscal certainty for SA. The stabilisation of these macroeconomics conditions facilitates a rise in saving and investment, and thereby job creation.
Our programmes in industry and trade policy are based on an analysis of changes in the world economy and the implications this has for our economy.
Technology, especially information driven technology, has substantially altered production processes. This in turn has led to more frequent product changes, stress on quality, a need for skilled labour and greater competition in technologically based production.
The basic approach of our industry and trade strategies is to ensure that, by engaging with the world economy, we maintain an expansion of economic activity and employment creation. This is based on a managed tariff reform designed to induce previously protected enterprises to become more efficient and to reduce our domestic cost levels so that they are closer to general world cost levels. This both establishes the basis for sustainable employment and for a programme of trade expansion which in turn will facilitate investment and employment creation. An integral component of this tariff reform is the underlying supportive industrial policy.
We are focusing on small, medium and micro-enterprises to create the new economic activity essential for improved wealth distribution, sustained growth and employment creation, thereby reversing the effects of past policy.
Industrial policies are essentially aimed at promoting efficient investment, located in sustainable activity, spread across the enterprise spectrum and geographically. It is this that will encourage labour-intensive growth, not trying to ensure that all productive activity is labour-intensive.
Much modern production no longer lends itself to labour-intensive methods. Trying to force the economy in that direction would not create jobs. This reality gives the lie to the hare-brained proposals about low wages. The usual meaning of flexibility is making it easier to hire and fire in the hope that, with high unemployment, this will drive down wages. Its only outcome would be to greatly weaken the trade union movement.
Modern production requires flexibility in skill, leadership, technology, management and institutions. This requires trained workers, interactive workplace relations, new managerial capacities and efficient dispute settlement processes. This is the type of labour market that is being developed. Those who believe otherwise are likely to be out of business fairly soon.
This does not mean that there is no room for improvement in the labour market. More work has to be done to develop the above features. The costs of compliance with legislation and regulation are too high for small business.
The simplistic solutions offered by the opposition reflect its failure to understand what is happening in the world economy. The fact that government, business and labour have been able to manage such a massive reform process is in itself testimony to the basic correctness of our strategic approach.
Underpinning the above policies and more recent implementation are reforms in the supervisory and regulatory framework of commercial activity.
At the centre of this reform is a body of laws that deals with competitive and corporate legislation, the objective of which is to improve accessibility to economic activity, enhance consumer rights and promote investment.
Much of the debt and inefficiency in the apartheid economy existed in the public sector. The objective in restructuring state assets is to increase strategic investment and delivery rather than to raise revenue.
For the operation of the overall economy, and more particularly for the stability of the basic basket of wage goods, agriculture is central. This applies even though the contribution of agriculture to our gross domestic product is relatively small. We have built the potential for a highly successful platform for agricultural production. Major reforms have been effected in land accessibility, marketing, tariff protection and in financial support for the sector. These reforms introduce additional stability into the economy.
In the past five years we have made major advances in rebuilding and redirecting a structurally stagnant economy. Business and labour deserve a large part of the credit. The basic impetus to these changes however, is the coherence of the economic policies of the ANC-led government. The speed with which the private sector has responded is cause for real hope.
The extent of this structural change does, however, make it more difficult to measure what is actually happening. Our statistical base, built on the old structure, is now obsolete and it is difficult to keep track of the changing location and patterns of production.
We know that the unemployment problem is serious. Unemployment as a percentage of the total employable workforce, measured strictly, is in the low twenties.
Given the high initial starting point and the depth of the structural change that we have undergone this is a manageable position if we continue on the path we have set. However, the success of the fiscal reform has also allowed us to release resources for more intensive short-term programmes to tackle the worst areas of poverty and unemployment. The jobs summit agreements will allow us to inject substantial resources into employment creation programmes.
It is only the ANC that can take such a brave and strategic approach to employment creation. It is the ANC alone that can secure the support of the union movement and the SA Communist Party for this strategy. Only the ANC can earn the trust of communities because of its track record.
It is also only the ANC that can engage in a meaningful dialogue about the overall national interest with the country's business community.
These capacities are vital because it is only through a truly national and combined effort that we will create sustainable jobs and a better life for our people.
Erwin is the minister of trade and industry and a member of the ANC's national executive committee.