INSIGHT | Economic participation, not handouts, will solve unemployment and poverty

8 September 2021

The road to prosperity in South Africa has been a long and arduous one.

Mass unemployment and poverty overshadow the distant dream of a bountiful, promised land. 

The Reconstruction & Development Programme document of 1993 put more emphasis on the provision of services such as water, electricity, roads, health institutions and low-cost housing, and little on economic participation at a local level.

That is where the boat was missed.

Though there are offices of Local Economic Development (Led) in the more than 250 municipalities, no single manager of a Led office, mayor or councillor, can boast that the youth play a dominant role in the local economy.

In fact, according to the Stats SA survey of the second quarter of 2021, the unemployment rate stands at 34.4%, as compared to 32.6% in the first quarter. 

The survey shows the burden of unemployment is concentrated among the youth, accounting for 59.5%. 

Some of these young people have become discouraged from participating in the labour market and are also not building on their skills base through education and training. 

Consequently, the latest statistics, in an expanded interpretation, easily translate into a staggering 12m unemployed people. 

It’s important to fix both the micro and macroeconomic frameworks to ensure sustainable jobs are created.

Many countries globally pay attention to the merchant economy (what we call township economy in SA) as it absorbs large numbers of the local population.

They also have laws that protect this level of the economy for the benefit of citizens.

They limit non-nationals to the investment level economy, so they don’t compete with locals in microeconomic activities such as spaza shops and hair salons. 

South Africa also has the Labour Relations Act, Act 66 of 1995 (as amended) that deals with such issues.

Section 38 (1) of the Immigration Act, Act 13 of 2003 states: “No person shall employ an illegal foreigner, or a foreigner whose status does not authorise him or her to be employed by such a person.”

The problem here is that government does not enforce its own laws.

How do we create prosperity? Should it be through increased taxes, social grants or active involvement in economic activity? 

When there’s not much growth in the economy, the focus should not be on putting a further burden on taxpayers. 

Neither should the focus be on the depletion of the fiscus through social grants. That is no way to grow the economy.

The focus should be on placing more South Africans in the economies of their townships, peri-urban and rural areas, and inner cities. 

South Africans must be the ones who wake up in the morning to open their cities for business. 

In that manner, you will have more people who generate incomes, grow the GDP and broaden the tax base, instead of being taxed to obliteration. 

Paltry cash handouts could be put to better use if channelled towards funding entrepreneurs.

When creating a participatory environment, you remove the youth from drugs, taverns, prostitution and crimes such as looting, and reduce dependency on social grants. 

The Review of Ten Years of Freedom published by the Government Communication and Information System in 2003, states that social grants were meant to be a temporary intervention. 

Unfortunately, no viable alternative was ever developed.

The National Development Plan (NDP) recognises that SA has an urbanising, youthful population. 

This presents an opportunity to boost economic growth and increase employment.

The NDP recommends a tax incentive for employers to reduce the cost of hiring young labour-market entrants.  

It also suggests a subsidy for the placement sector to identify, prepare and place matriculants and graduates into work. The subsidy will be paid upon successful placement. 

These could be built into the president’s Youth Employment Service (Yes) programme, which encourages companies to absorb graduates into the workplace.

The president’s Yes programme is a good initiative but needs to be expanded as a compulsory, national programme, as in other countries.

To solve the problem of graduates remaining unemployed because of a lack of experience, it could build in the following elements:

  • A programme where students are placed in sectors of work for eight weeks during their
  • A compulsory national service programme, where after graduation, students are placed in sectors of work: public service and private sector, for a period of two years;
  • Thereafter, students are allowed to look for work, or be retained.
  • In other countries, this programme is funded by government and managed by the department of defence, where students have some stipend for transport, meals and other necessities.

 

The NDP further states South Africa needs an economy that is more inclusive and dynamic, in which the fruits of growth are shared equitably.

By 2030, the economy should be close to full employment. This can only happen when citizens are active in the economy and not waiting for social security.

Social security should follow the standard pattern of many progressive economies, where it is used as a safety net to take care of the infirm, aged, unemployed and those unable to work due to disabilities.

Social security can then be upgraded substantially, because there will be fewer numbers in that bracket.  

Most citizens, particularly the youth, must be active, economic participants. 

Studies around Africa, South America, North America, Europe and in the region known as the Asian Tigers (Singapore, Malaysia, Taiwan, Indonesia) have shown that countries with economically active citizens excel in economic development.

One can’t achieve that when a great portion of citizens, 17m in our case, are recipients of social grants, and are passive spectators in their economy.

As the NDP says: “In some instances, policy change may be necessary, but in most areas, it is about getting the basics right, implementing government programmes, holding people accountable for their actions and finding innovative solutions to complex challenges.”

South Africa needs a paradigm shift. It cannot continue doing things in unrewarding ways and expect different results.

Clarence M Kwinana is a Gauteng-based town planner, writing in his personal capacity.

Source: Dispatch Live at https://www.dispatchlive.co.za/news/opinion/2021-09-08-insight-economic-participation-not-handouts-will-solve-unemployment-and-poverty/?fbclid=IwAR0J3Io8OwW9Cj-KtHuzlWkZQI5TW5LcW0KdkQ8OxXwLxLLeF2Ghsq8lwtw