Avoiding the 'jobless growth' trap With the global economic prospects uncertain, South Africa will need to look towards its primary and secondary industries – mining and manufacturing - for future growth.

Without growth in labour-intensive industries such as these, government’s target of creating five million jobs by 2020 is unlikely to be met, says the IDC’s chief economist, Lumkile Mondi.

The recent economic recovery in South Africa was similar to that of numerous other countries, in that although the economy was growing, employment creation has been weak. When the third quarter of 2011 is compared to the same period in 2010 the mixed fortunes of the primary sector becomes clear with the agricultural sector losing jobs, while mining created additional employment. The loss of employment in the agriculture, forestry and fishing sub-sector remains a concern, not only due to the loss of income for the affected families.

With the utilisation of production capacity still below pre-crisis levels for the majority of manufacturing sub-sectors, it is unlikely that substantial new jobs will be created within these sub-sectors any time soon. In addition, the agriculture and mining sectors, which are among those targeted by the New Growth Path for the creation of semi- and unskilled jobs, did not perform well in the nine months to September 2011. This was also largely attributed to poor external demand. However, the current drive to improve mineral beneficiation is expected to contribute to increased exports and

job creation over the next few years.To achieve its jobs target, it is vital that government press ahead with its R845bn infrastructure expenditure programme if the country is to avoid falling into the ‘jobless growth’ trap. The programme sets aside R296-billion to be invested in South Africa's energy sector, R262-billion in transport and logistics, R36-billion in hospitals and clinics, and R41-billion in education infrastructure. Substantial funding will also go to municipalities and provinces for housing, residential infrastructure and local economic development. There has been some positive movement in terms of implementing the programme, with parastatal Eskom building two new power plants, while Transnet’s R2,4bn diesel locomotive tender provides significant local manufacturing opportunities. These contracts will help buoy local sectors such as construction and manufacturing, as well as downstream industries. 

But to create enough jobs, especially for unskilled and semi-skilled workers, creative thinking about funding and partnerships is required. Government has the opportunity to work with private sector players – many of whom bring not only capital, but experience and much needed know-how. By providing certainty for private sector investors and giving them an opportunity to expand output while their industries remain under pressure because of current poor growth rates in developed markets, this could have a substantial positive effect on job creation and saving of jobs. 

In addition, because credit agencies Fitch as well as Standard and Poor’s (S&P) recently placed South Africa on credit watch, it is important for government to publically address the concerns of investors in order to continue attracting capital into the country. The ANC policy conference in July will prove an important milestone which investors will watch closely for any shifts in the economic and fiscal approach of government.