by Cindy Zentle

An unsteady future

South Africa continues to face teething problems

What will 2013 hold?
An unsteady future for South Africa

When President Jacob Zuma was elected, it was amid the uncertainty of a global financial crisis. South Africa and many other countries were pushed into a recession.

Our economy shed over a million jobs during the downturn, and has since only recovered 670 000. With new job seekers flooding the market each year, the official jobless rate has escalated to 25.5%, from 21%. The rise in unemployment, coupled with service delivery problems, has undoubtedly contributed to the labour unrest that struck the mining sector.

South Africa has reportedly been least affected by the global crisis and one can therefore not pin all blame on the economic meltdown. It did, however, fast-track these local problems to raise their ugly heads.

The majority of strikes late last year and already in early 2013 has left the labour environment quite shaky. These include recent strikes by farm workers and nurses. The unrest has worsened a growing rift between the government, business and labour, which are now blaming one another for the underlying reasons for South Africa’s problems of poverty and inequality.

Uncertainty as to which direction economic policy should take to address these challenges has been one of the main reasons for South Africa’s sovereign credit ratings being downgraded this year.

Analysts are not the only people warning about the absence of clear direction from the government.

Reserve Bank governor Gill Marcus, who was appointed by President Zuma in 2009, said last month: "We need cohesion and certainty of policy, as well as unity of purpose to build an inclusive, longer term vision." Unfortunately, ambitious efforts by the government to build that vision have so far yielded no fruit.

Two separate blueprints for inclusive growth and job creation were drawn up by two new government departments created by Zuma after he was elected president in 2009. A New Growth Path was announced by the Department of Economic Development in October 2010, while the National Planning Commission produced a longer term National Development Plan the following year.

The New Growth Path aims to create five million jobs within a decade. It envisages the government’s role in the economy will expand significantly, and advocates tighter fiscal policy and looser monetary policy to spur economic growth in a sustainable fashion. Fiscal policy could not be tightened, however, and South Africa’s budget deficit has widened considerably.

The National Development Plan proposed a creation of 11 million jobs in order to eliminate poverty in South Africa by 2030. The New Growth Path has suggested that some labour regulations be loosened to encourage companies to hire more people as well as lower entry wages to enable young people to get jobs.

The reality is that even though international organisations and business say South Africa’s existing labour laws are too rigid, new regulations have been passed by the Cabinet which will make it even harder to hire and fire employees. New labour regulations that aim to limit temporary work have been approved by the Cabinet after stalling at the National Economic Development and Labour Council. The new rules are now with Parliament and it is unclear whether, or when, they will see the light of day.

The government’s massive infrastructure spending drive has been touted as one of the solutions to South Africa’s economic ills, but has been slow in getting off the ground. President Zuma said at a conference in October that South Africa would spend as much as R4-trillion on infrastructure development over the next 15 years. But construction giant Murray & Roberts said last month that not a single tender had been issued for a major infrastructure project.

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