But one swallow does not make a spring and you will be right to ask if this recovery will last, particularly given the fact that investor perceptions have been marred by the protracted strike in the platinum mining industry. The strike lasted for 5 months and cost South Africa at the very least R20-billion in revenue. The country is also bracing itself for the prospect of more than 220,000 National Union of Metalworkers of South Africa (Numsa) members embarking on indefinite industrial action in the metals and engineering sector from this week. In the mean time the union has also warned of a possible strike at the national power utility Eskom.
Economies simply do not grow if people do not work. Nor will our economy grow if the government and the private sector fail to create jobs. The SA Labour News website quotes the Quarterly Employment Statistics (QES) survey to show that employment figures for the first quarter of the year increased by only 9,000 jobs, with significant losses counted in the trade and mining sectors. The survey, based on information collected by Statistics SA from formal, nonagricultural employers, is regarded as the most accurate on SA’s employment figures. It revealed an economy unable to generate jobs in almost every sector besides the public sector (don’t forget that this is jobs created by government and funded by the tax payer). The survey showed that between December last year and March this year employment rose from 8,498,000 to 8,507,000. This was due largely to an increase in the government sector — recorded as community services — in which jobs grew by 50,000. A small amount of job growth also took place in finance (7,000) and construction (5,000), but declined in every other sector of the economy. Mining lost 13,000 jobs and the trade sector — which includes retail — lost 34,000 employees. In the past year, employment in mining has shrunk 5.6%, the biggest decline of any sector. Total year-on-year employment increased 42,000, or 0.5%
This is dreadful news if the most significant job growth is in the public sector – the least productive bunch of employees out there.
Meanwhile National Planning Commission Dr Miriam Altman said while it was important for South Africa to grow its manufacturing output, the sector was unlikely to be a major source of employment in future. She said it was unlikely that more than 3% of employment created in South Africa over the next 20 years would come from the manufacturing sector.
Globally, 70% of employment was created in the services sector and South Africa also has to look at this sector to increase employment opportunities. SA is not even close.
But what about at the value of the rand? Foreign exchange company exchange4Free says SA’s devaluing rand problem is its budget deficit. The government is spending too much money based on what they are milking from a relatively small taxpayer base. The Zuma government has now committed to reduce this budget deficit. But the problem remains the same: The government is not going to get more money out of their tax payers while the economy is not growing and more jobs are not being created. To change the tide SA needs to increase employment. “You cannot reduce a budget deficit in an economy that is going into a very steep decline, particularly when, politically, you need to start delivering on employment and job promises. And who is the biggest employer by far… the government. Only the government can create jobs in a recession (by simply hiring more and more people to work for the government thereby creating the impression of new jobs and a vibrant economy) and they can only pay for it by digging deeper into their own coffers and getting as much of it back from taxpayers as possible,” says the exchange4free analyst.
Denial is the biggest risk to the SA economy. You cannot say you will improve the budget deficit when you do not have one single supporting factor other than your words to justify what you are saying. Actions must speak louder than words. But will we see it?