On Wednesday, our deputy president stood in the National Assembly and said, with no irony, that “if there is a government that is concerned about jobs in our country, it is the Jacob Zuma government”. He also told us that our economy is heading in the right direction and that we have nothing to worry about.
This is very much a minority view held by the president, the deputy president and a handful of loyal ministers. Everyone else is in agreement that the South African economy is in a dire situation. We’ll be lucky if we can break through 2% GDP growth this year, following a dismal 1.5% last year.
This is very grim news for the nearly eight and a half million South Africans who don’t have work and are desperately counting on a swift economic turnaround to stimulate the creation of jobs. At 2% growth, this is not going to happen. Instead, the steady decline in employment that we have seen since Jacob Zuma took office in 2009 will continue.
Expect to hear many more explanations from government about “external economic pressures”, and the time it will take to recover from the 2008 global economic downturn. But you need only compare our sluggish growth in recent years to that of other developing economies – including those in Sub-Saharan Africa – to expose this for the hollow excuse it is.
Most of our problems in stimulating growth have nothing to do with global conditions. They are our own doing and can only be solved by us. Through a crippling combination of the electricity crisis, labour market volatility, ill-conceived legislation, spiralling government spending (our public sector wage bill is set to reach a staggering R470 billion in the next three years) and policy uncertainty, we have managed to suffocate entrepreneurship and send investors elsewhere.
Where other developing countries have managed to lower their interest rates to encourage growth in start-ups, we cannot do so because of government-induced price pressures.
The problem now is that the challenge of turning the economy around appears so daunting and the leadership from government so vague, that we seem to be paralyzed in our response. Trapped like a rabbit in the headlights of the oncoming economic and jobs crisis, our government is unable to act.
But, like any huge problem, the only way to tackle it is by doing so one piece at a time. If you break the problem up into all its contributing challenges, you can plan and implement a response to each of them.
And so I would like to place on the table five steps that we can implement right away, that will halt our slide and begin the long process of economic recovery and meaningful job creation. These steps are aimed at recognising and supporting our big job creators, and ensuring that the doors to their businesses remain open.
The DA has a comprehensive economic policy that we will implement the minute we set foot in the Union Buildings, but the millions of excluded South Africans don’t have the luxury of time. These five steps are what can, and should, be done right now. It is crucial that our government starts working together with us to rescue our economy before it’s too late.
- We must immediately solve the energy crisis
Over the past seven years, our insufficient and unpredictable electricity supply has played the biggest role in our economy’s failure to recover. Economists put the cost of load-shedding on our economy at over R200 billion per year, and even President Zuma himself admitted on Tuesday that it is costing us 1% economic growth per year.
In the long term, we need to break the Eskom monopoly and completely re-look our energy plan, taking recent advances in renewable technology into account. But in the short term we can address both supply and demand to ensure a stable electricity supply with the least amount of disruptions to businesses.
On the supply side, the Department of Trade and Industry must immediately make available R500 million of its budget to purchase industrial-size generators for manufacturing industries so that they can keep their factories open and productive. This generator programme should specifically target labour-intensive small to medium-sized manufacturing companies, and should be combined with initiatives to improve energy efficiency in these companies’ manufacturing processes.
On the demand side, we need to look at load-curtailment agreements between electricity suppliers and large consumers. By shifting some productive activity to off-peak periods, and by pre-determining reduction in consumption, we can manage any periods of electricity shortages in a far more effective manner.
Then we must also immediately reintroduce the Independent Systems and Market Operator (ISMO) Bill – which will remove the operation of the national grid from Eskom and place it with a separate state-owned entity – and we must walk away from the ill-considered nuclear deal.
- We must protect two of our most valuable sectors: tourism and mining
ANC policies and regulations have caused untold damage to both these crucial sectors of our economy. Together, tourism and mining contribute two million jobs to our economy and, if we are to stave off further job losses, we need to urgently re-look these harmful policies and regulations.
The new visa regulations are already proving to be catastrophic for our tourism industry, with overseas arrivals down by 7% in the first quarter of 2015. Arrivals from one of our most important strategic markets, China, are down 38% in the same period. Tourism has the potential to grow like no other industry, and it is estimated that one South African job is created for every 12 tourists that arrive. Unfortunately, the reverse is also true, and if we’re turning away tourists in numbers, we’re also killing thousands of jobs.
To prevent further job losses, we must urgently reconsider the two contentious regulations that are responsible for the sharp decline in arrivals. We must repeal the requirement for in-person biometric visa applications, and we must suspend the requirement for an unabridged birth certificate when traveling with children until a proper study into the full extent of child trafficking has been done.
Mining accounts for more than half our exports, and ripples in the mining sector are felt far downstream in the manufacturing sector. While the mining industry is in need of urgent structural reforms, we can stem further job losses in the interim with three interventions:
- We must stop re-empowering once the government-stipulated B-BBEE ownership has been reached. Repeating this whenever B-BBEE owners sell their shares does nothing for broad-based empowerment and chases investors away.
- We must amend the Mineral and Petroleum Resources Development Act (MPRDA) to address issues around export blocking and price control, as well as state take-overs of mines.
- We must agree not to indiscriminately raise the B-BBEE ownership level until we’ve reviewed the success of current empowerment provision.
- We must do all we can to support small businesses
The DA’s views on small businesses and entrepreneurship are in line with the National Development Plan. We agree that this is where the bulk of our new jobs will come from, and it’s also the best way to fight apartheid’s legacy when it comes to business ownership. Whereas large enterprises operating in our low-growth environment are all about cost containment, SMMEs are the real absorbers of labour.
Government’s narrow focus on procurement as a tool for stimulating small businesses has had the opposite effect, as we continue to see low levels of entrepreneurship along with many failures of start-ups. Instead, the focus should be on financing, along with non-financial support, for SMMEs that show good growth potential.
Immediate steps should include tax incentives for business mentors; increasing B-BBEE points for skills development, mentorship and job creation; establishing one-stop Opportunity Centres where government support in the way of advice, business registration and training can be found; developing a streamlined Development Finance Institution to provide grants, equity and loans; and establishing a Red Tape Reduction Unit to help small businesses deal with the regulatory burden by identifying archaic and obsolete regulations.
- We must reform our labour market to protect both the employed and the unemployed
Our labour policy must balance the protection of workers’ rights with the need to build flexibility into the labour market so that businesses find it easier to create jobs. If we fail at finding this balance – as is currently the case – we end up protecting the employed at the expense of the unemployed.
In order to create a stable labour environment that boosts investor confidence, we must amend or repeal certain parts of the Labour Relations Act (LRA). This includes restricting collective bargaining agreements to the entities who were party to agreement, getting rid of “closed-shop” agreements that only serve to entrench majority unions, and not allowing majority unions to agree with employers on minimum thresholds for union representation.
Then we also need to democratise the strike balloting process – with a 14 day strike notice period and a secret strike ballot – as well as ensuring that unions take responsibility for unprotected, violent strikes.
- We must assure investors, through policy certainty, that we’re open for business
The ideological competition and confusion in the Tripartite Alliance is the biggest source of our policy uncertainty. While we are meant to be following the National Development Plan as our long-term policy framework, the introduction of contradicting plans such as the New Growth Path and the National Democratic Revolution have rendered this virtually impossible.
The lack of confidence in our economy can be clearly seen in the dwindling levels of foreign investment. In June, the Fitch ratings agency warned that “policy proposals currently under discussion could have an adverse impact on growth, if implemented”. We cannot afford any further adverse impact on our already struggling growth, and so it is crucial that we reconsider a raft of poorly conceived bills currently before parliament.
These include the Private Security Industry Regulation Amendment (PSIRA) Bill, the Promotion and Protection of Investment Bill, the Licencing of Business Bill, the Mineral and Petroleum Resources Development Act (MPRDA) and the Expropriation Bill. Only by amending or repealing these damaging pieces of legislation will we restore investor confidence and create job opportunities.
There is no denying that our economy is in a grave state, and that our government has so far been toothless in fighting rising unemployment. But this doesn’t mean we can’t turn things around. With the right urgent remedial action, we can bring back investors and see small and medium businesses thrive.
In the meantime, the DA will continue to work in Parliament to build the kind of inclusive economy that expands opportunities to all South Africans. We won’t stop fighting to amend, repeal or scrap the various pieces of legislation that threaten to drag our economy further down and cost thousands of South Africans their jobs.
Because we believe that a South Africa built on the values of Freedom, Fairness and Opportunity for all is still well within our reach.