The recent credit ratings announcement by Moody’s Investor Service (Moody’s), to maintain South Africa’s Baa2 rating (two above junk) with a negative outlook, has been widely lauded by the Presidency as a sign of the efforts of ‘‘Team South Africa’’.
While the vote of confidence by Moody’s is welcome, there is a lot more that needs to be done other than the short-termism of applauding one of the Big Three retaining the Baa2 rating.
Just three days after the announcement by Moody’s, unemployment data stunned the market, at an eight-year high of 26.7%, from the Q4 2015 number of 24.5%. Over the past quarter, manufacturing shed 100 000 workers, trade lost some 119 000 of its employees and 77 000 construction workers lost their jobs. Surprisingly, the agriculture sector picked up 16 000 jobs, despite the worst drought in 30 years.
Unsurprisingly, the social services sector added 51 000 jobs – adding to the ballooning public servant wage bill and directly contradicting efforts by the finance ministry to reduce this area of government over-expenditure. Over the past year, the 225 000 social services jobs added to the economy dwarfs the 204 000 total jobs, which shows leakage in other sectors, notably manufacturing at 141 000 jobs lost.
But before we get too excited by an increase of 204 000 jobs, the labour force grew by 383 000 year on year. With the economy stagnating at a 0.6% growth rate, the writing may well already be on the wall. The real issue is the reinvigoration of economic growth and creation of sustainable long-term jobs to arrest unemployment.
Historically, the main hurdles South Africa has faced have been a fractious labour environment, bureaucratic red tape inhibiting small business growth and stifling entrepreneurship, and notoriously wasteful government expenditure. Collaboration between labour, business and government is essential. Big business needs to support the incubation of entrepreneurship, financially and by allowing competition; labour unions need to temper 15% wage increases; and government needs to end wasteful expenditure and allocate much-needed resources into the economy at large and not to the politically-connected elite.
The plan set out by Team SA, spearheaded by private sector juggernauts Adrian Gore (Discovery CEO) and Mike Brown (Nedbank CEO), has committed to raise a total of R3 billion to support and invest in small and medium-sized enterprises (SMEs). The initiative is being driven by private sector, but expects to be funded 50/50 with government.
Companies have already raised two thirds of their share, with R1 billion on the table for contribution to the fund, while Deputy President Cyril Ramaphosa affirmed support for the project by undertaking to increase the fund to R10 billion over time.
Government also reiterated the aims of the National Development Plan and the Nine-Point Plan set out in the Budget:
- Promoting stable and cooperative labour relations;
- Encouraging development of energy-efficient, job-creating industries;
- Lowering the cost of doing business, removing regulatory constraints and acting swiftly to remove policy uncertainty;
- Boosting investment through launching Invest SA; and
- Implementing reforms to ensure that state-owned companies are financially sound, operate efficiently, are well-managed and properly governed.