Harness every effort to help the jobless

The 8.7million jobless South Africans, confirmed this week by Stats SA data that showed the expanded unemployment rate had ratcheted up to 36.1%, should be a wake-up call to all citizens. We all need to join in a single-minded campaign, a "grand bargain" for more growth and jobs.

The facts are that in the first quarter of the year the economy grew at a quarterly rate of 1.3% (2.1% annualised) and a total of 626000 people joined the ranks of the unemployed.

We are, some think, at a critical crossroads for investor confidence. We have to put our heads together to break the vicious cycle of low growth, high inflation and high unemployment.

No one can do that alone. It needs the government, state-owned enterprises, labour, business, educational and research institutions and individuals to play their part in a national effort.

The objective is to arrest the growth of an increasingly divided "two-speed society": one urbane, prosperous, dynamic and nonracial, the other impoverished and overwhelmingly black, peri-urban or rural, young and unskilled, who will increasingly face off as the "haves" and "have-nots" unless we close this divide.

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Nothing more starkly illustrates this fissure than the 15.5million South Africans who are working, offset against the 3.2million South Africans who have given up looking for work plus the 5.5million who are not able to find employment.

To be clear, South Africa has done very well in the past 20 years in supporting the poor and creating a black middle class. This is well documented in the Goldman Sachs report "Two Decades of Freedom".

But the newly wealthy cannot sustainably prosper while the jobless suffer.

This week, President Jacob Zuma reminded the nation in parliament that he remained committed to achieving a 5% growth rate (by 2019), and how in the short term his focus is on achieving the nine-point plan he outlined in his February state of the nation speech, centred on four pillars: "These include the current electricity shortage, the availability and cost of broadband, a regulatory environment that is cumbersome, and labour market stability."

Indeed, despite sometimes seemingly overwhelmingly negative headlines, quiet but firm progress is being recorded by the ANC government:

The public sector wage negotiations were well managed with a generous but still constrained 7% (2% above inflation) wage increase (plus benefits) for 1.3million workers, setting a somewhat balanced tone for the current mining wage talks;

Despite pressure on the fiscus, rising contingent liabilities and public debt from state-owned enterprises, fiscal controls are being firmly maintained by the National Treasury (likely at the expense of investment), creating the required stability for rating agencies to maintain South Africa's investment-grade credit rating;

The appointment of Brian Molefe to lead Eskom's recovery; and

A new business model for the modernisation of state-owned entities is being debated.

Usually, emerging market crises are accompanied by an extreme currency shock, fiscal blow-up, or a balance of payment or banking crisis. In the lead-up to the expected increase in US Fed fund rates, none of this is evident in South Africa. The banking sector is well capitalised, the currency is liquid , our fiscal ratios are solid and our foreign reserves reasonable. This doesn't mean our currency cannot sharply depreciate, or our equity markets get sharply buffeted by global headwinds.

But our "self-inflicted wounds" - the underperformance of our state-owned enterprises, labour market instability, lack of overall productivity and our energy supply challenges - are hindering investment, growth and, in turn, job creation. And governance issues, corruption and lack of accountability risk endangering the credibility and hope for a turnaround in the eyes of the investors who are critical for fuelling growth and jobs.

Three structural issues are thus paramount:

First, fixing state-owned enterprises, particularly the economically systemically important institutions such as Eskom. The Chinese model of modernising state-owned entities by listing minority stakes and thereby providing the market disciplines of reporting efficiency and proper governance is being debated.

ANC secretary-general Gwede Mantashe has been quoted recently as saying: "The Chinese option is where they take a portion of a state-owned enterprise and list it, but still keep the controlling stake of that institution ... If you call it privatisation, you are choosing an ideological path that is not in the discussions. You retain it and capitalise the entity."

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And Treasury Director-General Lungisa Fuzile commented: "The question as to whether portions of state-owned enterprises can be spun off to raise money is on the table. It is decidedly on the table. The Treasury has been asked by cabinet to look into how this could be done and whether, in the case of Eskom, it would be more feasible to do it in relation to power stations or the entirety of the balance sheet of the entity.";

Labour market reforms need to link wage inflation and productivity, and bring stability and predictability to the workplace. Secret strike balloting is seen by many industrialists as key to labour peace. The minimum wage can also be a useful part of such a reform package. Much effort is being put into this by the government, labour and business, but more must be done; and

Regulation should be smarter and predictable, not, as it is now, well-intentioned but in practice an investment and employment killer. Land reform, mining licensing, small business regulation and manufacturing incentives should be reviewed against a single-minded objective: to facilitate investment and jobs.

We shouldn't stop there. We need big, bold ideas. A national effort is required to work our institutions harder for the benefit of the jobless. The defence force, for instance, should actively recruit hundreds of thousands of young people to receive artisanal training, and, in uniform, these youngsters can earn a stipend by fixing community infrastructure.

We should have a national effort to support and fund small businesses to drive new employment for millions.

By just getting the basics right we can achieve 3% growth. We can reach 5% when we combine all our efforts, and with excellence of execution we can aim even higher.

Come on, South Africa. We can do it!

Coleman is a partner and MD at Goldman Sachs