No progress on NGP job targets after six months

Tomorrow marks six months since the launch of the New Growth Path (NGP) of Economic Development Minister Ebrahim Patel, and its target of creating five million jobs by 2020 looks far off.

According to Stats SA's Quarterly Labour Force Survey a net 14000 jobs were lost between the last quarter of 2010, when the NGP was released, and the first quarter of this year.

This took the official unemployment rate to 25%, a far cry from the NGP's 15% target.

The Department of Economic Development says a lot has been done to implement the NGP.

"Specific actions include, among many others, the establishment of the anti-red tape campaign, work on a skills accord, development of reporting systems to assess the impact of state activities on employment creation, and the establishment of the Industrial Development Corporation (IDC) initiatives outlined in (Patel's) budget speech," said director-general Richard Levin.

The IDC initiatives include R102-billion for investment in NGP priorities over five years.

Shakeel Meer, divisional executive of corporate strategy at the IDC, said R280-million of funding had been approved this financial year.

Levin said instead of focusing on the unemployment rate, which depends on the number of people seeking work, one should look at the employment absorption rate.

But the first quarter's employment absorption rate of 40.6% is also down on the fourth quarter of last year's 40.8%.

Stakeholders in the NGP were wary of criticising the implementation process.

"In some areas there has been rapid progress in the past six months, in others less so," said Raymond Parsons, the deputy CEO of Business Unity SA (Busa). "This is inevitable. Several elements of the NGP still require further research or clarification. The framework, as it stands, should be viewed as work-in-progress."

Manufacturing is identified as a key area of job creation in the NGP, with 350000 new jobs to be created by IPAP 2 (the Industrial Policy Action Plan).

"There is probably still not full consensus on the NGP among social partners so implementation has not proceeded as aggressively as IPAP," said Guy Harris, facilitator of the Manufacturing Circle. "We have not seen a scoreboard of jobs created. Progress needs to be made on key policies, such as beneficiation, before some of the ambitions can be fulfilled."

Economists are less forgiving. "I don't think there was ever going to be smooth progression into new jobs because we are at the early stages of an economic upswing," said Dennis Dykes, chief economist of Nedbank.

"A lot has been done, like IPAP2 and the measures announced in the budget and funding allocated by the IDC, but the bigger issue is whether the path itself is enough to hit the targets necessary to create those jobs."

Dykes said whereas the macro plans in the NGP were satisfying, the micro package was a concern.

"It is very interventionist and based on the premise that government knows what is best. But when you look at what government is doing, there are a lot of difficulties with things like labour policies. Subsequent to the NGP being announced we had new pieces of legislation tabled (the four labour law amendment bills of December) which are anti-job growth."

Issues on mining rights, land reform and land tenure also did not create an environment where businesses felt comfortable to invest and create jobs, Dykes said.

Mike Schüssler, an economist at Economists.co.za said attempts to stop Walmart, one of the world's biggest private sector employers, entering the country, did not point to a will to increase jobs.

"I also do not see any signs of wage restraint - which was also part of the NGP - especially from the public sector unions," he said.

The NGP suggests moderate wage settlements and caps on some pay increases.

Andrew Levy Employment Publications said the average wage settlement rate was 8.2% in the first quarter, but inflation was below 4% for most of the period.

Schüssler said the NGP had not been sold to business adequately. "Business, especially small business, get the impression that the government is not on their side."

Competition takes a slide

While government is working on an ambitious growth plan for SA, the country's global competitiveness has taken a knock.

According to the IMD World Competitiveness Centre, SA's ranking in terms of competitiveness dropped from 44th out of 58 countries to 52nd out of 59 countries.

SA's competitiveness also decreased according to the World Economic Forum's latest Global Competitiveness Report.

The fall in the IMD ranking is ascribed to the perceived rise and deterioration in labour regulations, a proliferation of bureaucracy, a reduction in foreign direct investment and an increase in government debt.

Job creation targets 'reasonable'

Are the New Growth Path's job and growth targets realistic?

The NGP says economic growth of 4%-7% is needed to achieve its job-creation goals. But with most growth forecasts for this year not yet exceeding 4% there are doubts how achievable this is.

"The employment goal of five million new jobs by 2020 in particular does not look obviously unreasonable," said Geoff Barnard, senior economist at the Organisation of Economic Co-operation and Development.

"It implies average annual employment growth of 3.3% to 2020, which is only a bit higher than the employment growth rates seen in the last cyclical upswing. With more emphasis on employment-intensive growth, it may well be possible to achieve this target."

Public Enterprises Minister Malusi Gigaba said state-owned enterprises were best positioned to drive infrastructure and economic growth.

Raymond Parsons, deputy CEO of Business Unity SA, suggested a target of one million new small businesses over the next decade alongside the employment goal to remind SA where most jobs need to be created.

Econdow economist Richard Downing said capital, skills and entrepreneurship were needed to grow the economy.