Jobs, jobs, jobs.
"People want to be told ‘How are you going to help me right now’".
US President Barack Obama, at the start of his 2012 re-election campaign.
We urgently need sustainable, permanent jobs in South Africa – people need them now, not by 2015 or 2020. But to achieve this we need to be pragmatic about the world as it is now, not plan for the world as we would like it to be. Economists use the term the "real economy" to emphasise this distinction. For now, put aside the "knowledge economy" and focus on the real economy.
We have nearly one million vacancies for people with skills, against 30% of the population unemployed and with few or no skills. We do not have the luxury of waiting for longer term interventions to bear fruit, such as fundamental reforms to our education system, as urgently needed as those are.
The second reality is that the state does not have the human and financial resources to solve our economic problems on its own. That's why we only spent 68% of our infrastructure budget in 2011. Government's main role should be to create the opportunities for economic growth with jobs. It struggles to achieve just this. As President Zuma said in his recent State of the Nation address: "Government alone can't solve the country's challenges, but working together, solutions are possible".
What are those solutions in the very short term? Some of the answers lie in the nexus between the economic policy documents South Africa has seen in the past twelve months, from Ebrahim Patel's New Growth Path to Trevor Manuel's New Development Plan, and to the DA's 8% Growth project (still a work in progress), and even in the depths of the convoluted Industrial Policy Action Plan (IPAP 2). There is common ground to be found here about jobs on the scale and of the type we need now.
By delving through these documents and applying some practical thinking, here are some suggestions, from A-Z, on how to create lots of new jobs, fast, over the next two to three years (the list is not comprehensive):
AFRICA: Start refurbishing every South African border post now to ease the flow of traffic in trade and tourism.
APPRENTICESHIPS: The SETAs have destroyed apprenticeships. Abolish the National Youth Development Agency, use the funds to promote blue collar jobs and offer full free FET education to all comers. Link properly capacitated FETS, and the few SETAs that work, directly to individual businesses offering internships, so that graduates do not emerge with worthless scraps of paper. They have been lied to enough. Offer tax rebates, funded by underutilised SETA levies, for private sector training linked directly to jobs.
BROADBAND: Roll out universal access at affordable prices to every citizen across South Africa, using PPPs, as the Western Cape is currently doing, and Gauteng is contemplating doing. It has a direct and proven link to GDP growth.
CORRUPTION: Save R30 billion a year (at least) by putting more big men in jail. Give the money back to the taxpayers – or pay off the Gauteng Freeway Improvement Plan in cash.
CRIME: Crime has now become (in Gauteng at least) one of the single biggest obstacles to small business growth. A 6% decline is hardly skimming the tip of the iceberg.
ENERGY: Energy is the lifeblood of the industrial revolution, whether in the form of coal and water, petrol or gas, or nuclear energy. Provide it at affordable prices, encourage private sector and SADC provision, and remove one of our two major limits to growth above 5% per annum.
ENTREPRENEURSHIP: Introduce courses on it at every public school in South Africa, along with basic economics (like Maths "literacy").
EPZs: While we dither about IDZs, declare every local airport an export processing zone. For instance, by linking Rand Airport with the Johannesburg Fresh Produce Market you support local emerging farmers and others with export opportunities to the sub continent.
FRANCHISING: Look at the McDonald University type of training from zero (to name but one example).
GREEN ECONOMICS: Establish recycling depots and payment systems in every village and township in South Africa.
HOUSING: Design new housing projects around local economic development, not adding LED as an afterthought.
INFORMAL SECTOR: There are about 3 million South Africans working in the informal sector, providing goods and services of every imaginable kind to their fellow citizens. Support them AFTER CONSULTING THEM FIRST ON THEIR NEEDS with, for instance shared equipment (compressors, generators, power tools, etc.). Don't allow bureaucrats to take over and don’t expect these vibrant entrepreneurs to accept the blessings of SARS, VAT and DTI company registration procedures in return.
INFRASTRUCTURE: Drop the suspicions about the private sector and get serious about public-private partnerships (PPPs), otherwise it will never happen. When your house is on fire, you don't quibble about who can help put it out. Remember also that investment in productive infrastructure is what is needed. Nkandla's infrastructure, for example, does not qualify. Allow mines and industries to build their own infrastructure and bypass Transnet if necessary.
LABOUR: While we wait for the big debate about labour policy to one day reach a conclusion, we can in the short term reform two utterly destructive measures against jobs – first being to block the extension of Bargaining Council agreements on wages designed for big business and organised labour to SMMEs (which create the bulk of new jobs) making dismissal, and therefore hiring, all but impossible; the second being to reject attempts to ban labour broking, which accounts for 30% of the current workforce. Relax laws on dismissals for SMMEs below a certain size (50 employees?).
METROS: Metros must train their own blue collar workers to meet their own needs. Cape Town does, using abandoned parastatal training facilities.
POLICY: Restore certainty about policy on the two main generators of the sorts of employment we need right now: mining and agriculture. They are the largest employers of unskilled workers. That means government must decide for once and for all on its policies, and speak with one voice on the topic. Investors demand policy certainty more than any other single criterion for new investments, for obvious reasons.
PROCUREMENT: Pay suppliers within 30 days. Otherwise you destroy emerging enterprises. Gauteng still can't do this.
RED TAPE: Slash unneeded and obstructive red tape in a concerted manner, and in cooperation with chambers of commerce, black and white, on the lines of the Western Cape's "From Red Tape to Red Carpet"model.
RURAL POVERTY: Launch a major expansion of rural road building and maintenance (gravel roads). It will give small scale farmers vital access to markets, and poor people access to government services and grants.
SMMES: Provide tax incentives (as Finance Minister Gordhan starts to do in his Budget) and combine all state-linked finance institutions into one that lends at more favourable rates than the banks do. Involve private sector SMME specialists and the banks on tender and SMME support boards, and give them executive powers.
SMME SUPPORT AGENCIES: Forbid any public SMME support agency from counting "business plans" as productive training. They are usually little more than business suicide notes. Instead, ask people what they want and deliver it: then follow up with mentorship support.
SOEs/SOCs: Since government is determined that state-owned companies will play a central part in the equation, don't wait for an end to that argument, but allow competition with every SOC, starting with ESKOM – and not just from local suppliers but also from SADC countries. They can use the money we pay them to buy our goods and services, much as China keeps the US economy growing.
TOURISM: It seems SAA will also be with us until the Second Coming. Until then, adopt an open skies policy for other airlines. SA is a long haul destination in which flight costs are a major component. Tourism is a big creator of both SMMEs and semi skilled jobs.
VOTE: Vote the bums out, as the Americans say.
YOUTH: Implement the youth wage subsidy programme (whether the DA's version or Pravin Gordhan's) with immediate effect.
(Note: This article appeared as an op ed in Business Day, 24/2/2012)
Sunday, February 26, 2012
Tuesday, February 14, 2012
Green Jobs: Boondoggle or Bonanza ?
In his February 2012 State of the Nation Address, President Zuma again referred to green jobs as a "solution"to unemployment. If only things were that simple in the real economy which the rest of us live in.
South Africans are starved for good news about more jobs. Little wonder then that talk in government circles about a green jobs bonanza has raised the hopes of many. But will South Africa's green strategies produce the transformation we seek from a 30% unemployment rate? In fact the picture that emerges after investigation gives as much grounds for concern as it does for hope.
Government has committed to cutting CO2 emissions by 34% over the next fifteen years in its Integrated Resource Plan . Economic Development Minister Ebrahim Patel, supported by President Jacob Zuma in several speeches, had declared green jobs as a key development for rolling back unemployment. There is talk of multibillion rand solar energy farms near Upington, wind energy in the Western Cape, and algae-based biofuels in the Western Cape. There are government's own roll out plans for one million subsidised new solar panels installed in houses. And at provincial level, Gauteng Province recently produced its own "Strategy for a Green Economy" this year (Gauteng Department of Economic Development, No 14, April 2010) to similar effect.
South Africa is also bound by non-tariff barriers to high carbon or CO2 emitting exports in accordance with international agreements, both within the G20 group of nations and at the Copenhagen climate accords in 2009 and Durban in 2011. Failure to comply may reduce our access to prime export markets in the future.
Besides, the International Labour Organisation (ILO) states that the existing market for green technologies is already worth US$1.3 trillion, and is set to double by 2020. UNCTAD, the United Nations Conference on Trade and Development, confidently forecasts that green technologies are likely to transform economies on the same scale as the invention of the railways, or of information technologies (ICTs) did in the previous century, creating millions of entirely new "decent" jobs in new sectors.
The Gauteng proposal envisages the creation of, inter alia, 148 000 new jobs in the alternative energy sector (solar, wind), up to 70 000 jobs in biofuels, 10 000 jobs in energy efficiency industries (e.g. light bulbs, retrofitting buildings etc.) and 7 000 jobs in rolling out government's plans for one million solar heating panels for homes.
The problem is that some of the rosy assumptions of the green jobs advocates have already raised eyebrows, their economic modelling amongst them. That's not all. The very drive to green our economy will stretch the capacity of the state to breaking point in South Africa, and may well, wittingly or unwittingly, see the public sector appropriate large additional sectors of the economy – to the long term detriment of growth and new jobs.
The devil is in the detail of the plans. Some of the money for greening the economy will come from developed nations, but most of this fundamental transformation will be funded by government. This means that even larger parts of the economy will be directed from the centre, with government as the central player. And it is here that we have to ask some hard questions.
1. It is demonstrably not true that moving to a green economy is purely a "win-win" situation for job creation. Jobs will be lost, affecting, amongst others, the 60 000 coal miners in this country.
2. In fact, South Africa is the world's third largest coal exporter, constrained only from becoming even bigger by the inability of the state to run our ports and railways efficiently. What will replace that income?
3. While oil dependency is a risk, so too is dependency on rare earth materials, 95% of which are sourced from one country – China. Such materials are vital to batteries for electric cars, and other green technologies (eg wind turbines).
4. We know that alternative energy supplies cannot function commercially without state support and subsidies. These subsidies will come from the private sector and individual taxpayers. That will remove limited investment resources from other economic trajectories that may work better.
5. Why do we trust South Africans political elites, given their track records so far, to make the right decisions on what economic strategies to follow, especially when they involve a fundamental transformation of the SA economy on the scale proposed?
6. In a state already marked by conspicuous corruption, what is to prevent rent seeking by the ruling classes and their relatives, locking us into technologies that may never be self-sustainable, and paid for by the real job creator, the private sector?
7. Why do we think our politicians, or anybody else's, have the ability to pick "winning" technologies? Did they anticipate the cell phone revolution? As Henry Ford famously said in another context, "If I had asked them, they would have asked for faster horses".
8. It is not true to say that current green technologies are disruptive in the manner of desktop computers or cellular phones. The truth instead is that we do not yet know what the transformative technologies that will eventually provide affordable, reliable and safe green energy are. Early indications point to some forms of genetic manipulation, but when the new idea comes, it will probably be as unthinkable now as the cell phone industry was to ordinary people just a few decades ago.
9. More than half the new "green jobs" created, says the pro-green economy UNEP (United Nations Environment Programme), will be in consultancies, academia, management, and regulation. Why do we uncritically accept the word of consultants and academics who have a direct material interest in the programmes they are advocating?
This is not to say we must be Luddites. But since it is clear that the transformation of a carbon-intensive economy to a green economy will not happen overnight without more state intervention in large swathes of our economy, we must apply our minds properly.
That there will be green jobs is clear. But there will also be losers. The mining industry in South Africa employs over 400 000 people. These workers work in a carbon-intensive industry. They are a haven for the unskilled or semi skilled workforce which suffers most from unemployment. But mineral beneficiation is carbon-intensive. Examine also a list of the major offending industries worldwide, listed in order of their carbon intensity; steel, aluminium, ammonia (the major source of nitrogen for all those "green" biofuels), pulp and paper – and household appliances.
That the state might have to incentivise current green technologies is no surprise. That it will penalise carbon usage is already obvious – see the R3.7bn p.a. levy Eskom pays for its coal usage, or the R360m we all pay for our plastic shopping bags, or the more recent tax on "polluting" vehicles, projected at R1.6bn p.a. And that is just the tip of the taxation iceberg to come, in an economy already straining at the seams to provide social support services off a limited tax base.
There is no doubt that the future lies with a less polluting and more careful use of finite resources by business in particular, and society in general. But the question that we are left with is whether we are at the start of a new dawn – or on the verge of another statist experiment which owes more to the failed utopianism of the last century than to inspirational visions of the next.
In sum, change there will be. The issue is change to what, how, and by whom? We must be wary of the consequences of state failure and crony capitalism as much as our policymakers are wary of "market failure".
(Note: This article was first published as an op-ed in Business Day,25/10/2010).
South Africans are starved for good news about more jobs. Little wonder then that talk in government circles about a green jobs bonanza has raised the hopes of many. But will South Africa's green strategies produce the transformation we seek from a 30% unemployment rate? In fact the picture that emerges after investigation gives as much grounds for concern as it does for hope.
Government has committed to cutting CO2 emissions by 34% over the next fifteen years in its Integrated Resource Plan . Economic Development Minister Ebrahim Patel, supported by President Jacob Zuma in several speeches, had declared green jobs as a key development for rolling back unemployment. There is talk of multibillion rand solar energy farms near Upington, wind energy in the Western Cape, and algae-based biofuels in the Western Cape. There are government's own roll out plans for one million subsidised new solar panels installed in houses. And at provincial level, Gauteng Province recently produced its own "Strategy for a Green Economy" this year (Gauteng Department of Economic Development, No 14, April 2010) to similar effect.
South Africa is also bound by non-tariff barriers to high carbon or CO2 emitting exports in accordance with international agreements, both within the G20 group of nations and at the Copenhagen climate accords in 2009 and Durban in 2011. Failure to comply may reduce our access to prime export markets in the future.
Besides, the International Labour Organisation (ILO) states that the existing market for green technologies is already worth US$1.3 trillion, and is set to double by 2020. UNCTAD, the United Nations Conference on Trade and Development, confidently forecasts that green technologies are likely to transform economies on the same scale as the invention of the railways, or of information technologies (ICTs) did in the previous century, creating millions of entirely new "decent" jobs in new sectors.
The Gauteng proposal envisages the creation of, inter alia, 148 000 new jobs in the alternative energy sector (solar, wind), up to 70 000 jobs in biofuels, 10 000 jobs in energy efficiency industries (e.g. light bulbs, retrofitting buildings etc.) and 7 000 jobs in rolling out government's plans for one million solar heating panels for homes.
The problem is that some of the rosy assumptions of the green jobs advocates have already raised eyebrows, their economic modelling amongst them. That's not all. The very drive to green our economy will stretch the capacity of the state to breaking point in South Africa, and may well, wittingly or unwittingly, see the public sector appropriate large additional sectors of the economy – to the long term detriment of growth and new jobs.
The devil is in the detail of the plans. Some of the money for greening the economy will come from developed nations, but most of this fundamental transformation will be funded by government. This means that even larger parts of the economy will be directed from the centre, with government as the central player. And it is here that we have to ask some hard questions.
1. It is demonstrably not true that moving to a green economy is purely a "win-win" situation for job creation. Jobs will be lost, affecting, amongst others, the 60 000 coal miners in this country.
2. In fact, South Africa is the world's third largest coal exporter, constrained only from becoming even bigger by the inability of the state to run our ports and railways efficiently. What will replace that income?
3. While oil dependency is a risk, so too is dependency on rare earth materials, 95% of which are sourced from one country – China. Such materials are vital to batteries for electric cars, and other green technologies (eg wind turbines).
4. We know that alternative energy supplies cannot function commercially without state support and subsidies. These subsidies will come from the private sector and individual taxpayers. That will remove limited investment resources from other economic trajectories that may work better.
5. Why do we trust South Africans political elites, given their track records so far, to make the right decisions on what economic strategies to follow, especially when they involve a fundamental transformation of the SA economy on the scale proposed?
6. In a state already marked by conspicuous corruption, what is to prevent rent seeking by the ruling classes and their relatives, locking us into technologies that may never be self-sustainable, and paid for by the real job creator, the private sector?
7. Why do we think our politicians, or anybody else's, have the ability to pick "winning" technologies? Did they anticipate the cell phone revolution? As Henry Ford famously said in another context, "If I had asked them, they would have asked for faster horses".
8. It is not true to say that current green technologies are disruptive in the manner of desktop computers or cellular phones. The truth instead is that we do not yet know what the transformative technologies that will eventually provide affordable, reliable and safe green energy are. Early indications point to some forms of genetic manipulation, but when the new idea comes, it will probably be as unthinkable now as the cell phone industry was to ordinary people just a few decades ago.
9. More than half the new "green jobs" created, says the pro-green economy UNEP (United Nations Environment Programme), will be in consultancies, academia, management, and regulation. Why do we uncritically accept the word of consultants and academics who have a direct material interest in the programmes they are advocating?
This is not to say we must be Luddites. But since it is clear that the transformation of a carbon-intensive economy to a green economy will not happen overnight without more state intervention in large swathes of our economy, we must apply our minds properly.
That there will be green jobs is clear. But there will also be losers. The mining industry in South Africa employs over 400 000 people. These workers work in a carbon-intensive industry. They are a haven for the unskilled or semi skilled workforce which suffers most from unemployment. But mineral beneficiation is carbon-intensive. Examine also a list of the major offending industries worldwide, listed in order of their carbon intensity; steel, aluminium, ammonia (the major source of nitrogen for all those "green" biofuels), pulp and paper – and household appliances.
That the state might have to incentivise current green technologies is no surprise. That it will penalise carbon usage is already obvious – see the R3.7bn p.a. levy Eskom pays for its coal usage, or the R360m we all pay for our plastic shopping bags, or the more recent tax on "polluting" vehicles, projected at R1.6bn p.a. And that is just the tip of the taxation iceberg to come, in an economy already straining at the seams to provide social support services off a limited tax base.
There is no doubt that the future lies with a less polluting and more careful use of finite resources by business in particular, and society in general. But the question that we are left with is whether we are at the start of a new dawn – or on the verge of another statist experiment which owes more to the failed utopianism of the last century than to inspirational visions of the next.
In sum, change there will be. The issue is change to what, how, and by whom? We must be wary of the consequences of state failure and crony capitalism as much as our policymakers are wary of "market failure".
(Note: This article was first published as an op-ed in Business Day,25/10/2010).