Government and job creation: If they could, they would
14 February 2022
President Cyril Ramaphosa’s 2022 State of the Nation address was hailed and condemned from political role-players, the public and analysts alike. Quite surprisingly, Helen Zille called it a bold speech that challenged the hecklers in his own party. So did quite a few political analysts. Opposition parties and many others doubt whether his soaring rhetoric about combating corruption and unfettering the private sector to grow employment will match its implementation.
All of them are, to varying degrees, correct in their assertions. Much of what he said flies in the face of the orthodoxy in his own party as well as the tripartite alliance, but seeing is believing and we’ve heard some sensible proposals from him before without any action, and in some instances, action that runs contrary to the intentions contained in his speeches.
Not surprisingly, Cosatu and the SACP swiftly and vehemently fulminated against his contentions about private sector growth and job creation. TimesLIVE reported that the hoary party, who has no electoral mandate except for that which the ANC won on promises other than instituting communism, called on Ramaphosa to re-examine his statements about the state not creating employment and that the private sector should take the lead in producing jobs. They distanced themselves from it and characterised it as fatally flawed and neoliberal.
“Besides the fact that the ‘We’ is definitely not inclusive, but in fact refers to the category of individuals who believe in that fatally flawed assertion, it is important to build a capable developmental state with organic capacity to serve the people diligently and capably,” SACP spokesperson Alex Mashilo said in a statement.
“This is one reason the private sector has also created and increased unemployment through retrenchments in pursuit of profitability and profit maximisation. It is also one reason inequality, both wealth and income inequality, is systemic under capitalist relations of production,” said Mashilo.
Moreover, he asserts, state employment is not only found in public service and administration but so too in public entities such as Eskom, Transnet and development finance institutions.
These contentions inevitably beg some questions. How has government fared in creating employment? How has this employment promoted the interests of the country in general? How much room is there for government to solve the unemployment crisis?
The state of the state
The Mail&Guardian reported last year that government is indeed the single largest employer in the country with 1.3 million employees across multiple sectors, including nurses, municipal workers and police officers. But seeing as South Africa has a population of close to 60 million people, of which a large proportion comprises people of working age, this figure seems much less impressive. Furthermore, Ramaphosa himself stated in the SONA that 80% of all the people employed in South Africa work in the private sector.
Of course, this would prompt the SACP and Cosatu to counter that the state should simply produce more work through infrastructure programmes, appointing more bureaucrats and the like. In a May 2021 working paper on the public sector wage bill and economic growth, Chuma Innocent Mbaleki wrote that the public sector wage bill gobbles up an eye-watering 14% of the country’s gross domestic product (GDP), 37% of national revenue and 34.8% of consolidated national expenditure.
These are exceedingly high sacrifices to keep a mere 1.3 million people employed. This means they are grossly overpaid while, looking at the returns on investment, being astoundingly unproductive and in many cases, deleterious. BusinessTech reported that data from the Organisation for Economic Co-operation and Development (OECD) showed in 2020 that South Africa has some of the highly compensated civil servants in the world.
The report further found that public sector wage increases drive government spending and not an increase in employment. This is unprecedented in the developing world and crowds out private sector investment and diverts scarce resources away from activities that might bolster employment in the public sector.
All the while, the citizenry’s “return on investment” is disappointing, to say the least: Large-scale and endemic corruption, poor service-delivery (especially in municipalities), poverty, decaying infrastructure, urban blight and unaccountability. Mashilo’s reference to Eskom, Transnet and development finance institutions is a case in point. These very institutions have been wracked by multiple corruption scandals, poor performance and an inability to deliver on their mandates. This is everything but the capable and diligent service that Mashilo is hoping for.
It is even more unwarranted considering the fragile shape of an economy reeling from the effects of Covid-19, low growth and investment, and government-induced policy maladies. Thus, if you want to rail against inequality, it is apt to start by comparing the income of the unemployed and working and middle classes in both the public and private sectors, to the inflated government salaries and the burden of the size and cost of running the government in this country. This has apparently escaped the SACP in their diatribe.
A matter of survival
To the minds of many in the ANC and certainly everybody in its alliance partners, Ramaphosa’s wishes are anathema because they represent their demise. The SACP’s whole ideological plank pivots on the idea of the destruction of private property, businesses and ultimately, all manner of freedoms and lives. Communism has been tried by parties and functionaries who are much more competent than those running South Africa now, and all of it ended (and continues) in failure, misery and tyranny.
Just ask the North Koreans and Cubans who have managed to flee those countries. Don’t be fooled by their high-ranking apparatchiks’ woolly and deceptive recent statements about “democratic socialism”. Adding an admittedly controversial word with a plethora of pliable meanings before your rebarbative ideology to make it seem more palatable in the 21st Century, and failing to explain what you mean by it, is a risible public relations ploy with no practical substance.
To hold up the private sector as the lynchpin of your economic strategy, as Ramaphosa did, is to abolish the SACP’s raison dê’tre. Once freed from counterproductive labour regulations and pernicious policies, South Africa could follow the growth trajectory of other winning nations (recent and long-standing). In this scenario the SACP with its paltry support base and ideological bankruptcy is likely to vanish.
As for Cosatu, their vociferous animus to a shrinking state and a vibrant private sector also goes to the heart of their existence. Today, they are largely a public sector union and it is in their vital interests that government not only maintains its bloated size, but grows even further. Without it, its shrinking member base will translate to diminishing political influence and revenue, as well as lower salaries for their top brass to spend on swanky goodies produced by the private sector.
If history is any guide, though, I don’t think Ramaphosa laying down the gauntlet in the SONA will result in much tangible policy action to match his high-flown rhetoric. This doesn’t mean that the SACP and Cosatu are correct about the direction of the economy or the country, but that any ANC president is in hock to his party and alliance and does not have much political room to manoeuvre to exact big changes. Just ask former president Thabo Mbeki, who presided over the highest growth period and lowest unemployment since 1994 by creating space for the private sector to thrive and create jobs only to be ousted and replaced by Jacob Zuma with the help of the SACP and Cosatu. Ultimately, if government could have created sufficient jobs to cut the current historically high unemployment rate, it would have done so already.
Dr Eugene Brink is strategic advisor for community affairs at AfriForum
