Institutional reform’ ‘critical in denting SA unemployment’

22 January 2014

While the economic recession of 2008 exacerbated the issue of “high and sticky” unemployment in South Africa, Plus Economics Advisory CEO Charlotte du Toit asserts that the structural drivers of the country’s high unemployment rate existed prior to the economic downturn, which simply exposed these structural inadequacies.

This position was in sharp contrasted to opposing economic opinion, which suggested that the country’s level unemployment – currently at 24.7% – was cyclical in nature.

“Structural issues that caused job losses and low levels of employment were issues before the recession… and, as a result, we must accept that by fuelling the economy and advancing economic growth, we’re not denting unemployment because of its structural nature.

“Local economic growth doesn’t translate into employment gains, which is the country’s Achilles heel,” Du Toit said at the launch of a United Nations report on the World Economic Situation and Prospects 2014 on Tuesday.

The economist and report co-author added that the challenge remained not in targeting unemployment directly through intensive job-creation initiatives, but rather in addressing the impediments to job creation within the economy itself.

Central to achieving this outcome, she averred, was the implementation of structural reforms through institutional reform.

“The structural nature of the impediments [to job creation] are institutional, therefore, institutional reform is required. Capacity [within government] is an issue and we need to get educated, trained, experienced individuals to start sharing their knowledge. South Africa doesn’t have a fuelling problem, but rather an engine-capacity issue,” Du Toit said.

She further held that if extensive educational training and skills programmes did not mobilise individuals to make a contribution to economic output and, by so doing, earn a living, these efforts were simply an additional cost to society.

“It’s like kicking the can further down the road. Government [needs to] focus on interim measures to not just create token jobs but assist an individual in actually making a contribution.

“This will require an effort to remove the distorted perception that an education means having a certificate, rather than a skills set,” Du Toit maintained.

In response to a question regarding the ruling African National Congress’s ambition to create six-million jobs over the next five years, she held that while the aim was achievable, it would not be realised in five years.

“We have to start doing the right things and not just saying the right things. [This will involve setting] firm, evidence-based targets [which are measurable], so that we don’t talk willy-nilly about six-million jobs,” Du Toit stated.

By: Natalie Greve 

Photo: Bloomberg

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