XHANTI PAYI: New jobs don’t come cheap

Since President Cyril Ramaphosa delivered his state of the nation address, much has been made about his statement that "government does not create jobs. Business creates jobs. About 80% of all the people employed in SA are employed in the private sector".

But, he added, "the key task of government is to create the conditions that will enable the private sector — both big and small — to emerge, to grow, to access new markets, to create new products, and to hire more employees".

In many ways, the budget delivered by finance minister Enoch Godongwana this week suggests the government has committed itself to play no small role in the creation of jobs.

In his maiden budget speech, Godongwana announced: "Over the medium term, R76bn is allocated for job-creation programmes".

If one considers that figure against the number of unemployed people in SA — 7.6-million — then it seems the government is planning to spend R10,000 per new job over the next two years (assuming the plan works).

The presidential employment scheme, which aims to put SA’s more than 3-million unemployed youth to work, is set to receive R18.4bn over the next two years.

This means the government will invest R3,000 per job per year in its efforts to get young people into employment. If it were to target only 1-million of SA’s unemployed youth, then each job — assuming it is effectively created — will cost the government R8,400.

Within the job-creation debate, many agree with Ramaphosa that small business is the key to the creation of employment. However, there’s a perennial concern about funding for SMEs, with the International Monetary Fund flagging weak lending to the private sector, especially SMEs, in its recent country report on SA.

In this regard, Godongwana announced some measures towards funding small businesses — especially their recovery in the wake of Covid. This funding includes R15bn in loan guarantees, allocated through participating banks and development finance institutions, and "a business equity-linked loan guarantee support mechanism" bringing the total "bounce-back scheme" to R20bn.

However, at a recent discussion on expectations around the budget, one participant argued that the best way to fund a business is through its customers.

We also know that the government is a critical customer to many businesses, buying a range of goods and services.

In this regard, Godongwana noted the Constitutional Court judgment setting aside preferential procurement regulations due to technicalities in how they were promulgated. But the government will need to work quickly to resolve the issues flagged by the court (and arising from the Zondo commission of inquiry into state capture) to ensure SMEs don’t find themselves outside the government’s procurement ambit for too long.

Connected to this is the R364.4bn the government spends on social grants. Many argue that money in the hands of South Africans can help drive consumption, and thus boost growth and employment.

However, a great part of what we consume — especially basic food stuffs such as rice, oils and vegetables — are imported. This means that purchasing and consumption of food, at least, can lead to a leakage of funds, rather than the growth and employment so many assume.

There are clearly positive indicators in the government’s approach to job creation: meeting the demands of stakeholders such as trade unions for job creation, and ensuring the support of SMEs and state-owned enterprises — in principle, at least. The major task ahead, of course, is implementation — making sure that the drivers responsible for delivering jobs are adequately resourced to do so.

All told, the jobs the government plans to create — coupled with the spend on education, which underpins the ultimate skilling of the workforce — account for as much as a third of the national budget.

That’s a lot of money. Which means Godongwana’s budget is not only about allocating money to the right areas and causes; it is about the stewardship of those funds.

Sadly, this is an area where SA has shown itself to have a poor track record.

*Payi, an economist and head of research at Nascence Advisory & Research, writes about labour issues