“It cannot continue like this”, they say. But it does. It is clear that a whole collection of things must change for South Africa to break free from its steadily growing mass unemployment.

Some of those changes are in the so-called ‘macro-economic framework’, established with the GEAR programme in 1996. Others must address the colonial and apartheid legacy. And some lie between the two.

Policies that stem from the macro-economic framework include: 

• Gradual deregulation of financial markets. This has left South Africa with one of the highest interest rates globally, whether on government bonds or any type of credit to individuals or for local business investment loans.
• Signing the WTO ‘free trade’ agreement. This eliminated protections for domestic industries, which severely impacted sectors like textiles and leather.
• Stifling public service sector growth for ten years with tax cuts. This was followed by austerity and now harsher and harsher budget cuts. This has shrunk the public service (including employment of frontline staff) and created more space for private capital, procurement and privilege. This has been done supposedly in the belief that the gains of the minority who benefit will eventually trickle down to the impoverished majority. 
• Insisting that the bloated R2.3 trillion Government Employee Pension Fund (GEPF) must act as a profit-maximising financial investor, lending to the indebted government and parastatals like Eskom at market rates. It is also the largest buyer of shares on the Johannesburg Stock Exchange (JSE). 

Policies that come from the colonial apartheid legacy include: 

• The failed dogma of an “export-led growth path”. This prioritises the extraction of minerals to sell abroad, with infrastructure projects that serve extractivism. In South Africa, this has the status of ideology, dominating government and ruling class thinking. The result is an undiversified and monopolised economy which is steadily deindustrialising. 
• The persistence since 1994 of the racist low-wage regime. One-half of the labour force that does have employment takes home less than half of the value they create every year. This strangles economic demand for ordinary goods and services in the domestic economy. Weaker trade unions and the pressure from the growing army of the unemployed add to the old legacy. 
• The world-beating inequality. This contributes to suppressing any normal domestic economic demand. A recent report on the retail sector found that the highest paid earned between 155 and 1,308 times more than the lowest in companies like Woolworths and Pick n’ Pay. 

Increase demand with better wages

The retail example illustrates how weak the unions are in that sector, but the same can be said about the South African coal mining industry. In 2005, the sector employed a little more than 50,000 workers. Today, it employs over 90,000. Coal mining is one of the few industries thriving in South Africa. It thrives from selling the best coal to China and India, making Eskom’s economic life difficult in the name of free trade. This is the export-led growth path. 

The fall of the wage share of the national income, from about 50% in 2015–2016 to 45% in 2021, meant a total accumulated loss of R390 billion in domestic economic demand over five years.

Yet, in this coal industry, the share of value produced that is paid in wages has gone down. This combines the legacy of colonialism and apartheid with the dominant economic policy. The share of value-added that doesn’t go to wages goes to profit—it goes to capital, the owners of the mines. In short, workers have been getting less, and shareholders have been getting more.

This fall in the labour share of value added (or Gross Domestic Product) is an international fact. Since 1995, the labour share in the industrialised OECD countries has fallen by four percentage points, on average. Weaker unions are pointed to as the reason: “For firms to stay globally competitive, they need to suppress production costs, and reducing costs through wages is a commonly used solution”. But this reduction in the wage share puts a big hole in domestic demand. The result is growing unemployment, even in the Global North. 

So, one key component of a strategy to reduce mass unemployment in South Africa is higher domestic demand. Wages must become higher, at the expense of profits, in mining, on farms, and at the big retailers. This means that the trade union movement has to be rebuilt, not only to oppose immediate threats of retrenchments but also to revive the buying power of workers.

Public works programme

However, no government on earth can break out from a situation of mass unemployment without starting up equally massive programmes for public employment. This historical truth is even more compelling in South Africa. 

South Africa has suffered two unemployment shocks since 1994: a loss of one million jobs during the global financial crisis in 2008. Then we had the Covid lockdown in 2020. But ours is not only about recovery from shocks. And mass unemployment is not about an office in Sandton entering the ‘Fourth Industrial Revolution’. We have chronic growth in mass unemployment, which we must break out of.

It is obvious where large public projects for repair, maintenance and new building could start: a lot would be about employing people in long-term unemployment and youth. We have a country-wide water and sewage infrastructure crisis in cities, towns, townships and informal settlements. We have millions of people living in shacks. Victims of the climate crisis floods in KwaZulu-Natal and elsewhere are still displaced. Rural schools are falling apart. Local, regional and even provincial roads are either in a terrible state or need repairs. There is no shortage of need.

Instead of beginning to satisfy these needs, however, the infrastructure agenda is dominated by the building out of the Durban harbour, the R20 billion N2 Wild Coast project and the R25 billion highway expansions in KZN, managed by a bankrupt Sanral. These are private-public partnerships funded by the Treasury, which borrows funds from the markets. In short, this is a mineral export infrastructure programme designed to create profit, not employment.

At the same time, the DA-ANC coalition in KZN is scaling down infrastructure support programmes for water and electricity infrastructure and small-town repairs by close to 50%, citing “budget cuts”. 

To finance such public programmes, a progressive government would first look at the funds that are under its control. It would get rid of the neoliberal paradox in the national budget, where the biggest creditor to the budget is the state pension fund GEPF, lending at commercial rates. This fund should act as a public resource for cheap and long-term borrowing—the proper role of a public pension fund. 

This could provide funds for SARS to stop endemic tax evasion. In 2019, the Davis Tax Committee noted that Global Financial Integrity estimated tax losses of more than $122 billion between 2003 and the end of 2012. And it certainly hasn’t stopped since then.

Focus on the unemployed, not on business

In May, before the elections, President Ramaphosa promised that an ANC government would create “one million new jobs per year for five years”. At the beginning of September, he announced that the first of three “strategic priorities” of the ANC-DA coalition and its hanger-on parties is “inclusive growth and job creation”. 

The wage share of value added in coal mining since 2010 has mimicked the situation in South African agriculture. According to Stats SA, coal miners and farm workers are equally exploited.

But there is one caveat—it must happen via the private sector: “We all know that the government doesn’t create jobs. Business creates jobs”, said President Ramaphosa in his 2022 State of the Nation Address (SONA), mindlessly re-iterating the neoliberal mantra. DA leader John Steenhuisen commented that it was “directly from the DA playbook”. 

In this playbook, the focus is not on unemployment and the unemployed. The focus is on business—creating a “conducive environment” for business owners and corporations. To the political right-wing, employment and “inclusive growth” are side-effects of this. Unfortunately, the data shows it hasn’t worked. 

For progressives and the Left, the focus is on unemployment and the unemployed: on employing people to get things done that have to be done—build houses on a mass scale, fix the infrastructure that Ramaphosa’s approach has left to rot, staff the health service properly, the list is endless. We have a debilitating crisis in public health and education, but the provincial governments are cutting staff. We have students by their tens of thousands who have completed education as doctors, nurses, and other professions, but they sit at home. 

Everything else follows from this approach, including stopping society from falling apart as a result of criminality, violence and drugs. 

The economic policies of the DA and the ANC have had a love affair for over two decades. Sometimes, they were close. Sometimes, they were a bit more distant. Now they are finally married and in bed together, where they belong. The rest of us must build the alternative that will bring jobs. Their approach is doomed to failure. 

Dick Forslund is an economist at the Alternative Information and Development Centre (AIDC).