Let Economic Recovery Count for the Poor

unemployment Eastern Cape
Wednesday, 2 June, 2010 - 09:53

The Eastern Cape Province lost more jobs than the country as a whole in proportionate terms during the global economic downturn. Despite the losses suffered by big businesses, collective losses to thousands of families, by far outweigh the losses by the former. The provincial budget should reflect an explicit appreciation of the need to grow the economy and create meaningful jobs

Since the global economic slump set in almost two years ago, there has been a flurry of activities aimed at returning economies back on track and, mercifully, signs are starting to emerge that the worst has possibly been shoved behind us, at least for now. Indeed, according to the latest quarterly bulletin of the South African Reserve Bank (SARB), recovery in global economic activity gained momentum in early 2010. This is thanks to the large-scale monetary and fiscal stimulus that continued in many parts of the World.

A bit of wind was, however, taken out of the sails by doubts over creditworthiness of certain large businesses as well as the highly indebted countries, most of which are in the less developed regions of the world not to mention the Greek woes that received a belated relief from the European Union in late March. Moreover, policy adjustments aimed at checking an upsurge in the general price level in the United States of America and China tended to result in a less than welcome credit squeeze while jittery investors, quite rightly, had it at the back of their minds that state stimulus packages were merely transitory initiatives that would disappear sooner than later.

In South Africa, the global economic mess caused an economic contraction in early 2009 resulting in a real gross domestic product (GDP) decline by 1.8 percent - a concomitant of which was a sharp decline in employment and a huge dent on household incomes, especially the poor ones. In his budget speech, the Eastern Cape MEC for Finance, Mcebisi Jonas, noted that according to South Africa’s labour force survey, about 95 000 jobs were lost across the province between the final quarter of 2008 and the final quarter of 2009 - a significant seven percent of all the jobs in the province. This in part implies that certain sectors continued shedding jobs well into the period when the recovery was underway. As a result, the Eastern Cape is said to have lost more jobs than South Africa as a whole in proportionate terms. These massive job losses, unfortunately, set the province back five years in terms of job creation - returning to employment levels registered in 2004. The worst culprit in the job-shedding frenzy was the motor industry which laid off up to 52 000 workers.

Alongside the rest of the global economy, as noted above, the South African economy has crawled back slowly into a recovery path. In general terms, the post-election period in 2009 coincided with a gradual positive growth of the economy, but certainly not sufficient to provide much tangible relief to the battered economy. That is why you probably dismissed me as being crazy for suggesting, way too early, that the benefits of the recovery be brought to bear on the poor. In any case our trickle down economics do not allow for such ‘reckless’ policy options that have the potential to upset the markets and jeopardise the very growth that we yearn for.

But the model deems it perfectly in order to bail out ailing big businesses — supposedly to save jobs and keep corporate ‘fat-cats’ in a productive mood. Well, the model is deeply flawed and seemingly, we are clueless when it comes to making the markets work for the poor. But do we try hard enough to whip the market into working for all and therefore contribute to equitable beneficiation? Or are state operatives too tightly enmeshed to the big business interests to notice the travails of the less fortunate in the society?

Although huge losses were undoubtedly suffered by the big businesses, the collective losses to thousands of families whose breadwinners lost jobs by far outweigh the losses by the former. The multiplier effect of their meagre wages has an enormous impact on the local economy and once they are out of a job, there is a negative knock-on effect on numerous sectors of the economy not to mention the direct adversity to their families’ social-economic wellbeing. To its partial credit, the national government deemed it fit to adjust upwardly, social transfers and even broaden the reach to cover more children. One has to hasten to say that this should not constitute a long-term strategy of fighting poverty, because it is certainly not sustainable.

The state’s other initiative around Expanded Public Works though a noble one is fraught with numerous challenges and politicisation that may render it just as good as other initiatives that were supposedly meant to help or empower the vulnerable but ended up being new avenues for rent-seeking behaviour and political patronage. Already the bad manners exhibited by senior ruling party operatives appear to be rubbing off on the increasingly roguish African National Congress Youth League . Recently it was reported that in the Nkonkobe municipality (Amathole DM) ANCYL members were denying fellow youths participation in a non-party initiative, allegedly because the opportunities were only meant for ‘cadres’. In other words, one had to become a paid-up member of the party in order to enjoy the conventional rights of an ordinary citizen! Unfortunately, this is becoming a standard experience for many job-seekers who are not ‘connected’.

In spite of the good intentions (in some cases), our responses to the challenges of the moment are unlikely to yield the desired results. For instance, the Eastern Cape’s current budget was totally unable to come up with credible strategies for creating jobs. It even had no response to the most recent job losses. The references to the on-going recovery in the motor industry as a positive sign of better things to come offers no immediate relief to the newly jobless. In fact, the rather sluggish pull out of the recession just adds to the despair of the thousands that were already waiting on the wings prior to the economic slump. Hopefully, the Reserve Bank’s recent decrease in the interest rates to 6.5 percent will spur a bit of growth as businesses take advantage of cheaper funds.

Even so, there is still a lot more that the state can do to shore up market-driven growth while at the same time addressing equity concerns in a manner that produces a win-win outcome for all. But it has to start by re-examining its approaches and the actual implementation of its initiatives. For instance, budgets should reflect an explicit appreciation of the need to grow the economy and create meaningful jobs. Although the recent Eastern Cape budget attempted to align its estimates with priorities around improvement of the quality of education and health services, rural development and even the fight against corruption, only about eight percent was set aside as the capital component of the budget. Our recurrent expenditure is astronomically too disproportionate to our development budget. It is not clear how this is supposed to reflect a genuine desire to address our numerous developmental challenges.

All the spheres of the state need to re-look at just how they implement some of the rosy policies and sound programmes that have been put on paper. The provincial state has to show willingness to curb wastage of public revenue within its ranks and look into ways of strengthening its oversight role over the municipalities. As things stand, the COGTA-driven Turn-around Strategy (TAS) that was hailed as a real roadmap to deliver municipalities out of the quagmire of dismally poor service delivery performance appears to be in limbo. Targets and deadlines are starting to be breached and stakeholders have conveniently been shunted by the wayside.

On its part, the national state must stamp out the shameless pilferage and rent-seeking behaviour which are quickly becoming the past-time for politicians and top bureaucrats alike. Also, government in general has to depart from the idea that you only need to throw money at challenges for them to dissipate. While our increased budgetary allocation to the social sector is commendable, supervision of how services are rendered is even more important. Not all poor health services are related to lack of drugs and equipment — over 50 percent have to do with an indifferent attitude among healthcare givers, just like much of the dismal performance in our schools is attributable to indiscipline among learners as well as ineptitude among a section of our teachers.

All these things happen because no one is held to account for their acts of omission or commission - needless to say that it’s the poor that invariably bear the brunt of the resultant mess. The state has to move away from hollow rhetoric to the active pursuit of its stated developmental objectives. This endeavour must reflect a practical desire to broaden access to the benefits of growth and even to the means by which to attain economic growth and development. Much as the various so-called empowerment schemes are important, they have failed to rope-in the majority. They only seem to benefit politicians and their cronies. Crucially, we should be alive to the fact that the perpetual marginalisation of the majority is not sustainable. The growing inequality is a ticking time-bomb. Remedial measures are required sooner than later for chickens will, inevitably, come home to roost.

- Peter Kimemia manages all programme activities including project staff and resources at
Afesis-corplan. His current research focus is on promoting good local governance practice.

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