Overview
• The New Growth Path: A brief overview
• The spatial challenge
• Implications for provinces
• Implications for municipalities
SONA 11 February 2011
• “We have declared 2011 a year of job creation through meaningful economic transformation and inclusive growth.
• “We have introduced a New Growth Path that will guide our work in achieving these goals, working within the premise that the creation of decent work is at the centre of our economic policies.” …
• “All government departments will align their programmes with the job creation imperative. The provincial and local spheres have been requested to do the same.
• “The programmes of the State Owned Enterprises and development finance institutions should also be more strongly aligned to the job creation agenda.”
The jobs challenge
Labour absorption (Percentage of people aged 15-64 who are employed) (ILO)
South Africa 41,3%
Egypt 43,2%
India 55,6%
Argentina 56,5%
South Korea 58,1%
Malaysia 60,5%
Brazil 63,9%
China 71,0%
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8
12
16
20
24
28
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1980 1985 1990 1995 2000 2005
Mil
lio
ns
Working age population growth (1980-2009) =
Labour Force growth (1980-2009) = 1.9%
gap = unemployed + not participating
New global context• The rise of new economic
powers– China, India, Brazil– Scramble for Africa’s
resources• Economic fragility
– Imbalances and systemic weakness remain
– Slow recovery in global North– Policy space
• Climate change – and new massive green industrialisation wave
• Technological innovation – jobs for the future
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0
10
20
30
40
50
60
70
80
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
% o
f glo
bal G
DP China
India
South Africa
Brazil
Japan
United States
Western Europe
world GDP and national shares calculated using PPP dollars (IMF WEO)
estimatedactual
China – an example
What we sell: Top 10 Exports1.Iron ore2.Ferro-Alloys3.Chromium ores4.Manganese ores5.Platinum
6.Flat-rolled steel
7.Wool (raw)
8.Copper waste and scrap
9.Zirconium and vanadium ores
10.Nickel plates, sheets and foil
What we buy: Top 10 Imports1.Cell-phones and phones2.Computers3.Printing machines4.Plastic and rubber boots5.Televisions and monitors6.Kettles, microwave ovens and toasters7.Dresses and women’s jackets8.Suitcases and bags9.Sports shoes10.Computer and cash register parts and accessories
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The New Growth Path
• Addresses– Deep-seated structural
problems that lead to high joblessness and inequality
– Specifically have to turn around major job losses in recent crisis
– Take advantage of opportunities in regional economy and changing global conditions
• The process– Builds on mandate to prioritise
employment creation
– Approved by Cabinet in October 2010
– Cabinet lekgotla identified priorities for 2011/12, reflected in SoNA
• Requires alignment by all spheres and agencies of the state, with regular reporting on what they are doing to support employment creation and growth
Employment intensity and growth
• To achieve jobs target requires growth AND greater employment intensity of growth (employment increase relative to GDP growth)
• Employment intensity of 0,2% would require a growth rate of over 15%; employment intensity of 0,8 would require a growth rate of 4%
• Debates about historic intensity of growth: 0.8 from 1996 (Census data) to the second quarter of 2010 (QLFS data); 0.5 from 2001 (LFS data) to the second quarter of 2010 (QLFS data); and .67 from 2002 (LFS data) to the second quarter of 2009 (QLFS data).
5 million new jobs by 2020
Identify key jobs drivers where employment is
possible
Identify what is needed to achieve
the jobs and investment
New opportunities in changing
regional & global environment
Private sector: how to align outcomes
with jobs goals
Key steps by the state: directly and
in facilitating broader growth
The approach:
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Look for employment opportunities in “jobs drivers” and implement policies
to take advantage of them
InfrastructureEnergy, transport, communications,
water,housing.
Spatial opportunities:
Rural development
African regional development
Main economic sectors:
Agriculture & agroprocessing
Mining and beneficiationManufacturing (IPAP2)Tourism/other services
Social capital:The social economy
The public sector
New economies:Green economy
Knowledge economy
Jobs drivers
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Policy drivers
• Macro-economic strategy: counter-cyclical/support a competitive rand– More relaxed
monetary policy
– Address inflationary pressures through fiscal policy and targeted micro-economic strategies
1. Address cost drivers and inflationary pressures across the economy
2. Active industrial policy based on increasing competitiveness and targeting sectors that can create employment directly and indirectly
3. Comprehensive rural development
4. Stronger competition policy
5. Stepping up education and skills development
6. Enterprise development
7. Reform of Broad-Based BEE
8. Reform labour policies to support productivity and improve protection for vulnerable workers
9. Technology policies geared to improving innovation in ways that support employment creation and small- and micro-enterprise
10.Developmental trade policies with a strong orientation to new growth centres
11. Investment to support African development
Training at centre of new growth path
Key skills targets Engineers: 30 000Artisans: 50 000 by
2014/15 Broad-based workplace training:
10% of workforce or 1,2m workers on
training
Increase FET college intake to
1 million students
Computer skills at all schools, training for all
public servants
Sufficient resources for
training
Easier recruitment of foreign skills
coupled with skills transfer plans
SOEs to target artisans.Review of
SETA performance.
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Policy driver: Development
policy package
Looser monetary policy stance to support a more competitive (and stable)
exchange rate and reduce cost of investment Additional measures
to depreciate and then stabilise the rand, as required
Measures to address inflation
focussing on volatile prices
More restrained fiscal policy reflected in
around 2% real growth in expenditure
Address main cost drivers to
enhance competitiveness
Support higher savings including
through retirement-fund reform and
reduce the cost of industrial finance
Pact with organised labour and business on wages and
prices, protect the social wage and support job creation
Eliminate waste and
ensure rigorous reprioritisation
of budgets
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Resource driversResource drivers:• state budgets (national,
provincial and local)• the resources of SOEs
and DFIs• Universities and science
council resources• retirement funds• the domestic private
sector • international investment• donor funding• community-owned
financial institutions such as stokvels and co-ops.
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• SoNA:– R9 billion in the Jobs Fund
over the next 3 years – public employment schemes plus subsidies to private employers
– R10 bn from the IDC in next 5 years for job-creating projects
– R20 billion in investment subsidies
– Comprehensive support for SMEs
Institutional driversThe developmental state• Agile, responsive,
learning• Profound shift in
culture – from compliance/process to delivery/outcomes
• Alignment around growth path – review budgets, programmes and procurement policies
1. The DFIs (IDC, DBSA, Land Bank, Khula, SAMAF, NEF)
2. The GEPF and the PIC, as crucial investment drivers
3. The SARB, within its Constitutional mandate
4. The infrastructure SOEs (Transnet and Eskom)
5. ITAC and Customs & Excise
6. The Competition Commission/Tribunal and other regulatory, standard-setting and accreditation bodies
7. The science councils, universities and Mintek
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SOCIAL DIALOGUE• Time-consuming – but crucial• Deepen dialogue at sector and workplace• Strengthen institutions from constituencies to NEDLAC• Mobilise South Africans behind a vision
Institutional drivers outside the state
BUSINESS• Business and markets vital –
jobs, investment, entrepreneurship, technology
• Large companies linked to national-base
• Developmental state not simply hostage to market forces and vested interests: through careful alliances, clear purpose and leveraging its resource and regulatory capacity, can align market outcomes more clearly with development needs
LABOUR• Resources include skills commitments,
productivity-agreements, retirement funds, union investment vehicles, wage agreements, public service delivery
• Without a common vision and strategic unity, not possible to make real progress and the society will simply exhaust itself on policy polarisation, while the extent of the developmental crisis grows
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In other words…
…a comprehensive response to the structural crises of poverty,
unemployment and inequality…
…based on solidarity across society
A dual challenge around geography• Apartheid space
was designed to enforce marginalisation and disempowerment– The Bantustans
as labour reserves
– Townships far from jobs, adding to the cost and difficulty of employment
– New administrations at municipal and provincial level
– Limited coherence on economic policy with national sphere
– Institutions and systems in some areas weak and under-funded
– Particularly in former Bantustans where revenues are low and it’s hard to attract skills
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-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Northern Cape
Free State
North W
est
Limpopo
Mpum
alanga
Eastern Cape
Western Cape
KwaZulu-N
atal
Gauteng
Mill
ions
of
rand
Provincial GDP, 2009
Manufacturing
Finance, real estate and business activities
Other
Inequalities in economic activity and opportunities
• Gauteng, KZN and the Western Cape account for – Just over half the
population– Two thirds of the GDP– Two thirds of all formal
employment and all private employment although only half of public employment
– Three quarters of manufacturing and of financial/business services
The employment challenge
• The labour absorption rate – the share of the population with employment – is around 64% internationally, but only 41% in South Africa
• Much lower in former Bantustan regions than in the metros and secondary cities
• Reflected in provincial disparities, with the lowest labour absorption rates in Limpopo and the Eastern Cape
0%
10%
20%
30%
40%
50%
60%
Limpopo
Eastern Cape
North W
est
KwaZulu-N
atal
Northern Cape
Mpum
alanga
Free State
Gauteng
Western Cape
Employment ratio, 2010
Municipal differences
• Differences in economic opportunity translate into huge differences in incomes
• Incomes in the former Bantustans are around a tenth as high as in the metros and secondary cities
• Income inequalities mean that average incomes are much higher than medians in all cases -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Major urban centre Rural and small town former RSA
Mostly former Bantustan
average median (roughly)
The result: Huge differences in municipal revenue and capacity
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Mostly in former Bantustans (R400 pc; 70% subsidies)
Rural and smaller towns in former
RSA (R2100 pc; 20% subsidy)
Major urban centres (R4300 pc;
20% subsidy)
Billion
s of ra
nd
Subsidies
Own income
Municipal revenue by source, 2009
0
5
10
15
20
25
30
Major urban areas (R1290 pc)
Rural and small town former RSA
(R710 pc)
Mostly in former Bantustans (R230
pc)
Billion
s of ra
nd
OtherDonationsOwn incomeLoansGrants
Funding of capex by source, 2009
The New Growth Path response• The economic strategy:
– Develop a realistic spatial perspective – what can we do to improve conditions in every region?
– Ensure support from SOEs and DFIs
– Drive rural development to create livelihoods in impoverished regions
– Make economic centres (metros and secondary cities) more efficient
• Governance:– Support improved
communication and alignment between spheres on economic strategies
– Tailor implementation of NGP to realities of different regions
– Clear and practical annual priorities
– Improve understanding of the employment impact of projects, programmes and regulations, with regular reports
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In the coming year...• Improve alignment between settlement patterns and
economic activity in the long run• Better planning to secure outcomes (eg power station
with human settlements, water, industry)• Improve connections between economic policy
departments in provinces, municipalities and national government, based in – Strengthening the Economic Development MinMEC– Clear prioritisation amongst economic programmes and
projects
• Address regulatory inefficiencies in economic centres (metros and secondary cities)
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Provinces – initial areasof joint action• Align provincial and national economic plans• Integrated green economy plan developed by IDC for
all provinces• Provincial impact of infrastructure• Small business agencies: coordinated, one-stop shop• Agro-processing: connect the opportunities in a
systematic way• Procurement: review of regulations that will provide
provinces with new opportunities• Jobs goals to be developed by each province.
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The contribution of SOEs and DFIs
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
North W
est
Limpopo
Mpum
alanga
E Cape
Gauteng
Free State
N Cape
W Cape
KZN
Transnet - employment from mega projects, including suppliers
Rail Ports Pipelines
0%
5%
10%
15%
20%
25%
30%
35%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Free State
Mpum
alanga
North W
est
Western Cape
Limpopo
Eastern Cape
Northern Cape
KwaZulu-N
atal
Gauteng
Share of GD
P
Valu
e in
Rm
ns a
nd n
umbe
r of j
obs
IDC disbursements, 2006 to 2010
Value (millions of rand)
Estimated employment impact
Province's contribution to national GDP (2009)
Eskom
• Major plants located near coal reserves, with localised employment effects– Should create 2000 new jobs in the coming year
• Main employment impact from maintaining electricity supply across the country
• Also create jobs in all provinces through– Procurement from build programme– Electrification programme– Municipal electricity maintenance
Working with the DFIs and SOEs• NGP should drive a spatial vision that
increasingly shapes projects from DFIs and SOEs
• EDD is working with the IDC, Khula and SAMAF to align with requirements of employment creation and equity in spatial terms
• Improve communication flows between spheres to maximise impact
Conclusion
• 2011 is a year of job creation• Coordination of policy, regulation, planning and implementation
across government is critical• Involve communities• The public sector contributes directly and by creating conditions for
new private activities that can generate new opportunities on a mass scale
• Social partners - business, labour and civil society - have a crucial role to play
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