Unemployment time bomb
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Lindile Ndlovu
Aug 13, 2007, 5:28:06 AM8/13/07
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Unemployment time bomb
Khathu Mamaila, City Press, 12 August 2007
It’s a done deal. Reserve Bank governor Tito Mboweni will in all
likelihood increase the repo rate this Thursday.
Again he will give the old explanation for his decision – the need to
keep inflation under the mythical 6%.
Of course there is a need to keep inflation under control. We would not
want to be like Zimbabwe with hyperinflation.
In all fairness, some of the contributing factors to the higher
inflation are external and Mboweni can hardly influence them. One of
these is the high price of oil.
What the South African policy- makers ought to ask themselves is what
is the key priority for the country. If they are honest, they will
arrive at one conclusion – job creation.
So, once there is consensus that job creation is the number-one
priority, then the policy options should be in line with meeting that
objective.
Officially, unemployment is at about 25%. This is conservative because
the figure does not include people who have given up looking for work.
According to the labour movement, unemployment is at about a staggering
40%.
This is a ticking time bomb. In fact, in some parts of the country, it
has exploded as more people take to the streets to demand service
-delivery.
The common thread connecting the mass protests in various towns is the
demand for houses. It is safe to assume that people who believe that
the state should build them houses are unemployed.
But if these people could get jobs, they would stop their dependency on
the government for things that employed people can get for themselves.
People such as Finance Minister Trevor Manuel are on record as saying
that the current spending patterns on welfare are unsustainable. They
are right.
The government’s strategic objective should be to create more jobs to
free people from viewing the state as the sole supplier of their most
basic needs.
Despite Mboweni’s consistent denials, the Reserve Bank has always
sought to protect the rand. It favours a stronger currency.
While this may be good for a few rich people who travel overseas for
holidays, it is not good for the manufacturing sector and the -export
market.
A stronger currency undermines the country’s efforts to -focus on job
creation.
With a weaker rand, South African products are cheaper in the
international markets.
As the -demand for domestic products -increases, the capacity to meet
the demand will have to be increased, thus more people will have to be
employed.
With a weaker rand, South Africans’ appetite for foreign products that
are sold in US dollars will decrease. This would go a long way in
reducing the deficit in our trade balance.
But more importantly, if foreign products are more expensive, this can
stimulate domestic producers to fill the vacuum and advance job
creation.
The argument for the benefits of a weaker rand is not new. What may be
new is the emerging evidence that we cannot -afford high unemployment
any longer.
The high rate of crime has some of its roots in unemployment. There is
a general breakdown of the moral fibre of our societies that can be
traced backed to unemployment.
Aids – one of the key challenges we are facing – also tends to flourish
in conditions of poverty and unemployment.
We should get our priorities right. We need jobs.
The problem is that the unemployed do not have a voice. The -labour
movement represents the employed.
The policy-makers and government in general tend to be more concerned
about the formal economy.
The signs are there. The unemployed are getting restless. They too want
to reap the benefits of the growing economy.
And unless the right interventions are made, we may have to kiss our
economic and political stability goodbye.
Khathu Mamaila, City Press, 12 August 2007
It’s a done deal. Reserve Bank governor Tito Mboweni will in all
likelihood increase the repo rate this Thursday.
Again he will give the old explanation for his decision – the need to
keep inflation under the mythical 6%.
Of course there is a need to keep inflation under control. We would not
want to be like Zimbabwe with hyperinflation.
In all fairness, some of the contributing factors to the higher
inflation are external and Mboweni can hardly influence them. One of
these is the high price of oil.
What the South African policy- makers ought to ask themselves is what
is the key priority for the country. If they are honest, they will
arrive at one conclusion – job creation.
So, once there is consensus that job creation is the number-one
priority, then the policy options should be in line with meeting that
objective.
Officially, unemployment is at about 25%. This is conservative because
the figure does not include people who have given up looking for work.
According to the labour movement, unemployment is at about a staggering
40%.
This is a ticking time bomb. In fact, in some parts of the country, it
has exploded as more people take to the streets to demand service
-delivery.
The common thread connecting the mass protests in various towns is the
demand for houses. It is safe to assume that people who believe that
the state should build them houses are unemployed.
But if these people could get jobs, they would stop their dependency on
the government for things that employed people can get for themselves.
People such as Finance Minister Trevor Manuel are on record as saying
that the current spending patterns on welfare are unsustainable. They
are right.
The government’s strategic objective should be to create more jobs to
free people from viewing the state as the sole supplier of their most
basic needs.
Despite Mboweni’s consistent denials, the Reserve Bank has always
sought to protect the rand. It favours a stronger currency.
While this may be good for a few rich people who travel overseas for
holidays, it is not good for the manufacturing sector and the -export
market.
A stronger currency undermines the country’s efforts to -focus on job
creation.
With a weaker rand, South African products are cheaper in the
international markets.
As the -demand for domestic products -increases, the capacity to meet
the demand will have to be increased, thus more people will have to be
employed.
With a weaker rand, South Africans’ appetite for foreign products that
are sold in US dollars will decrease. This would go a long way in
reducing the deficit in our trade balance.
But more importantly, if foreign products are more expensive, this can
stimulate domestic producers to fill the vacuum and advance job
creation.
The argument for the benefits of a weaker rand is not new. What may be
new is the emerging evidence that we cannot -afford high unemployment
any longer.
The high rate of crime has some of its roots in unemployment. There is
a general breakdown of the moral fibre of our societies that can be
traced backed to unemployment.
Aids – one of the key challenges we are facing – also tends to flourish
in conditions of poverty and unemployment.
We should get our priorities right. We need jobs.
The problem is that the unemployed do not have a voice. The -labour
movement represents the employed.
The policy-makers and government in general tend to be more concerned
about the formal economy.
The signs are there. The unemployed are getting restless. They too want
to reap the benefits of the growing economy.
And unless the right interventions are made, we may have to kiss our
economic and political stability goodbye.
Lindile Ndlovu
Alternative Information and Development Centre (AIDC)
129 Rochester Road
Observatory
7925
Tel: 021 447 5770
Fax 021 447 5884
Cell: 073 074 0110
www.aidc.org.za
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