South Africa

Big job creation lie in South Africa

South African politicians promise mass job creation ahead of the 2024 general elections, as unemployment is one of the country’s most pressing problems.

However, few acknowledge that creating jobs means the government should enable the private sector rather than trying to do it itself.

Over the weekend, Build One South Africa (BOSA) leader Mmusi Maimane promised to create 2 million jobs over the next five years.

He said BOSA would ensure at least one job in every South African household, which would require 2 million new jobs.

Maimane hit all the right notes, including a monthly minimum living wage of R6,700, fixing education, tackling inequality, getting investment, and fixing Eskom.

However, like all politicians, he was scant on details on how BOSA would ensure that the problems were fixed.

If Maimane’s 2 million jobs plan sounds familiar, it is because numerous South African politicians have promised the same.

In 2011, former President Jacob Zuma promised to create 5 million jobs over ten years. It translated into creating 500,000 jobs per year.

Zuma’s 5 million jobs plan failed spectacularly as South Africa’s unemployment rose rapidly during his presidency.

In April 2020, President Cyril Ramaphosa committed that R100 billion would be invested in job creation as a stimulus package for the country.

The Presidential Employment Stimulus was an ambitious plan to create and support over 800,000 jobs within six months.

South Africa’s unemployment rapidly increased during this employment stimulus plan, raising questions about its effectiveness.

Mmusi Maimane, leader of Build One SA (BOSA)

The major problem is that the government should not be a job creator. Its task should be to empower the private sector to grow the economy and create employment.

Renowned economist Professor Thomas Sowell said it is important to consider what it takes to create a job.

“It takes wealth to pay someone who is hired and additional wealth to buy the material that person will use,” he said.

“The government creates no wealth. Ignoring that fact enables politicians to claim to be able to do all sorts of miraculous things they cannot do.”

It raises the question of how the government, without creating wealth, can create jobs. The ANC government is notorious for its job creation claims.

The only way for the government to create jobs is by taking wealth from others – whether by taxation, selling bonds, or imposing mandates.

Simply put, it is done by transferring wealth. It is not creating wealth when the government uses transferred wealth to hire people.

The government is, therefore, taking money from an efficient private sector and moving it to an inefficient, incompetent, and corrupt public sector.

The government is essentially transferring jobs from the private sector. It is not adding to the net number of jobs in the economy.

Another thing politicians love is to mandate benefits that employers must provide for workers. It includes a minimum wage and making it difficult to fire a worker.

“Politicians gain politically by seeming to give people something for nothing,” Sowell explained. They get votes through their misguided “worker-friendly” policies.

The only thing these policies achieve is to make workers more expensive. It means that fewer people will be hired, especially during an economic recovery.

Another way of reducing the cost of the government-imposed mandates is hiring temporary workers to whom the mandates do not apply.

“There are millions of unemployed people who could be hired for regular jobs if it were not for the mandates that politicians have imposed,” Sowell said.

“Economists have long been saying that there is no free lunch, but politicians get elected by seeming to give free lunches in one form or another.”

Economist Thomas Sowell

The argument from politicians is often to tax the rich to fund job creation programmes or pay basic income grants. However, there are not enough rich people to make it work.

South Africa’s rapidly growing spending on grants is a great example. Instead of growing the economy and employment, more people rely on grants to survive.

The number of people receiving government grants increased from 2.5 million in 1994 to 28 million in 2023. With only 7.1 million taxpayers, it is unsustainable.

However, the government is not slowing down. It is borrowing record amounts to continue paying grants and is doubling down on “worker-friendly” policies.

The people who pay the highest price for misguided political policies around employment are poor people.

“A classic example is the minimum wage law. Minimum wage laws appear to give low-income workers something for nothing,” Sowell said.

“People with low skills or little experience usually get paid low wages. Passing a minimum wage law does not make them any more valuable at a higher wage.”

In reality, forcing employers to pay people higher wages makes many low-skilled and inexperienced workers expendable.

These people, who desperately need employment and experience, are left unemployed without the prospect of a better life.

It raises the question of why politicians love things like raising the minimum wage. It is because appearances are what count in politics – not reality.

So, while South Africa continues to suffer from slow economic growth and high unemployment, politicians continue to fight for votes with cheap rhetoric of creating jobs.

Expect more promises of grandiose job creation plans which will fight inequality, reduce unemployment, and increase salaries.

However, the reality is that the government should get out of the way to let the private sector fix the country. Don’t expect to hear from a politician, though.


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