14 February 2014
While South Africa, along with many emerging economies, has suffered the effects of economic uncertainty among developed countries, measures have been put in place to ensure that the economy grows and creates more jobs, says President Jacob Zuma.
Delivering his State of the Nation address in Parliament in Cape Town on Thursday night, Zuma reassured South Africans and foreign investors that despite moments of turbulence, especially in the country’s mining sector, there was light at the end of the tunnel.
“Jobs are now being created again. There are now 15-million people with jobs in the country, the highest ever in our history, and over 650 000 jobs were created last year,” Zuma said.
“This is still not good enough. The unemployment rate still remains high. Youth unemployment in South Africa continues to be of concern, as it is throughout the world.”
The government had implemented a number of measures to address this, Zuma said, including the introduction of the Employment Tax Incentive Act, which provides incentives for employers to hire younger workers.
Zuma noted that the government had inherited a nightmare from apartheid when it took over in 1994 – from declining employment and investment levels, a poorly educated workforce and large monopolies to a declining mining sector, high cost structures and the erosion of the country’s manufacturing base.
Due to the maladministration and the unjust rule of the apartheid regime, there were very low domestic savings, significant disinvestment by foreigners and large outflows of capital by South African residents.
Low savings, high government consumption expenditure, falling rates of return, capital outflows and stagnating employment, to name a few things, had presented huge barriers to growth and investment.
Zuma said that the government, first under Nelson Mandela and then under Thabo Mbeki, before he himself took over in 2009, had been forced to work like a healthcare professional to “nurse the economy to recovery”.
“On average, the economy has grown at 3.2 percent a year from 1994 to 2012, despite the global recession which claimed a million jobs.”
However, Zuma said, more still needed to be done to curb stubborn levels of poverty, inequality and unemployment, especially among young people.
External factors affecting economic growth
Zuma said it was difficult to ignore external economic factors when diagnosing the performance of the local economy. Developments in the United States had led to a rapid depreciation in emerging market currencies, including the rand, which fell by 17.6 percent against the US dollar last year.
The weaker exchange rate posed a significant risk to inflation and would also make South Africa’s infrastructure programme more expensive, Zuma said.
“However, export companies, particularly in the manufacturing sector, should take advantage of the weaker rand and the stronger global recovery.”
Mining a key driver of the economy
Zuma said the mining sector remained a key job driver of the economy, adding that government intervention was needed to bring about stability in the troubled sector.
“Mining employs over half-a-million people. It is the biggest earner of foreign exchange in our country. It also contributes about R20-billion rand directly to the country’s tax revenue,” he said. “We need a mining sector that works.”
To complement mining, other job-creating sectors that had been identified – tourism, agriculture, the green economy, infrastructure development and manufacturing – would continue to receive investment from the fiscus.
“While we have these difficulties, we know that we can cope with this period of turbulence,” Zuma said. “We have done so before in the past five years. We will, in fact, emerge stronger if we do the right things.”