Economic Sectors and Employment Cluster media briefing

24 February 2011

Minister of Rural Development and Land Reform, Gugile Nkwinti

In his State of the Nation Address, President Zuma announced 2011 as the year of the job creation through meaningful economic transformation and inclusive growth. As a structure designed to ensure policy coordination and alignment across the government on issues of economic development, employment and equity, the Economic Sectors and Employment Cluster will be central to the implementation of this directive. Thus our work will focus on critical regulatory and policy reforms that support overall growth and meaningful economic transformation, and the unlocking of growth and employment potential in the key jobs drivers as identified by Cabinet in the New Growth Path.

The Cluster has identified major interventions to achieve the over-arching aim of five million new jobs by 2020. We are however cognisant of the fact that South Africa, like other economies across the globe, is emerging from a devastating economic crisis that saw us shed almost a million jobs since 2008, with employment only starting to grow in the past six months. Moreover, while there are signs of recovery from the downturn, we are still dealing with the underlying structural challenges of high unemployment, poverty and inequality.

The New Growth Path proposes a number of complementary interventions to overcome the structural weaknesses in the economy. These interventions are needed to achieve the jobs-rich growth required to address the unusually high levels of inequality, poverty and unemployment still found in our country.

We recognise that, as the New Growth Path notes, while employment creation directly by the state – through employment in government agencies, public employment schemes and subsidy systems – may prove important in the short run, especially in the recovery from the downturn, in the longer run employment creation by the private sector will prove critical. For this reason our proposals centre largely on how government policies and programmes can do more to encourage growth in sectors that can generate employment on a large scale.

Job creation will be at the centre of all government’s programmes in 2011. This focus is necessary to overcome systemic and spatial patterns of development established under apartheid that effectively marginalise much of our people from the core formal economy. To this day, despite relatively rapid economic and employment growth since the transition to democracy, only 41% of working-age adults have a job, compared with the international norm of over 60%. The labour absorption rate is as high as 64% in Brazil, 71% in China and 56% in India.

The Cabinet Lekgotla in January prioritised key interventions to encourage accelerated employment creation in the coming year. These interventions centre on measures to support employment creation in the main economic sectors while making the economy as a whole more productive and employment friendly. Government departments will now table action plans that lay out how they will create employment directly and, even more important, by creating an enabling environment for employment creation in the private sector.

A central initiative to support employment creation in the coming year will be the establishment of the Jobs Fund. As outlined by the President and reaffirmed in the Budget Speech, the R9 billion Fund will support projects with the potential to create jobs on a large scale, particularly for youth. Projects supported by the Fund are expected to employ 50 000 to 100 000 people over the next 3 years. The funds are currently on the National Treasury vote and the rules that will govern the fund will be published later in the year.

The creation of decent work remains the principle intervention for addressing poverty and inequality. In addition, the New Growth Path proposes a number of complementary interventions to address structural challenges underpinning inequality.
These include:

• ensuring more equitable access to education and skills development;
• accelerating rural development;
• supporting land reform designed to support a more productive and inclusive agricultural economy; and
• upgrading financial services for smaller enterprises and the social economy.

Key workstreams are: job creation by government, the contribution of state-owned enterprises and development finance institutions, unlocking growth and employment potential of key jobs drivers, the implementation of crosscutting policy and regulatory reforms and the social practising process.

Government Department’s contribution to job creation

In line with January Cabinet Lekgotla resolutions, government departments will;

• set targets for direct job creation, and skills development through their programmes and institutions, as well as;
• include specific targets for inclusion of economically marginalized people (youth, women and persons with disabilities) within their overall employment and training targets.

The Cluster in collaboration with Performance Monitoring and Evaluation is developing a system for monitoring net job creation from government interventions and policies, both directly through employment in programmes and local procurement, and indirectly through the creation of a more conducive environment for private job creation.

State Owned Enterprises (SOEs) and Development Finance Institutions (DFIs)

Implementation of the New Growth Path will require greater leveraging of key institutions and agencies of the State. We have a wealth of resources; skills, investment, experience in our DFIs and SOEs which will need to be better utilised if our ambitious targets for job creation and skills development are to be met. The Cluster will work closely with colleagues in the Infrastructure Cluster to achieve this.

Jobs Drivers

We have developed concrete actions and priorities for 2011 based on the jobs drivers prioritised by Cabinet for this year. These are infrastructure, manufacturing, the mining value chain, the agriculture value chain, the green economy, tourism and other services.

Infrastructure
On infrastructure we will maintain high levels of public investment focusing on transport and energy. This jobs driver creates direct employment during construction and maintenance, but is also a critical enabler of growth and employment throughout the economy. Public investment expenditure will further be leveraged upon through procurement reforms to support domestic manufacturing and employment.

Manufacturing
Implementation of the Industrial Policy Action Plan as adopted by Cabinet in February 2010 is proceeding well. Key successes include;

• work on improving the regulatory environment and supporting investment in the automotive sector to the tune of R2, 69 billion over the 2010/11 to 2012/13 MTEF period. These interventions have been instrumental in securing R13 billion in private sector investment commitments and supporting the creation and retention of 24 000 jobs in the sector;
• an interdepartmental task team reviewing the Preferential Procurement Policy Framework Act, (PPPFA) regulations has concluded its work and the recommended amendments are currently before Cabinet. Implementation of these amendments will be prioritised in 2011 to support local procurement  and domestic industries.

Illegal imports have continued to threaten the existence of vulnerable sectors such as clothing and textile and other infant industries. More capacity will be deployed to strategic ports of entry to significantly reduce illegal imports. An intergovernmental task team comprising of SAPS, SARS, DTI, DHA and EDD will be established to develop and implement other measures to counter illegal imports.

The Section 12i Income Tax Allowance Incentive was launched by the Minister of Trade and Industry in December 2010. Investments with the total value of R6.8 billion have been approved.

The mining value chain
Work in the mining value chain will focus on encouraging growth in the sector in particular through the development of a new licensing regime promoting transparency and trust in the allocation of mining licenses. Cabinet has approved the formation of a State-owned mining company, and work is underway to realise that mandate. We will also be working to finalise the beneficiation strategy with a focus on maximising sustainable employment creation while avoiding an excessive strain on our limited energy supplies.

The agricultural value chain
Agriculture is developing proposals for supporting subsectors in ways that maximise employment creation, upgrade employment for farmworkers and improve food security, including by stabilising production of wheat and maize. It is also committed to expanding the Zero Hunger Campaign. Government is committed to establishing a supportive environment including by ensuring more competitive pricing of inputs, starting with fertiliser; increasing demand through stronger agro-processing and export marketing; and actions to fast-track water licensing and facilitate solutions to complex land claims.

The green economy
We will finalise a strategy for supporting industrial development through the green economy, leveraging upon interventions already agreed and in place through the IPAP process amongst others. The Integrated Resource Plan (IRP) 2 public consultation process has been finalised, we will make announcements soon in this regard with clear signals on the role and opportunity for the domestic renewables industry.

Tourism and other services
In tourism, we will unlock the potential for growth and employment through finalisation of the airlift strategy and developmental pricing arrangements for strategic markets. We will also review visa requirements for strategic markets and intervene to improve tourism infrastructure.

Other jobs drivers
We have also developed action plans for the knowledge economy, social economy, and African regional development. Further details of this will be available in the Outcomes briefings later in the year.

Policy and Regulatory Reform

The January 2011 Cabinet Lekgotla, decided on key policy and regulatory reforms that will support employment across these jobs drivers. These cross-cutting issues will be prioritised and include;

• the setting up of the Companies and Intellectual Property Commission;
• reform of Broad-Based BEE Codes so they contribute more to employment creation directly and through local procurement, with greater incentivisation of support for local procurement, SMMEs and broad-based ownership;
• an anti-red tape campaign to minimise unnecessarily burdensome procedures especially for small- and micro-enterprise;
• a national one-stop shop to support major projects in getting regulatory approvals and infrastructure. This will be based on a plan to strengthen the capacity of TISA;
• strengthening of the powers of Competition Authorities through amendment of the Competition Act building on current successes.

Finally, government is committed to upscaling financing for economic development, especially for activities that create employment. Already, through the IDC substantial progress has been made and resources identified.

Social Pacting

In our engagements with Business, Labour and Community we have  established commitment on the vision, broad aims and key elements of the New Growth Path. We are now working with social partners to finalise concrete commitments to support job creation, investment, skills development and equity. There are some low-hanging fruits in which government can work with social partners and there are some areas in which further work and discussion is necessary, progress on both tracks proceeds well.

We thank you.

Enquiries:
Neo Momodu
Cell: 079 462 5081

Issued by: Government Communications (GCIS)