GLOBAL PERSPECTIVES ON JOB DEVELOPMENT

Transcription

1 GLOBAL PERSPECTIVES ON JOB CREATION AND ECONOMIC DEVELOPMENT NCSL Legislative Summit 27 July 2010 Hon Shahid Esau, Speaker of Western Cape Provincial Parliament 1

2 INTRODUCTION Growth this certainly what tis needed d to reduce unemployment and poverty but the South African economy is not likely to advance to a sustainable growth path if policies and institutions do not show a commitment to also reducing inequality. The World Bank cites evidence to show that growth depends on education and life expectancy, particularly for those at lower income levels. High levels l of unemployment accompanied by entrenched poverty and inequality can erode the gains made by growth. Growth, however, should not be seen as synonymous with poverty alleviation even though it is often correlated with a reduction of poverty. The literature on development is replete with studies of countries that achieve high rates of growth only to flounder because poverty and inequality were not tackled comprehensively. Our preference as a government favours a set of prescriptions that cover job creation, poverty alleviation and a reduction in inequality. It is essential that resources are allocated in a way that takes cognizance of this so that our development goals are achieved. Manenberg - coloured township with high unemployment Youth playing soccer on open tarmac in Duinefontein 2

3 OVERVIEW OF SOUTH AFRICAN ECONOMY 3

4 The Global Competitiveness Report 2009/10 World Economic Forum ranking of South Africa. The Davos reports ranks 133 countries and in the following categories SA secures high ranking. Strength of Auditing and Reporting Standards Efficacy of Corporate Boards Financial Market Sophistication Soundness of Banks Regulation of Securities Exchanges

5 OVERVIEW OF WESTERN CAPE ECONOMY The Western Cape, like the South African economy has continued to mirror the performance of the global economy. After reaching a recessionary low point of -6.4% annualized in the 1st quarter of 2009, the economy recovered strongly back to positive growth of 3.2% annualized in the 4th quarter of Unofficial statistics indicates that the Western Cape economy grew at -1% for However, this contraction is likely to be somewhat less pronounced than the national level. Official statistics from StatsSA for 2009 are only due for release in July However the general perceptions are that the economy would have negative growth in

6 KEY SECTORS OF WESTERN CAPE ECONOMY The Western Cape has the second largest economy in the country. Its economy is also more diversified and sophisticated when compared to South Africa as a whole. The Western Cape economic activity is concentrated in the: Financial Intermediation Insurance Real Estate Business Services Sector And, in 2008, this economic activity accounted for 30.6 % of GDPR (see Figure 1.1below ). From a national perspective, this sector also dominates national economic activity; however, its contribution is only around 22 %. o The manufacturing ( %) and dthe wholesale, l retail trade, catering and accommodation sectors (16.3%) are the second and third largest sectors contributors of the regional economy o The construction sector, although a relatively small contributor at 5.3 %, remains a key driver for growth in the Western Cape. Since 2004, this sector has shown stable growth to Western Cape GDPR rising 0.3 percentage points between 2007 and In addition, this sector contributes more to the Western Cape economic activity compared to the national level where its contribution is recorded at 4%. o The agriculture, forestry and fishing sector is another growing sector, where the regional contribution outstrips the national contribution. In 2008, this sector s s contribution to regional GDPR was 4.1 % (up slightly from 4 % in 2007) compared to around 2.9 % nationally. 6

7 FIGURE 1.1: SECTORAL CONTRIBUTION TO THE WESTERN CAPE GDPR (%) 2008 Community, social & personal 4.8% Transport & storage & communication 11% Electricity, gas & water 1.5% Agriculture, forestry & fishing 4.1% General government 9% Manufacturing 17.1 % Financial intermediation, insurance, real estate & business services 30.6% Wholesale & retail trade, catering & accommodation services Construction 5.3% Mining & quarrying 0.2 % 16.3% 7

8 THE WESTERN CAPE ECONOMY o o o o Despite p its relative wealth,, the economyy still suffers from extreme inequality, which manifests itself on the basis of race. The Gini coefficient, which measures inequality, is 0.6 which is high by international standards. Levels of poverty is also high at nearly 30% of the population. To address some of these issues the Provincial Government currently spends R276 million on economic development in the Province. The main aims of this expenditure is to : 1 To grow the economy in a sustainable 1. manner, for the benefit of all who make the Western Cape their home. 2. To create employment, especially for the presently unemployed. 3 To 3. T make k ownership hi off the h economy representative of the demography of the Province. 4. To increase levels of participation in the economy by all, especially by the previously excluded and presently marginalised. 5. To make citizens and their enterprises effective players in the global economy economy. 6. To create a fair, effective and conducive business environment for enterprises and consumers. 8

9 THE WESTERN CAPE ECONOMY REAL GROWTH The financial crisis has impacted on economic growth as indicated on slide 4. The crisis affected some of the key sectors of the provincial economy. This is indicated in the next table which shows a decline in almost all important sectors of the provincial economy. 9

10 TABLE 1: REAL GROWTH (%) IN WC GDP (BY INDUSTRY AT 2005 PRICES) INDUSTRY est [1] Agriculture, forestry & fishing Mining Manufacturing Electricity Water Construction Wholesale l & retail iltrade Catering and accommodation Transport Communication Finance & insurance Business services Community, social & other personal services General government services

11 Overview of Poverty Key differences between poor and non poor households (NIDS DATA SET) Poor Non Poor Overall Mean Household size Mean Household Age Household Head Mean Education (years of education) Male Headed Household 42.2% 68.8% 59.9% Unemployment Rate 53.6% 19.7% 31.1% The unemployment rate is highest among poor households. The negative economic growth which has direct impact on our high poverty rate in the Western Cape. The South African government already employs more people in government and public entities than most countries (Schussler, UASA, 1/07/2010 and Loni Prinsloo). About 24% people are employed by the public sector. The 15- to 34-year-old age group makes up by far the largest percentage of unemployed people in the Western Cape. 11

12 Interventions to stimulate job creation and economic development POLICIES The New Industrial Policy Action Plan (IPAP 2) focuses on key areas to boost the country s industrial capacity and government s target to create up to 2.4 million jobs by The IPAP 2 will focus on strengthening the Industrial Development Corporation (IDC); revising procurement legislation; deploying trade policies and targeting anti-competitive practices. IPAP2 would also help the country to leverage more local procurement to raise domestic production by renovating the Preferential Policy Framework Act and assigning tenders locally (South Africa info, 18/02/2010). The Department of Trade and Industry has set aside an additional R3.6 billion for industrial policy initiatives (South Africa info, 18/02/2010). Informal Trading Development Policy provides a framework for growing businesses along the continuum from survivalist to globally competitive and reducing the business failure rate. This multi-pronged programme meets business needs which places the entrepreneur at the centre and aligns the services of various spheres of government and other external agencies requiring partnerships with province, the Red Door, the Small Enterprise Development Agency (SEDA) and various business support service providers. EHD stratedy 2006, p. 5. IIndustrial d t i lp Policy li A Action ti Pl Plan (IPAP 2007) FAST TRACK 4 LEAD SECTORS Enabling Legislature Informal Trading and Development Policy (2005) Capital/Transport equipment & Metals NCA (National Credit Act) Government Support Automotive & component Chemicals, Plastic fabrication & Pharmaceutical Forestry, Pulp & paper, and Furniture BBBEE Act (Broad based Black Economic Empowerment) PPPFA ACT (Preferential Procurement Policy Framework ) Small Enterprise Development Agency (SEDA) Real Enterprise Development (RED Door) Corporate/Business Support 12

13 Interventions to stimulate job creation and economic development Entrepreneurs, SMMEs 93%of Cape Town s formal businesses are small, contributing 50% of total output and 40% of total employment. Most vulnerable sectors are the manufacturing; finance; retail; electrical and engineering sectors. The Western Cape has adopted its business support and Informal Trading Development Policy in 2005 to place the entrepreneur s business needs at the centre and align the various spheres of government and external agencies. The Economic Empowerment strategically focuses on the part of the Broad-based Black Economic Empowerment Scorecard that affects small businesses most significantly: procurement The RED Door promotes the development and growth of small enterprises, through the provision of services and support mechanisms in partnership with other key role players. Its aim is to contribute to the creation of an environment that enhances the establishment, growth and sustainability of small business Department of Economic Development: Enterprise Development Programmes SKILLS DEVELOPMENT identified by the Provincial Skills Development Forum (PSDF) WCAPE: Critical Skills/ Priority Sectors Communications Technology Business Processing and Outsourcing (BPO) Oil and Gas Boatbuilding RED Door Real Enterprise Development key role players/partnerships SARS (South African Revenue Services) CIPRO (cc and company registration authority) SAMAF and KHULA (govt microlending org) SEDA ( govt small business support agency) Private/Business sector Micro Economic Development Strategy (MEDS) includes, Work and skills for Programme FET (Further Education and Training ) Colleges SETAs (Sector Educational and Training Authorities) 13

14 Interventions to stimulate job creation and economic development YOUTH Work and Skills for Programme The 15- to 34-year-old age group makes up by far the largest percentage of unemployed people in the Western Cape. In his Budget speech (17 February 2010), FET Colleges Finance Minister Pravin Gordhan announced a policy proposal to support reforms through a subsidy to employers that will lower the cost of hiring young people without work experience. Under consideration is a cash reimbursement to employers for a two-year period, operating through the SARS payroll tax Business/ platform, and subject to minimum labour Corporate Sector standards. It will be available to tax- youth SETA SETAs compliant businesses, nongovernmental organisations and municipalities. Our preliminary estimate is that about 800,000 people will qualify. The aim is to raise employment of young school-leavers by a further 500,000 by 2013, with the intention that young people should benefit from this initiative by early next year. Government / P bli Public Sector 14

15 MAJOR OUTPUTS Enterprise Development Programmes RED Door LED (Local Rural ldevelopment Economic Development) Business advice & support to 27,000 potential and existing entrepreneurs Access to R3.5mil in loan funding from commercial banks and R1.8mil in RED Finance Entrepreneurs securing more than R45mil in tenders 912 jobs being created The Small Business Week Exhibition Implementation of the Municipal Economic Development Programme (MEDP) West Coast MEDP help with development of aquaculture sector strategy LED roadshowin the form of distict level workshops Plek Plan offices sourced, developed and packaged 30 economic opportunity projects Implement Khulis Umnothu & Comprehensive Rural Development Programme The Rural Economic Assistance Fund assisted a Fishing initiative in West Coast and Agribusiness in Central Karoo SKILLS Development Workforce Development (WFD) in collaboration with the Learning Cape Initiative (LCI)set up the Provincial Skills Development Forum (PSDF) to ensure stakeholder participation and improve human resources. The WORK FOR SKILLS FOR 100,000 PROGRAMME offer unemployed youth with little or no experience, skilled or unskilled opportunities to participate in 12 month work experience programme. The pilot run in two phases placed 731 learners in 36 large and small organisations in WCape. 15

16 Trade and Sector Development Programme The Purpose of the Trade and Sector Development is to stimulate economic growth through industry development, trade and investment promotion. Sector Support particularly for prioritised sectors with a focus on developing and accelerating growth, strengthening clusters, increasing competitiveness in the global economy and skills development. The Programme is divided into 3 sub programmes namely, Trade and Sector investment Development Promotion Strategic Initiatives There are nine sectors of emphasis within the Sub Programme: Sector Development, prioritised according to the industries growth and job creation/retention potential. The lead sectors 1. Oil and Gas 2. Information Technology & Communications 3. Business Process Outsourcing (BPO). These priority sectors are further complemented by a second layer of significant sectors, namely; 4. Agro Processing; g; 5. Boat building 6. Tooling 7. Engineering 8. Clothing, Textiles and Fashion; 9. Furniture The Programme, building on the work by DEADP, more recently has begun to conceptualise a strategy for Green Technology, with intensive engagements with stakeholders in government, academia and industry. 16

17 Major Challenges The economic crisis and slowdown impacted on some of the Programme s key projects. The 2009/10 Small Business Week experienced the most challenges as the usual sponsors (banks, franchises and the like.) cut back drastically on sponsorship and presence. The credit crunch has also moved banks to aggressively tighten their lending criteria. The Red Door programmes battled to secure investment from municipalities. This has been mainly because of the change in either political administration (council) and/or staff at municipalities. The voucher programme has experienced an unprecedented influx of service providers due to the change in business models of both the NYDA and SEDA. The RED Door programme continued to lose key staff to local municipalities, development agencies and the private sector. It has been difficult to respond effectively to this challenge, given traditional staff mobility and the demand for skilled small business development practitioners. The Black Economic Empowerment Advisory council could not be established due to a change in policy direction. The impasse regarding alignment of the PPPFA and the BBBEE Acts continued and prevented the programme from taking full advantage of the proposed changes which could see funds allocated to SMMEs for procurement increase substantially. 17

18 THE IMPACT OF 2010 FIFA WORLD CUP ON SA s ECONOMY Since 2005, the HSRC has been undertaking an annual survey of respondents, to provide benchmark indicators of public attitudes towards the 2010 World Cup (HSRC, 2006). The survey results revealed that most South Africans were confident that the event will bring increased job opportunities and improved economic growth to the country. Before the conclusion of the 2010 WC event, the local WC organisers agreed that hosting major sporting events has its benefits and disadvantages. Now that the WC Soccer event has come and gone, economists have indicated that hosting the World Cup Soccer contributed significantly to South Africa s economic recovery. It was predicted that the international sporting event would assist the country in growing its gross domestic product (GDP) from 1.6% to 3% in 2010 (Peter Delonno, Business Times 12/07/2010). It has also been noted that the South African business confidence index rose to the highest h level l (84.8) in June This 2010 World Cup event has also benefited the tourism sector (Economic Climate, 06/08/2009). According to the South African Department of Home Affairs, about foreigners entered into the country between 1 June and 21 June 2010 compared to the arrival of during the same period in Many of the visitors were from the UK, USA, Germany, Australia, Mexico, Brazil, France, Netherlands and Argentina (LOC, 23/06/2010 and South Africa info 24/06/2010). The World Cup has ensured great exposure for South Africa and will open the country to a new spectrum of visitors. SA Tourism estimates tourism revenue around R27 billion, which is a thousand percent of what was spent on marketing (LOC, 23/06/2010). Even though the official figures will be released in a few months time, the tourism sector is confident that it met the projected numbers for the World Cup (South Africa info, 24/06/2010). This event also resulted in significant construction projects, with the refurbishment of roadways, stadiums, and airports around the country. About direct jobs were created by the construction projects and between and indirect jobs evolved that would boost the economy (Economic Climate, 06/08/2009). After the World Cup event, most workers are likely to be absorbed into the national workforce because the skills attained during this period, especially in construction projects, will make them an invaluable part of the economy (Economic Climate, 06/08/2009). 18

19 The successful collaboration between all role players in the Justice, Crime Preventions and Security, Police, the National Prosecuting Authority, and Correctional Service demonstrated that criminal matters can be dealt with in a fast and efficient way, especially during such international events (Government Communications, Politics Web, 14/07/2010). Administration and processing of visas by the Department of Home Affairs ran smoothly and there were no single incidents of hooliganism for the duration of the tournament. South Africa had efficient systems in place across all sectors (i.e. Safety and Security, finance, health, accommodation, etc) to cater for the World Cup (Government Communications, Politics web, 14/07/2010). Moreover, the South African advertising economy will acquire a boost of more or less $200 million this year as brands such as Nike target World Cup fans through digital advertising messages and images of football stars signed to the brand. This industry is expected to an increased growth of 3% to 7% especially with TV and internet advertising during the World Cup (Mark Sweney, Mail & Guardian 23/06/2010). / The automotive and components sector also benefited from the World Cup fever, with new vehicle sales (entry level cars) of about in June 2010, led by Toyota and about in May 2010 by Volkswagen (Times, 4/07/2010). South Africa has indeed reaped some economic benefits by hosting the World Cup. However, the South African economy has been weak and is highly dependent on the external environment. Economist Annabel Bishop states that we do not expect rapid job creation this year, instead expect more job losses in the second quarter of 2010 (Sapa, South Africa info, 6/05/2010). Now that the World Cup is behind us, the country needs to focus and build on pressing issues such as the unemployment crisis; better service delivery, especially in the health and education sectors (Business Times, 12/07/2010: / p 18). 19

20 Glossary PPPFA Act Preferential Procurement Policy Framework Act BBBEE Act Broad based Economic Empowerment Act SMME Small Medium Micro Enterprises SEDA Small Enterprise Development Agency FET Further Education and Training Colleges RED Door Real Enterprise Development 20

21 Thank you Sh. Shahid Esau Speaker of Western Cape Provincial Parliament Tel: Fax: