19 February 2007
Labour and the 2007 State of the Nation Address

1. Introduction

The challenges faced by South Africa in eradicating poverty emerge as the cornerstone upon which the 2007 State of the Nation speech is based. From a labour perspective, this raises significant implications for the linkages between poverty eradication and economic empowerment through job creation. In this regard, the key themes that emerge from the speech are the need to create good quality jobs en mass, to promote the growth of the small and medium business sector, to speed up the process of skills development and to implement programmes to ensure broad-based black economic empowerment.

2. Summary of the labour-related content of the speech

2.1 Employment creation

The rate of growth of the economy over the course of the past 2 years has been at an average of 4.5%, the highest since attaining democracy since 1994. Over the past 3 years, the economy has created approximately one and a half million jobs. In the period March 2005, to March 2006, 300 000 of the jobs created were in the formal sector outside of agriculture, representing a growth rate of about 4%. A small part of these jobs are those created through the permanent job opportunities as a consequence of the Expanded Public Works Programme. Notwithstanding this, the President noted the need to significantly improve upon this programme.

The number of employed people has been increasing at about half a million in the past 3 years, with a steady progress in the advancement of black people in the economy. In 1994, Black people owned just over 3% of market capitalization of the Johannesburg Securities Exchange, this has since increased to about 5% and the proportion of black people in top management positions has grown from 24% to 27%.

As far as accelerating the implementation of the Accelerated and Shared Growth Initiative of South Africa (ASGISA), the Government will has set itself the target of completing the process of reviewing the country's experience in macro-economic indicators such as the Exchange Rate, inflation and interest rates. This will be done with a view to putting in place measures that will facilitate the growth of industries which produce tradables for both the domestic and export markets and have the potential to absorb large pools of semi-skilled workers.

2.2 Small Medium and Micro Enterprises (SMMEs)

The President noted that South Africa could do much better to create self­ employment through small and micro enterprises. Given that the large majority of the unemployed are youth, there is a specific need for interventions such as the National Youth Service and the development of young entrepreneurs. The following objectives have been set in this regard for implementation over course of the next year:


·         The Government will take further practical action to improve access to micro-finance including the reach of the Apex Fund (SAMAF) and the agricultural micro-credit fund (MAFISA).


·         The Government will ensure the proper functioning of the Small Enterprises Development Agency (SEDA).


·         The Companies Bill will be processed as part of the measures to reduce the regulatory burden on small, medium and micro enterprises and to empower minority shareholders and employees.


2.3 Further Education and Training Colleges

The progress made with regard to the recapitalisation of Further Education and Training Colleges (FETs) has created an opportunity to significantly expand the number of available artisans. Starting this year, resources will be allocated to provide financial assistance to these institutions. The President noted that questions pertaining to responsibilities between the national and provincial spheres in the management of the FET system will be resolved as a matter of urgency.

2.4 Youth development

The Government had set itself the target of increasing the number of young people engaged in the National Youth Service Programme to 10 000. This has been surpassed and the Government will now seek to increase this number by at least 20 000 through 18 Departments which have already developed plans in this regard. Thirty thousand young volunteers will be enrolled in community development initiatives and 5000 young people will be employed as part of the Expanded Public Works Programme in the maintenance of government buildings. In addition, efforts to integrate youth development into the mainstream of Government work will be intensified. This will include a youth co-operatives programme. The Government will also pursue ongoing efforts to link unemployed graduates with employment opportunities.

2.5 Social security

The Report of the Committee of Inquiry into a Comprehensive System of Social Security in South Africa (2002) showed that there is a need for a contributory earnings-related social security system in South Africa because this is currently lacking for large numbers of working people. The principle guiding this approach is that over and above social assistance provided through the government budget, there is a need to explore the introduction of an earnings-related contributory social security system that is informed by the principle of social solidarity. This will mean that all South Africans will enjoy membership of a common administratively efficient social insurance system, while those earning higher incomes will be able to continue contributing to private retirement and insurance schemes. Elements of this system would need to include:


·         Continuation of the minimum benefits contained in the social grants system with benefits paid through a modern administrative system.


·         A wage subsidy for low-wage employees, possibly directed at first entrants into the job market, especially young people.


·         A social security tax to finance basic retirement savings, death, disability and unemployment benefits.


The Minister of Finance will further elaborate on these issues in the Budget Speech. Government will undertake a comprehensive process of consultation with all social partners both individually and through NEDLAC in this regard.

3. Impact on labour

Aubrey Matshiqi argues that what has been delivered by the post apartheid Government in the short period of thirteen years of democracy is unprecedented anywhere in the world.1 Notwithstanding this, there is a need to acknowledge that there are objective factors in both the domestic and global environment that mitigate against the achievement of national goals at the desired pace and scope. In addition to this, he argues that some of the failures in achieving progress at the desired pace can be attributed to shortcomings in the policy design process, policy content and policy implementation processes that are not properly synergised. Whether this is true or not, it is worth using this analytical framework to embark upon an reflective exercise to gauge to what extent the policy design process, policy content and policy implementation have negatively impacted upon the rate of progress in relation to job creation, broad based back economic empowerment and speeding up the process of skills development.

There is no doubt that notwithstanding economic growth, unemployment remains a serious problem in South Africa, particularly for women, the youth and black people. The pace of broad based black economic empowerment is still dismally slow. Within this context, the labour sector needs to embark upon a structured exercise of assessing its impact and identifying shortcomings and challenges in related policy approaches. The public hearings hosted by the Portfolio Committee on Labour in 2006 provided a platform, for the public to articulate some of the pressing challenges in relation to the content and implementation of labour policy. Some of the key issues to emerge in this regard are:


·         There needs to seriously review the efficacy of learnership programmes. The fact that learnerships are often not sustainable and that many young people do not find employment after completing them, needs to be urgently addressed. There is a need to conduct an impact assessment of the extent to which learnerships have led to employment over the course of the past five years


·         The Department of Labour needs to evaluate the implementation of the National Skills Development Strategy on a regular basis and identify its strengths and weaknesses.


·         SET As are not sufficiently impacting on job creation in the way that they should be. This situation needs to be monitored and addressed.


·         There is a need to identify the skills required for key sectors to maintain and expand production. That means identifying both existing bottlenecks and the training outputs required to maintain the sector by replacing existing skills in the coming years. The Department of Labour must ensure that qualifications and skills correspond with the needs of the economy.


·         There is a need to increase the number of graduates and to ensure greater representivity among professional graduates as black people, especially black women, are not adequately represented in these fields.


·         The tendency of employers to casualising and outsource jobs in order to reduce remuneration needs to be monitored and curbed.


·         There is a great need for entrepreneurship education amongst young people for self-employment. There is also a need to increase the access of young people to finance for setting up SMMEs. Funding for early stage investments is low in South Africa. It is important that start­up initiatives receive seed capital and there is a need to increase business development support.


·         There is a need to take stock of youth development programmes and consolidate these.


·         There is a need to evaluate/ assess the impact of labour legislation.

The public hearings provided clear insight into what some of the challenges are in generating job creation at a desired pace. As a matter of urgency, the Department of Labour will need to reassess and revamp its skills development strategies. These emerged as a serious point of contention during the course of the public hearings. This, coupled with the fact that the Department was only able to spend 57% of the National Skills Fund3 and the fact that many SET AS did not meet their performance targets, provides the basis for serious oversight in this regard. It is also important that given that the areas of economic expansion and growth have not correlated with targeted areas of skills development, that there is an urgent need for a study that addresses this mismatch and highlights the areas where jobs are growing in the economy. This data must then be used to realign skills development strategies, to improve upon learnership programmes and to invest skills development resources in more targeted, effective ways.

It is not only the need to create jobs that is important, but it needs to be emphasised that the quality of jobs produced must also be an important factor of consideration. For example, the Public Works Programme has been criticised because it results in jobs that are of a short-term nature. The extent to which this is true or not needs to be explored. In addition, official definitions of employment include those who are employed on a casual basis. Yet, the issue of casualisation has emerged as a serious point of contention, particularly where employers opt to casualise workers to reduce remuneration packages. This issue is potentially a red herring one and needs to be addressed with tact and strategic visioning.

The growth of the SMME sector is critical to addressing unemployment and this is arguably the sector of greatest opportunity for job creation. Yet, young people report that experience problems in accessing funding and that mentorship programmes and the support provided to them can be significantly improved upon.

Strategies for job creation, particularly amongst young people and the need to implement broad based black economic empowerment more effectively need to be critically reviewed and improved upon if the pace at which economic empowerment takes place is accelerated.


State of the Nation Address, Joint Sitting of the South African Parliament, Febraury 2007.

Annual Report Department of Labour, 2005/06.

Draft Report of the Portfolio Committee on Labour on Youth Development, February, 2007.