IMF To South Africa: Create Millions Of Jobs For All South Africans, Not Just ‘Insiders’

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Written by Dana Sanchez

With unemployment in South Africa at 25.2 percent and rising, the International Monetary Fund warned Wednesday that the country needs inclusive growth – the type that will generate millions of jobs for all South African, not just “insiders.”

Half of all young South Africans are unemployed, according to a labor force survey released earlier this week by Statistics South Africa.

David Lipton, senior deputy MD of the IMF, spoke in Pretoria before heading to the World Economic Forum on Africa in Cape Town, according to an article in Business Day Live.

“In the long run, failure to deliver inclusive growth would be a threat to social stability,” Lipton said in the article. “The imperative now is to generate growth that will create the millions of jobs to reduce unemployment.”

Lipton cited problems in South Africa including power and transportation bottlenecks that sapped the economy; weak business confidence that held back investment and a lack of competitiveness manifesting in a growing trade deficit. Salaries have increased faster than productivity and the country’s collective bargaining system “had to serve the interests of the entire population — not just insiders,” Lipton said in the article.

South Africa’s credit ratings have recently been downgraded worldwide and analysts cite unrest including mining strikes that turned violent over the past year and other service delivery protests, according to the article.

Failure to address the need for inclusive growth threatens social stability, and the country must do more to tackle its domestic problems, Lipton said.

South Africa’s jobless rate rose from 24.9 percent in the fourth quarter of 2012. While the country has made big improvements in social and economic development since apartheid ended, the outlook is “subdued” and will likely remain so, Lipton said in the article.

The IMF predicts South Africa’s economic growth will increase to 2.8 percent in 2013 and 3.3 percent in 2014 after a 2.5 percent increase in 2012, according to the article.

But that’s just a prediction, Lipton said, and uncertain at best. Growth could also be impacted by resilience in the global economy, increased export demand from the region and from China. South Africa would benefit from stronger growth elsewhere on the continent, he said, but this would not offset the pressure of weak global demand and domestic constraints, according to the Business Day Live article.

“South Africa really needs to rely more on domestic sources of growth … to do more on its own,” Lipton said. “The key for South Africa will be to deal with home-grown issues.”

South Africa’s rigid labor laws have often been cited by business leaders as an obstacle to creating new jobs, according to Business Day Live.

The biggest challenges facing South Africa include improving a weak education system and creating an environment more friendly for starting a business, said Kevin Lings, an economist at Stanlib, in the article.

The flow of capital into South Africa that it needs to finance its budget and current deficits could be further compromised if the country fails to resolve structural problems in the economy, Lipton said in the article.