Corporate Interest

AsgiSA’s quiet death – where to next for South Africa’s economic policy?

17 February 2010

The shortage of skills in critical sectors of the SA economy runs so deep and so wide that even the current economic recession is unlikely to ease the demand.

Guest contributor Sven Lunsche has been a financial journalist since graduating with a BJourn from Rhodes University in 1986.  He has worked for The Star, the Sunday Times Business Times and Financial Mail.

This article is republished with the kind permission of the Wits Business School Journal.

The history of South Africa’s economic policies resembles a messy alphabet soup. It started out in 1994 with the Reconstruction and Development Programme (RDP), now barely remembered bar for the “˜matchbox’ RDP houses that dot townships throughout SA. It was followed in 1996 by the Growth, Employment and Redistribution Programme (GEAR), a free-market orientated policy that served as the basis for a sound monetary and fiscal policy for over a decade under Finance Minister Trevor Manuel.

In 2006 followed the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) and its sister programme, the Joint Initiative on Priority Skills Acquisition (Jipsa). Launched with much fanfare by then Deputy President Phumzile Mlambo-Ngcuka, the two policies were aimed at addressing the country’s chronic problem areas: unemployment and the skills shortage.

The silence around AsgiSA has been deafening since President Jacob Zuma’s government took office in May 2009, and the programme appears to have died a quiet death. An AsgiSA consultant confirms that there has been no official decision to shelve the programme, “œbut it’s dead all but in word”. Politicians are more frequently invoking the ANC 1956 Freedom Charter – with its reference to nationalising the country’s mining industry – than AsgiSA.

No annual report has been published for the plan since early last year, and telephone enquiries to the communication unit of the Presidency get referred to Alan Hirsch, its chief director for policy coordination. He has not proclaimed AsgiSA’s current status – nor the programme’s future, for that matter – but stressed before the election that there was no need to change AsgiSA’s overall goals.

The aim of AsgiSA is to halve unemployment from 28% in 2004 to 14% by 2014, and to halve the poverty rate over the same period. For this to be achieved, growth needed to average at least 4.5% between 2005 and 2009, and at least 6% from 2010 to 2014. Average economic growth was 5% between 2004 and 2007, 3.1% in 2008, and is expected to decline by about 2% in 2009.

The economic crisis has thrown a lot of these targets out of kilter, but it certainly has not swayed government from committing to promises of more jobs. However, the targets, including the AsgiSA ones, appear ever more out of reach.

Shortly after his induction as president, Jacob Zuma said that government would create 500 000 jobs by the end of 2009, and four million jobs by 2014, in line with the AsgiSA target. But, in the context of a global and local recession, scepticism about the government’s ability to achieve this is prevalent. Since the beginning of the crisis in September 2008, about one million jobs have been lost, and the official unemployment rate has risen from under 23% to around 25%.

If, indeed, AsgiSA’s policy and targets are still part of government policy, then they are subject to the same economic policy discussions that have created such a major rift within Cabinet. Six months into the term of the new government, there was still a lack of clarity under whose jurisdiction macro-economic policy formulation – and thus AsgiSA – would fall: Finance Minister Pravin Gordhan, Economic Development Minister Ebrahim Patel or Planning Minister Trevor Manuel.

Whoever has responsibility, the likelihood that AsgiSA’s main target of halving unemployment will be achieved is highly improbable – certainly not within the 2014 deadline. The Human Sciences Research Council’s (HSRC) employment scenario shows that an average growth rate of between 3% and 4.5% until 2014 would leave unemployment at between 21% and 28% respectively. Meeting the AsgiSA targets, the HSRC says, seems unlikely “œin the absence of large special interventions”. Only if the economy moved into a growth rate of 6-7% or more on a sustainable basis would it be possible to meet the targets, the study found.

The AsgiSA consultant (as mentioned above) bemoans the lack of policy consistency under respective ANC governments. A study for AsgiSA by the Harvard Group in 2007 found that the countries with consistently high growth rates were those that identified key economic strategies and persisted with them, despite changes in government. “œI fear that the policy adjustments under the Zuma presidency have given the impression that our economic strategy is haphazard and adjusted every five years or so. This is not positive for investor confidence.”

If AsgiSA is viewed under the monocle of broader economic policy, then there are some successes – most notably Jipsa’s efforts to make inroads into SA’s chronic skills shortage. The shortage of skills in critical sectors of the SA economy runs so deep and so wide that even the current economic recession is unlikely to ease the demand.

Indeed, in an interview with Financial Mail earlier in 2009, Hirsch said that many companies had cut back on their skills and training projects. “œWe won’t be in a slump forever, and the danger is that when the economy recovers, companies will be searching for skilled staff again,” he commented.

This is where Jipsa comes in. Under its guise, a number of initiatives have been launched to make inroads into the shortages of artisans and technicians. Six companies – Sasol, Eskom, Transnet, Anglo Platinum, ArcelorMittal SA and Gold Fields – have entered into a skills business partnership with government to provide training in about 5 000 skills, over and above their own needs.

The 2008 Jipsa annual report – the last one published by the Presidency – says that, by March 2008, 18 879 people had been registered for artisan training over the two years since the founding of the programme. While this was short of the targeted 12 500 artisan learners a year, there is some optimism that the number was going to be achieved in 2009.

An accelerated artisan training programme driven by the Steel and Engineering Industry Federation of SA (Seifsa) has shown that, after a dramatic drop of apprentice intake in 2003, there has been steady growth and, for the first time since 1998, the number of apprentices entering the sector has exceeded 5 000. Seifsa says that the initial funding of R70m in May 2007, for a target intake of 1 300 learners, had now grown to R136m in support of the March 2010 intake.

But, even on the skills front, there have been some setbacks – some of them potentially disastrous. A failure by AsgiSA – or any other government programme, for that matter – to improve the maths and science proficiency of SA’s school leavers is proving detrimental to many corporate initiatives to address the skills shortage.

With less than 10% of public school pupils completing the maths higher grade matriculation exam – the majority are opting for the standard grade or maths literacy paper – many companies are being forced to offer engineering or technicians bursaries to private school – and thus mostly white – matriculants.

This is exactly what Jipsa is trying to avoid.