South Africa goes to work

Tackling chronic unemployment is critical for South Africa's political stability, writes Karina Robinson

THABO MBEKI, the man set to succeed Nelson Mandela as South Africa's president following elections next year, is launching a major new job creation scheme in alliance with big business to deal with the country's chronically high unemployment.

"This is something we are starting. We are now talking to some of the major corporations in South Africa," said Mr Mbeki, who effectively runs the government, in an exclusive interview with Bloomberg at Oliver Tambo House, his Pretoria residence.

Although South Africa is beating inflation and lowering its budget deficit - pleasing both foreign and domestic investors - its main challenge lies in dealing with unemployment. A year ago unemployment was estimated at about 33 per cent. Since then the price of gold has slumped, leading to the loss of 51,000 jobs in the industry in the last quarter of 1997 alone, according to Cosatu, the trade union federation.

The jobs initiative will mark an improvement in relations between business and the government. A November session of Archbishop Desmond Tutu's Truth and Reconciliation Commission saw white-controlled business criticised for benefiting from apartheid by exploiting oppressed black labour. Businesses were accused of not doing enough to help the new, multiracial, equal opportunity South Africa.

"We believe major business is committed to the new South Africa and this plan will allow us to address problems like job creation in a partnership manner," said Theuns Eloff, chief executive of the National Business Initiative. The NBI groups together South Africa's 170 largest companies. It is co- leader of the job creation plan, due to be announced in about a month.

Mr Eloff said the initiative involved NBI companies, such as Anglo-American Corporation, South Africa's largest company, helping their employees to set up new business ventures which would then sell services back to them. Financial help would be given to boost participation by black people, women and the disabled.

The importance of jobs in promoting political stability was underlined by a recent Gold Summit where the industry agreed to a moratorium on lay- offs pending the establishment of a special committee to deal with the industry's problems.

In May, a Jobs Summit attended by officials from government, industry and labour is due to address the employment question. However, tensions between business and government remain.

"Getting business, labour and industry together has been called the Team South Africa approach. A key concern is that jobs are not being created fast enough," said Arnold Basserabie, group chief executive of Fedsure Holdings, a financial services company. He added that some government bills might actually work against job creation - a reference to the Employment Equity Bill.

The bill has business worried. Currently under review in Parliament, it requires employers to analyse their workforces by race, gender and disability. If this shows any under-representation, the employer must draw up a plan to correct this, with deadlines.

Mr Mbeki said the bill would help redress the legacy of discrimination. "There is a need to train workers, increase their skill levels and raise their levels of productivity."

He insisted there would be no quotas imposed on business; rather, each company would draw up its own plan, which would be monitored by the government.

Mr Mbeki also said job creation was not something the government could do by itself. "The private sector has a major responsibility," he said. This will reassure investors, some of whom feared increased government spending in order to deal with unemployment in the run-up to the 1999 elections.

"I don't doubt Mbeki will stick to his fiscal discipline since it is a prerequisite to allow the private sector to create jobs," said Jac Laubscher, chief economist at Sanlam Asset Management.

Finance minister Trevor Manuel recently said South Africa's budget deficit would not exceed 4.3 per cent of gross domestic product for fiscal 1998, down from 5.6 per cent the previous year.

Inflation as measured by the CPI fell to 8.6 per cent in 1997 and should continue its downward trend. with the December figure coming in at 6.1 per cent.

Growth is proving the major problem. GDP increased by only 1.7 per cent in 1997, down from 3.2 per cent in 1996, according to the Central Statistical Service. However, an expected drop in interest rates as inflation comes under control should help the position.