Infrastructure Development, COVID-19, & Unemployment

By Rebone Tau, Project Manager for Political Affairs at Rosa Luxemburg Stiftung Southern Africa.

 

On 15 May, the Department of Social Development announced that a record 3.5 million people had applied for the special COVID-19 Social Relief of Distress grant within just three days (1). The R350 monthly grant will be paid from May until October to people who are unemployed and who do not receive any other form of social grant or unemployment insurance fund payments from the government. Such a high figure is indicative of the high unemployment rate in South Africa, which officially stood at 29 percent at the end of 2019 (2). According to the National Treasury, this could rise to 40 percent in 2020 as a result of COVID-19 and the extended lockdown (3).

 

While the Social Relief of Distress grant offers much-needed relief for millions of South Africans over the next six months, it may simply leave them without income again once this period is over. Various estimates show that South Africa’s economy could contract by between six and seven percent in 2020 (4). A V-shaped recovery is expected in 2021, but GDP growth rate will still be lower than pre-COVID-19 levels. This situation is likely to exacerbate an already bleak future for millions of the unemployed and widen existing structural inequalities. Against this background, state-led interventions in the labour market become more necessary than ever because private sector recovery is likely to take much longer.

Minister of Finance in April said that restaurants must hire South Africans after the lockdown. This is because the government knows that after the lockdown, South Africans might say they are unable to find jobs and they would still want the R350 that was allocated to them during lockdown. In this regard, one can say Mboweni is looking for a shortcut in dealing with South African unemployment. It is known fact that many foreign nationals are in the hospitality industry working mostly as waitrons in restaurants. The captains of industry will not agree with what Mboweni is saying, as they exploit the workers who are often underpaid and work long shifts. The working conditions are not good at all. The government will have to look at different options on how to empower those who are unable to find work after the lockdown. The National Youth Service must be accelerated after the lockdown because young people need the right skills to participate in the economy of this country.

 

Infrastructure build programmes

A key intervention in this regard could be the government’s infrastructure build programmes. According to the National Infrastructure Plan adopted in 2012, these programmes usually involve investments in healthcare facilities, schools, water, sanitation, housing and electrification projects. Other projects include the construction of ports, roads, railway systems, electricity plants, hospitals, schools and dams (5). Many of these projects require low-skilled labour, which is also likely to be found among the millions applying for the special COVID-19 grant. Limited resources and declining revenue mean that the government is unlikely to extend payment of this grant beyond October. This carries a risk of creating social unrest because grant recipients may develop a false expectation that the government must continue paying them beyond the current crisis.

To address this, the government should consider employing the grant recipients who remain unemployed after October in various infrastructure projects. According to the National Treasury, one of the structural problems of South Africa’s economy is low levels of labour-intensive growth (6). Major reasons for this include the government’s own cumbersome regulatory framework, which creates infrastructure backlogs, as well as lack of funds. President Cyril Ramaphosa has signalled his intention to address these challenges a number of times, including in his first State of the Nation Address (SONA) in 2018. In his 2020 SONA, he reiterated that infrastructure development will be at the centre of his government’s job creation agenda (7).

 

 

Infrastructure & the COVID-19 recovery period

Given this stated intention and the expected rise in the unemployment rate, the upcoming COVID-19 recovery period provides a perfect opportunity for the government to use infrastructure development to create jobs for millions of South Africans. Unemployed grant applicants provide their identification, residential and other details while applying, so the government already has a database that it could readily tap into.

Before COVID-19 struck, there were signs that the government was already seeking financial support for its infrastructure programmes. In February, President Ramaphosa met leaders of various local banks and multilateral finance institutions, including the German Development Bank. These institutions indicated that they had R140 billion to invest in infrastructure development in South Africa in 2020 (8). The government therefore has to move with speed, even during this crisis period, to plan ahead, secure this funding and cushion the most vulnerable in society against unemployment.

Part of the challenge is relaxing the complex regulatory requirements for large infrastructure projects that often create long delays in decision making and approvals. In addition, governance and capacity weaknesses persist, leading to huge amounts of public funds being lost to corruption. A recent example is a R230 million housing project initiated in 2014 by the Free State provincial department of human settlements. According to a Public Protector report released in May 2020, only R21.3 million of the R230 million paid to the main contractor was used in the project, meaning that around R200 million of taxpayers’ money was lost (9).

While it may be a tall order to address these challenges within a short period of time, the nature of the impending unemployment crisis demands urgency. If the 3.5 million South Africans return to a situation of unemployment with no other income, grant or unemployment insurance fund payments, socio-economic challenges such as poverty, crime and inequality could increase exponentially.

 

 

References:
1  Department of Social Development
2  Stats SA
3  EWN
4  National Treasury
5  Government of South Africa
6  National Treasury
7  Government of South Africa
8  Daily Maverick
9  Daily Maverick
The views and opinions expressed by the author do not necessarily represent those of Rosa Luxemburg Stiftung.