The reality is that the private sector creates more jobs, says Ramaphosa

President Cyril Ramaphosa believes the government can have its economic cake and eat it.

He told MPs on Wednesday the government did not agree with the idea that by recognising the role of business in creating employment, the state automatically diminished its central role in co-ordinating, planning and guiding the development of the economy.

“We do not accept that we must make a choice between a developmental state that drives economic and social transformation, and a vibrant, expanding private sector that fuels growth and employment,” said Ramaphosa on Wednesday. 

The president was replying to the state of the nation address debate following his Sona last week Thursday.

During his speech, which focused largely on measures the country was taking to enable faster economic growth and the creation of employment, Ramaphosa told the nation that SA’s unemployment rate had reached an all-time high.

In the past year, he said SA benefited from a clear and stable macroeconomic framework, strong commodity prices and a better-than-expected recovery. However, he said SA had been “held back by an unreliable electricity supply, inefficient network industries and the high cost of doing business”.

This means that the government has had to take “extraordinary measures” to enable businesses to grow and create jobs.

“We all know that government does not create jobs. Business creates jobs. About 80 per cent of all the people employed in SA are employed in the private sector.

“The key task of government is to create the conditions that will enable the private sector — both big and small — to emerge, to grow, to access new markets, to create new products, and to hire more employees,” he said.

TimesLIVE reported that the South African Communist Party called on Ramaphosa to re-examine his assertion that the state does not create jobs.

He was also criticised by the EFF’s Julius Malema, who said during the Sona debate: “More than 10-million South Africans who are capable of working and are willing to work cannot find jobs anywhere, and these are black people who were systematically excluded from meaningful economic participation under colonialism and apartheid.”

Responding to this on Wednesday, Ramaphosa said the focus on job creation outlined in his address gave rise to a useful debate on the role of the state and of the private sector in fostering economic growth and creating employment.

“They have earnestly sought to answer the central question of who will create the jobs for the 11m unemployed people in SA.

“The state has a clear role to play in job creation — through state owned enterprises, public employment programmes, industrial policy, competition policy, infrastructure investment and indeed through the employment of the public service itself,” he said.

The reality in SA, like most countries, he said, is that the private sector created the most jobs. 

“The private sector employs some three-quarters of SA’s workers and accounts for over two-thirds of investment and research & development expenditure,” said Ramaphosa.

In SA, he said the number of people employed in the public sector increased from 1.9 m in 2002 to 2.8 m in 2017.

“Over the same period, the number of people employed in private sector increased from 8.2 m to 13.5 m. SA is not alone in seeking to rapidly expand our productive capacity by unleashing the potential of the private sector.”

Using China as an example, Ramaphosa said SA should look at the approach taken under Deng Xiaoping to mobilise private capital and promote private enterprise to meet the country’s developmental needs.

“As noted by Prof Tshilidzi Marwala of the University of Johannesburg in an article published yesterday: ‘In 2018, 87 per cent of urban employment in China was from the private sector compared to 18 per cent in 1995. At the same time, the total GDP increased from $734bn in 1995 to $13 trillion in 2018’.”

He said as is evident from the programme that he outlined in his address, “we envisage both a capable developmental state and a dynamic and agile private sector, which work together and complement each other.

“This is what we mean when we talk about a mixed economy that draws on the resources, strengths and capabilities of both public and private sectors.”

TimesLIVE