The choices of leaders: it’s time to do the right thing

Picture: Reuters - South Africa, Botswana and Namibia are all, like Argentina, rated as upper middle-income countries, yet have shockingly high unemployment and poverty rates, the writer says.

By Isobel Frye

Argentina’s Vice-President Christina Fernandez de Kirchner is sponsoring a new Basic Universal Wage bill through Congress. The monthly ‘universal wage’ of $50 would be paid to all unemployed residents of Argentina between 18 and 65.

This is not an unemployment insurance scheme, but a tax -funded grant to ensure that the basic needs of the unemployed are met, and to ensure that the unemployed remain within the embrace of society.

There are some clear similarities with the universal basic income grant proposals that have been spoken of in South Africa, especially the principle of making sure that no one goes to bed hungry and that basic needs are met.

However, there is a shocking policy difference. While Argentina has an unemployment rate of 7 percent, South Africa’s unemployment rate is 44.1 percent, with significant demographic differences. Forty-eight percent of the unemployed are black African, 72 percent are under 24 years, and in the Eastern Cape 52 percent of the population is unemployed.

The fate of South Africa’s immediate neighbours is similar, although not as stark. Namibia has an unemployment rate of about 34 percent. Unemployment in Botswana is about 30 percent. Structurally between a third to a half of adults are unemployed in the region. And yet South Africa, Botswana and Namibia are all, like Argentina, rated as upper middle-income countries.

And these three countries are also the most unequal in the world. South Africa and its neighbours suffer from what is known as the ‘African curse’. GDP levels are high because of export profits of extracted commodities, but there is no multiplier of wealth captured in these countries. The commodities are exported with little employment- generating beneficiation undertaken in the countries of extraction. The main jobs associated with mining are the very low-paid and low-skilled extraction jobs. The higher-skilled and hence higher-paid jobs take place abroad.

The lack of industrialisation in African countries is one of the key reasons for the structural unemployment. It always has been the skilled manufacturing jobs that generate a multiplier of secondary employment required to support skilled workers. These include including local production jobs for food and goods required by a consumption class, as well as retail, restaurants and hospitality and the construction sectors for the houses and schools and hospitals as well as digital infrastructure. The demand of a well-paid manufacturing class creates a virtuous cycle of production and consumption that in turn creates labour markets with single digit unemployment.

A radical structural change is needed if the region is serious about creating single digit unemployment.

Will the political leaders ever take the necessary radical steps to turn around the dying economies over which they preside?

There are three factors that affect the answer to this question.

The first would be whether the leaders believe that their ongoing incumbency is under threat. The era of unchallenged loyalty to liberation parties is past. Kenya has recently demonstrated the path of adhering to the will of the electorate. So really the issue is whether opposition parties are hungry enough for power to develop credible alternative socio-economic policies that challenge the pro-elite policies of incumbent parties.

The second factor is the degree of policy autonomy that ruling parties believe they have in a world of multilateralism underpinned by developing world debt-dependency. International directives on national spending priorities are built into the conditions of international financing. In addition, international ratings agencies exercise a shadowy, unaccountable grading that determines the cost of borrowing at every level of national economies.

But the third factor can be the tipping point: the patience of people living under systems that seem to offer them no relief. When people rise up, as in the Tunisian Jasmine Revolution, it is because the threat of sanction becomes preferable to the desperation of continuing to live in destitution without hope for change.

The answers to questions two and one bode ill for peaceful change in Southern Africa. Ownership and control of the wealth of these countries continues to be held by a small elite, most of it off-shore. The myriad ways in which holding companies put distance between their profits and the tax coffers of the countries of extraction is well known, and yet no action is taken on the global stage against these practices. And yet when developing nations seek to assert their sovereignty against the interests of the extractors, such as done by Hugo Chavez of Venezuela, they are dismissed as loony populists and sanctions are rapidly imposed.

A recent paper by Duma Gqubule for the Social Policy Initiative lays bare the dilemma of rulers in this situation. Unless the leadership has the will to reshape their national macro-economic policy architecture, they will not be able to adopt policies that rebuild the manufacturing base and with it create the jobs needed to correct this perverse neo-colonial value extraction. Were a government to insist that their macro-economic policies had to target employment and GDP growth rather than inflation and debt, then all trade and investment policies, all infrastructure priorities and state subsidies would be required to flow along a value chain that prioritised meeting domestic basic needs, and critically, building domestic demand.

Like village orphans feeding on crumbs, southern governments have been told what is allowed and what is not by the nations that made up the rules of the game.

And yet during the global pandemic we started to see a shift in certain monetary policy fundamentals, and an embrace of helicopter money and quantitative easing that previously was declared unhealthy.

More than 12.2 million adults in South Africa live without jobs, or permanent grants of any kind. Argentina has under a million unemployed people. To speak of a universal basic wage makes sense in Argentina where employment is the norm. Where unemployment is the default however, talk of a universal basic income makes more sense. A peaceful future in the highly unequal Southern Africa is possible, but then national leaders need to have the courage to do the right thing.

Frye is Executive Director of the Social Policy Initiative

This article is original to the The African. To republish, see terms and conditions.