Even if the local education system was fixed, it would take decades before the effects on local growth were realised, Rashad Cassim, the SA Reserve Bank’s head of economic research and statistics, said this week.
“If you fix education, it will take 10 to 20 years to see the growth effect. I’m a big believer in the power of small numbers,” he said at a state of the nation panel discussion held at the Gordon Institute of Business Science, which is the University of Pretoria’s postgraduate business school.
South Africa’s low employment level stemmed from the lack of an informal sector comparable to what existed in other so-called middle-income countries such as Brazil, Peru and Colombia, he said.
Even when times were good, South Africa was incapable of a growth rate of much more than 2% to 3%, he said.
“A symptom of that is that you cannot bring the unemployment rate down.
“People ask me for one big idea to solve our problems and I cannot think of one,” said Cassim.
The immediate concern should instead be with small “bottlenecks” like better roads.
“When you are in a business cycle, you could’ve been at a peak. We happen to be in a trough. We are in a cyclical downturn and it is partly to do with the global cycle, global aggregate demand and local aggregate demand.”
The “unprecedented stimulus” provided by monetary policy has had no growth effect, he said, referring to the record-low interest rates set in South Africa after the 2008 global financial crisis.
The crux of the problem was sorting out what cannot just be blamed on the cycle, he said.
Cassim said there was a need to understand the economy better and not “trivialise” economic debates.
Other panellists said a fixation on the national economic growth rate could distract you from what was really wrong with South Africa’s economy.
Xhanti Payi, an economist at Nascence Advisory and Research, said: “You can build more stadiums and get a 5% growth rate without achieving anything.”
The US had halved its unemployment rate with a growth rate of 2%, he said.
Prince Mashele of the Institute for Security Studies made a similar point, saying the high growth figures during former president Thabo Mbeki’s era did nothing to stop the growing reservoir of unemployable young people.
The inflow of people into that pool had to be stopped, he said.
Putting the people inside it to work was a separate imperative for which public works projects, or making child grants conditional on caretakers providing labour, could be solutions, he said.
The ultimate solution is, however, to “fix the public education system”.
It is a “myth” that South Africa had a massive problem of unemployed graduates, said Mashele.
“The unemployment rate among people with degrees is 3%,” he said.