Back in late May, a press release went out from the Department of Trade and Industry, headlined “Apartheid to blame for South Africa’s unemployment rate;” you can see the full document here. The release was based on a speech by the Johannesburg Chief Representative of the Bank of Tokyo Mitsubishi UFJ, Yoshiro Yokoi.
In his speech, Yokoi reportedly said that South Africa is “paying dearly” for apartheid, and that “If everyone had access to education back then, we would not have this high unemployment rate.”
This has been on my mind since I read that release. It’s an argument I’ve heard before, of course, that the structures and inequalities of the apartheid era are responsible for contemporary economic troubles in South Africa. But to hear it expressed that way, that apartheid is almost 100% to blame for today’s unemployment project, really made me think. Is it true? Can we blame South Africa’s 25% unemployment rate entirely on apartheid? Or are there other factors at work?
There’s no real doubt that apartheid is the root cause of a lot of South Africa’s problems. Under apartheid, most South Africans didn’t get an education that was worth anything much. Most South Africans were not allowed to move freely around the country, were not able to borrow money on fair terms, were not able to freely start businesses, and in many cases were not even able to live with their families because of the patterns of migration and employment that were common.
All of these injustices, and many others, have effects that endure today. Educational attainment is still highly unequal in South Africa. Historically black schools still have, on average, fewer resources, higher learner-to-teacher ratios, and less favourable outcomes. Under-educated parents are unable to help their children with their schooling. Income disparities mean that, on average, black South African families generally have fewer resources to devote to education, so that it’s harder for black learners to take extra lessons or build up home libraries (shown to enhance educational attainment), or learn computer skills at home. Disruptions to family life also have their cost. Some children raised in unstable homes don’t learn the social skills necessary to function well in a job, for example. And the list goes on.
Given this, it’s unsurprising (but depressing) to see huge differences in employment rates by race. While unemployment rates for black South Africans hover around 30%, rates for white, Indian, and coloured South Africans are much lower. Apartheid, then, clearly bears much of the responsibility for the gap in employment between black South Africans and other South Africans. However, it’s not the whole story.
While apartheid accounts for much of the inequality in employment in South Africa, I do think that there is more to it. Specifically, the policies that have been pursued in post-apartheid South Africa have done little to improve the employment situation, and much to exacerbate it.
For a start, as we’ve discussed before, the close relationship between government and trade unions has led to a series of labour regulations that are very nice for those who have a job, but that make hiring new staff unappealing for employers. Things like requiring whole industries to adopt the determinations of wage negotiations between big employers and unions, as well as very tough restrictions on hiring and firing, have tended to discourage job creation and encourage capital-intensive production.
At the same time, government has done relatively little to encourage the development of the small business sector, which is a key driver of new employment in most economies. Excessive red tape is hindrance to business formation, and employment equity rules, while important for redressing imbalances, can be burdensome for small firms trying to grow and often don’t make sense.
In the years after apartheid ended, South Africa enjoyed a “peace dividend” – the economy expanded, incomes rose, and the markets boomed. However the Achilles’ heel of the boom was employment; even as growth ticked up, employment remained stagnant. With a large pool of unemployed people, one would expect to see labour intensive industries developing in South Africa, but that is not the case, and the reason for that is very likely that government rules and regulations around labour and other issues make such businesses unviable.
Apartheid created a number of structural problems in South Africa that will take a very long time to solve. However, in the years since the end of apartheid, more could have been done to address the urgent problem of employment. While apartheid must shoulder most of the blame for South African unemployment, the ANC-led government cannot escape its share.