JOB CREATION AND JOB CREATION AND INFRASTRUCTURE INFRASTRUCTURE IN SOUTH AFRICAIN SOUTH AFRICA

March 2011March 2011

CLGF Conference (Cardiff)CLGF Conference (Cardiff)

SALGASALGAEconomic DevelopmentEconomic Development

And PlanningAnd Planning

Mayur MaganlalMayur Maganlal

• Introduction

• Unemployment Challenges

• Role of Capital Investment in Infrastructure

• Expanded Public Works Programme

• The case of Ehlanzeni (Limpopo Province)

CONTENTS

• Traditional LED is focused on “creating the enabling business environment”, given the vast poverty and unemployment challenges but current administration is taking a more proactive / focused / interventionist stance

• Job creation, public investment and rural development emerged as key points in finance minister Pravin Gordhan’s budget 2011 speech

• The SA government pursues its New Growth Path (NGP) which includes a focus on infrastructure spend– Energy, transport (road construction and maintenance), communications,

water, education and housing• Industrial Policy Action Plan (IPAP2) to support key sectors and more

focused use of government procurement to create jobs • National Programmes such as EPWP affect all spheres of Government to

invest in infrastructure projects and job creates:– Labour Intensive Construction methods– MIG Funds– For new projects and maintenance– Incentives based on performance– For LG, capital investment is often an easier than doing “LED”

INTRODUCTION

The jobs challengeLabour absorption (Percentage of

people aged 15-64 who are employed) (ILO)

South Africa 41,3%

Egypt 43,2%

India 55,6%

Argentina 56,5%

South Korea 58,1%

Malaysia 60,5%

Brazil 63,9%

China 71,0%

4Confidential

8

12

16

20

24

28

32

1980 1985 1990 1995 2000 2005

Mil

lio

ns

Working age population growth (1980-2009) =

Labour Force growth (1980-2009) = 1.9%

gap = unemployed + not participating

UNEMPLOYMENT CHALLENGE

GLOBAL ECONOMIC CRISIS : THE NATIONAL

RESPONSE

NO Reference to either the local or provincial spheresNO Reference to either the local or provincial spheres

‘Stimulus Package’ (NEDLAC/Presidency)

Investment in Infrastructure

Global Coordination

MacroeconomicPolicy

Industrial & Trade Policy

Employment Measures

Social Measures

•Transport (road, rail, public transport, port operations);•Water, dams & sanitation;•Housing;•ICT;•Electricity;•Health & education;

•Counter-cyclical (expansionary) fiscal policy •Reducing real interest rates;•Competitive exchange rate;•Tax relief to low-income households and companies in distress;

•‘Rescue package for vulnerable sectors (clothing, textile, autos, mining, capital equipment, retail, housing construction, private services);• Support for SMMEs in crisis;•‘Green’ industries;•Local procurement;•Trade: tightening import controls.

•National Jobs Initiative (R10 bn);•Support where > 50 retrenchments;•Expand Public Service (education, health, social work, CJS);•EPWP II: 2 million full-time equivalent jobs;•Training & skills development, incl. training the retrenched;

•Improve global Economic coordimation;•Prudent regulation of SA capital markets;•G20 as platform to enhance stability in fin mkts;•Use IFIs to finance counter-cyclical policies in developing countries.

•Industry-level social plans;•Improved UIF benefits;•Emergency Food Relief;• Support community food production.;•Access to FBS;•Social Grants (CSG to age 18, pension for men from age 60);•Promotion of Cooperatives;

R 787 bnR 787 bn2010 - 122010 - 12

Overarching Priority: To implement counter-cyclical policies that are customised for the locality, through a dedicated ‘local stimulus package’, ‘local stimulus package’, to mitigate the negative impacts, and to position the local economy for recoveryto position the local economy for recovery

Investment in Infrastructure

Industrial Policy

Employment Measures

Social Measures

•EPWP, • Municipal “shovel ready” Infrastructure Projects;•2010 projects

•Advice to corporates and SMMEs & support to access rescue packages & concessionary credit, Local procurement

•Employment programmes to absorb retrenched workers, leveraging on National Jobs Initiative;•Retraining

•Support to communities and households in distress through partnering with NGOs & the private sector (CSI)

Surveillance of local economySurveillance of local economyPartnership: civil society & private sectorPartnership: civil society & private sectorOngoing CommunicationOngoing Communication

GLOBAL ECONOMIC CRISIS : THE NATIONAL

RESPONSE

New Growth Path Drivers

7

SoNA:–R9 billion in the Jobs Fund over the next 3 years – public employment schemes plus subsidies to private employers–R10 bn from the IDC in next 5 years for job-creating projects–R20 billion in investment subsidies–Comprehensive support for SMEs

1. Address cost drivers and inflationary pressures across the economy

2. Active industrial policy based on increasing competitiveness and targeting sectors that can create employment directly and indirectly

3. Comprehensive rural development

4. Stronger competition policy

5. Stepping up education and skills development

6. Enterprise development

7. Reform of Broad-Based BEE

8. Reform labour policies to support productivity and improve protection for vulnerable workers

9. Technology policies geared to improving innovation in ways that support employment creation and small- and micro-enterprise

10.Developmental trade policies with a strong orientation to new growth centres

11. Investment to support African development

STATE OWNED ENTITIES - ESKOM

• Major plants located near coal reserves, with localised employment effects– Should create 2000 new jobs in the coming year

• Main employment impact from maintaining electricity supply across the country

• Also create jobs in all provinces through– Procurement from build programme– Electrification programme– Municipal electricity maintenance

Nation-wide programme which will draw significant numbers of the unemployed

into productive work, so that workers gain skills while they work, and increase their

capacity to earn an income

EXPANDED PUBLIC WORKS PROGRAMME

(EPWP)

To utilise public sector budgets to alleviate unemployment

EPWP OBJECTIVE

• Deliberate attempt by the public sector body to use expenditure on goods and services to create work opportunities coupled with training for the unemployed

• Projects usually employing workers on a temporary basis (either by government, by contractors, or by other non-governmental organisations), under code of good practice for SPWP or learnership employment conditions

WHAT IS AN EPWP PROJECT

• Increasing the labour intensity of government-funded infrastructure projects

• Creating work opportunities in public environmental programmes (eg Working for Water)

• Creating work opportunities in public social programmes (eg community health workers)

• Utilising general government expenditure on goods and services to provide the work experience component of small enterprise learnership / incubation programmes

AREAS OF OPPORTUNITIES FOR

EPWP

BACKGROUND TO EPWP PHASE 1

• The first phase of the Expanded Public Works Programme achieved its 1 million work opportunities targets a year ahead of schedule

• The second phase of the EPWP to scale up further to contribute significantly to halving unemployment by 2014

• EPWP was projected to grow to three times it current size within the next 5 years

• EPWP 2 implementation to start on 1 April 2009

KEY ENHANCEMENTS EPWP 2

• EPWP Employment Creation Targets• EPWP Wage Incentive• Sector Programmes

o Introduction of the Non-State Sector

(community)

• Increasing Technical Capacity and Support• Funding

Grant/ Allocation Local Municipal Infrastructure Grant 2009/10: R202 million

2010/11: R554 million 2011/12: R1.1 billion

• Overall Phase 2 targets will be distributed across all spheres of government over a five year period based on projects/programmes

• The EPWP incentive is based on paying all public bodies that create work above a minimum threshold for the EPWP target group an incentive of R50 per day for every day of work created

KEY ELEMENTS OF PHASE 2

Phase 2 targets in Full Time Equivalents broken down per sphere of government

  Local Provincial National Non-State Totals

2009-2010  60 548   117 554  22 698  8 696  209 496

2010-2011 72 658  136 630  28 999  20 870  259 156

2011-2012 94 939  181 667  40 991  41 739  359 337

2012-2013 122 549  243 527  56 272  76 522  498 870

2013-2014  152 581  320 692  76 570  130 435  680 278

Totals 503 275 1 000 070 225 531 278 261 2 007 137

Infrastructure Sector

Project based employment in capital works Potential for long term employment programmes in maintenance works

INFRASTRUCTURE SECTOR

• Both the programme and budgets of the EPWP have multiple objectives:– Eradicate backlogs and create employment– Provide social services and create employment– Taken existing programmes, and institutional setups

and required additional job creation:– Municipal official who previously build roads, now has

to still build roads, but must also create jobs– Lot of energy focused on changing how existing

programmes are implemented, not establishing new institutions with the purpose of doing things more labour-intensively

OBJECTIVES FOR INFRASTRUCTURE

SECTOR

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Satara

Skukuza

Talamati

Berg-en-dal

Lower Sabie

Pretoriuskop

Crocodile Bridge

NELSPRUI T

Barberton

Sabie

Swadini

Belfast

Graskop

Hazyview

Badplaas

Kabokweni

Lydenburg

Ohrigstad

White River

Machadodorp

Komatipoort

Burgersfort

Pilgrim's Rest

EPWP REPORT FOR EHLANZENI DISTRICT

MUNICIPALITY

Summary of EPWP performance

- Number of projects = 25

- Expenditure = R78,953,542

- Planned jobs = 800

- Actual Jobs = 976» Youth = 388

» Women = 581

» Disabled = 7

- Training» Accredited = 2105

person/days

» Non-accredited = 1405 person/days

EHLANZENI DISTRICT: STATUS REPORT

      EMPLOYMENT

PROJECT NAME LM BUDGET YOUTH WOMEN

DISABLED

TOTAL

Nyathi WTW NLM R38,000,000

24 18 3 43

Mangweni Bulk Supply

NLM R1,500,000

16 16 1 42

Buffelspruit Bus Route

NLM R6,010,000

14 22 1 37

Goba Bus Route NLM R3,490,000

15 25 0 45

Msogwaba Bus Route

MLM R3,097,773

10 8 1 19

EHLANZENI DISTRICT: STATUS REPORT (08-

09)

      EMPLOYMENT

PROJECT NAME LM BUDGET YOUTH WOMEN DISABLED TOTAL

Backdoor taxi & bus route P2

MLM R2,500,00024 17 1 32

Zwelisha B Water Supply

MLM R3,500,00035 22 0 57

Nsikazi North Water Network

MLM R1,642,62753 40 2 95

Roads & Stormwater infrastructure – Shabalala P2

MLM R1,000,00025 12 0 37

TOTAL 216 180 9 407

EHLANZENI DISTRICT: STATUS REPORT (08-

09)

• Have not reached our full potential in implementing the EPWP program

• No unit dedicated to EPWP activities

• Planning

• Infrastructure sector active, however economic, social & environmental/culture sectors not reporting on activities

EHLANZENI DISTRICT: CHALLENGES