State of the Nation: Zuma's jobs focus brings sighs of relief in South Africa

South African businesses breathed a sigh of relief Thursday night when President Jacob Zuma announced a raft of economic incentives to create jobs, including tax breaks for the manufacturing sector, in his second State of the Nation address.

Mr. Zuma’s speech to the parliament in Cape Town was all the more a relief given the increasing pressure coming from Zuma’s own party for more drastic government intervention into the economy, including nationalization of the country’s mines. Zuma’s list of promises excluded actual nationalization, but did pledge to support the creation of a state-owned mining company.

"The president has come to appreciate that minerals belong to us,” said Julius Malema, the fiery African National Congress Youth League leader, after the speech. “We must now start eating mangos and not just having a mango tree." The ANC Youth League, along with trade unionists, was crucial in swinging support toward Zuma for his 2008 election, but has more recently become critical of Zuma for his perceived pro-business economic policies.

Zuma’s ANC has control of almost two-thirds of the seats in parliament, so passing his parliamentary agenda should be no problem given sufficient political will. And it is the political will that critics of Zuma, both within his party and outside of it, are questioning.

Those on the left complain that Zuma still has not honored promises from his 2010 State of the Nation speech, in which he signaled a pro-poor focus for his government. Those on the right say that Zuma’s accumulated promises would bankrupt the national budget at a time when the country’s economy should be growing. But his almost single-minded focus on the economy and creating jobs for unemployed youths seems to have drawn tentative praise from all corners.

“In many ways, it’s what you expect from such a speech in an election year,” says Azar Jammine, director of the Econometrix forecasting firm in Johannesburg. “The big question is whether these intentions will be realized, and that’s the same question that is posed year after year after year.”

Job creation is key

South Africa's economic climate is strong. There was continued growth even throughout much of the global slowdown, Mr. Jammine says, “but it’s not growing fast enough to reduce unemployment in an appreciable way. At one point, one has to ask how much progress could be made, even in a period of economic growth, without improving the skills base."

The forefront of Zuma’s job-creation plan is a 9 billion rand ($1.2 billion) fund to help create jobs and a separate 20 billion rand ($2.7 billion) in tax breaks for businesses to create jobs, a proposal welcomed by both labor unions and business owners. Improving the skills base would entail on-the-job training for those who are already employed, developing further skills to make them more effective workers.

“We cannot create these jobs alone,” Mr. Zuma said, reading his speech from an iPad. “We have to work with business, labour and community constituencies. Experience shows that we succeed when we work together.”

Both ideas are almost certain to be passed, in part because the ANC’s most bitter rival, the Democratic Alliance party, claims the jobs fund idea as their own.

DA leader Helen Zille – whose party controls Western Cape province which includes Cape Town – welcomed Zuma’s speech, but she cautioned that the government needs to start improving its capacity to deliver basic services. “While we have an incapacitated state, none of the plans will come to fruition,” she said.

Trade unions hold many of the cards

Zuma’s strongest criticism came from within his own tripartite governing alliance – the ANC, the Congress of South African Trades Unions (COSATU) and the South African Communist Party.

COSATU leader Zwelinzima Vavi told reporters after the speech that it welcomed Zuma’s promises to promote “decent” work opportunities, but fretted that the proposals were vague and made no mention of improving workers’ rights. “If it is business as usual, government aims will be completely defeated,” Mr. Vavi said.

In the end, Zuma’s success will be measured in how it deals with restive trade unions that form the base of COSATU’s (and the ANC’s) support in the election season. COSATU has always supported the ANC ruling alliance, but it has recently hinted that it could withdraw that support in local elections if it felt the ANC was not backing pro-worker policies.

COSATU had originally rallied hard to support Zuma’s candidacy for leadership of the ANC, helping Zuma to oust the decidedly pro-business former South African President Thabo Mbeki as ANC leader. But COSATU’s relations with Zuma have soured of late. In the leadup to South Africa’s World Cup, wage strikes by several key trade unions nearly brought the South African economy to a halt.

This year, as other union contracts come up for renewal, COSATU-affiliated unions appear to be no less militant, with the truckers’ union SATAWU threatening to shut down key sectors of the economy unless their demands for 20 percent salary increases (over two years) are met.