Zuma’s job promise endangered by South African recession
South African President Jacob Zuma is struggling to keep his pledge to create hundreds of thousands of jobs as the economy remains mired in the worst slump in 17 years.
Gross domestic product probably shrank an annualized 3.3 percent in the three months through June, according to the median estimate of 22 economists surveyed by Bloomberg. It contracted 6.4 percent and 1.8 percent in the previous two quarters. The statistics office releases the figure at 11:30 a.m. in Pretoria tomorrow.
Zuma pledged to create 500,000 jobs this year and to reduce the unemployment rate by 50 percent by the end of his term in 2014 as governments around the world fought to limit the impact of the worst global recession since World War II. Instead, manufacturers and miners fired thousands of workers in the second quarter, pushing up the jobless rate to 23.6 percent, the highest of 62 countries tracked by Bloomberg.
“We are not going to make those goals,” said Jac Laubscher, group economist at Cape Town-based Sanlam Ltd., the biggest South Africa-owned life insurer. “Why create those expectations? That will only lead to disappointment and a negative response from the electorate.”
Zuma, 67, was elected president in May with the backing of the Congress of South African Trade Unions, the country’s biggest labor federation, and the South African Communist Party.
In his first state-of-the-nation address on June 3, he pledged to create 4 million jobs over the next five years, double the government’s previous target. This year alone, he promised to add half a million jobs, mainly temporary employment created through public works programs.
The economy shed 267,000 jobs in the second quarter, while 302,000 people without work gave up looking for a job, adding to poverty in a country where 34 percent of people live on less than $2 a day.
“Our recovery might not be as strong as we would hope,” Zuma said on July 23. “Even if the economy begins to grow again next year, we will have to wait a little longer for a significant increase in new job creation.”
Protests erupted in several townships around Johannesburg last month, with residents blockading streets and throwing stones at vehicles. They demanded houses, clean water and health-care services. Unions have staged a series of strikes.
The global recession has slashed demand for mining and manufacturing exports. Factory production, which accounts for 15 percent of the economy, plunged 17 percent in June from a year ago, the statistics office said on Aug. 11.
Zuma may also find it hard to finance a planned increase in child support grants pledged during the election. Finance Minister Pravin Gordhan said on July 1 the government may miss its revenue target by as much as 60 billion rand ($7.4 billion) in the year through March 2010.
That is likely to push up the budget deficit to 7.4 percent of GDP, according to JPMorgan Chase & Co. The government had forecast in February that the shortfall would reach a decade high of 3.8 percent.
While the economy may recover next year, growth will probably only reach between 2.5 percent and 3.5 percent for “several years,” Gordhan said on July 1.
Last week, the benchmark FTSE/JSE Africa All Share index fell for the first time in more than a month, dropping 1 percent to 24,815.77. The rand slumped for a third week, sliding 1.3 percent against the dollar to 8.0894, while the yield on the R157 government bond, due 2015, declined 37 basis points to 8.1 percent.