Good news! JZ to pull 500 000 jobs out of his arse!

From Moneyweb

Related:
ANC South Africa GDP hits wall

Zuma promises half a million jobs

Financing 500,000 jobs in a recession

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Zuma, please tell us more...

In his first-ever State of the Nation address, President Jacob Zuma made a range of promises in a variety of areas, many of which are going to be very difficult to keep.

By far his most ambitious pledges were on the employment front.

Said Zuma, "[An] important element of our drive to create job opportunities is the Expanded Public Works Programme. The initial target of one million jobs has been achieved. The second phase of the programme aims to create about four million job opportunities by 2014. Between now and December 2009, we plan to create about 500 000 job opportunities."

This is extremely ambitious. Right now, the total number of employed people in South Africa is just under 14m, so Zuma plans to somehow increase the number of jobs in the country by nearly 30%, which is a staggering target. His chances of achieving this seem very slim.

Labour consultant Andrew Levy said, "I'm not quite sure where and how we are going to create all those jobs in such a short time. If the state president is talking about a public works programme, well, we've had that for four or five years, and we haven't created that number of jobs.

"And one's simply got to say that, even if it's accelerated, I doubt very much that there's the managerial ability and talent to deliver it. If you are going to have 500 000 jobs by the end of the year, that means we've got to get management, we've got to get capital, we've got to get investment, we've got to have delivery on the ground, even if it's only buckets and spades.

"There has proved to be such a dearth of talent and, sadly, so much money getting deflected on the way, that one's simply got to say, look, it's unlikely this will come through."

The government faces many other challenges in achieving this goal. For on thing, the recession that the country is currently experiencing is going to chip into government revenues. As people and companies earn less, they will pay less tax, meaning that the government will have less money to work with.

Admittedly, the South African government has very little debt and plenty of scope to issue more, and could theoretically raise the money to pay for expanded public works and job creation. However, such spending is not sustainable, and would not offer a lasting solution to the problem of unemployment, and government may not be able to raise enough money to create four millions jobs.

Zuma's second major promise to business and the economy was to "ensure that the cost of telecommunications is reduced through the projects underway to expand broadband capacity."

It's no secret that South Africa is in dire need of better broadband access at cheaper prices, and government has long been promising to help in this regard. According to IT analyst Irnest Kaplan of Kaplan Equity Analysts, government's role is to "make sure that the framework and the policies that they put in place enable competition, and then to step away and let market forces take over."

Unfortunately, government's track record in this regard is very poor. The licensing and development of a second national telecoms operator to rival Telkom was held up for years thanks to government slackness, and the state regulatory body, the Independent Communications Authority of South Africa, has often intervened in the markets to Telkom's advantage.

As Kaplan says, "It's a very fine balancing act between protecting the interests of licensed operators - because they were given a licence and were given certain exclusivity periods - versus opening the market up and letting anyone who's got capital produce a product or a service and sell that into the market.

"So it is a balancing act, but government has probably not done enough in terms of opening up the market. We are seeing more of that the last year or two, but you still have your sort of big, dominant telco players who really call the shots in this game."

Looking at these two promises and the doubts that exist about them, it's clear that the biggest fault in the speech was the complete lack of detail provided. While Zuma made many over-arching promises - like the ones above, and others like a pledge to reduce violent crime by 7 to 10% a year - he gave no real indication of how he would go about achieving these goals. The best we can do is wait and see.