Mangosuthu Buthelezi's Weekly Newsletter to the Nation

We all remember the phrase, "It's the economy, stupid." It was made famous by political strategist James Carville who hung it on a sign in Bill Clinton's Little Rock campaign office to keep everybody "on message" in the 1992 election.

Whilst I would not have put it quite so prosaically, the sentiment ran through my mind when I read about the government's proposed restructuring of the Expanded Public Works Programme (EPWP). The IFP (and the DA) have consistently pointed out that the EPWP, for all its theoretical merits, can never be the answer to our high levels of structural unemployment. What South Africa needs to create jobs is an open labour market. I'll return to that soon.

The lofty vision of the architects of the EPWP, no doubt inspired by Rooseveltesque New Deal sentiments, was to create five million jobs over five years and bridge the gap between the 'second' and 'first' economy.
This has proved to be wildly optimistic. The IFP has consistently pointed out the EPWP can never be an unemployment panacea.

The reasons are simple: the EPWP is not part of an open labour market and most of the working jobs created last only as long as the infrastructural programme that has prompted them.

Yet the EPWP has an important role to play by training 'unemployable' workers into employable ones and investing in much needed public works programmes. Turning back to job creation, we know that to cut through the structural conditions that produce large-scale poverty, economists agree that the growth rate needs to be increased to six percent plus, a similar pace to other comparable emerging markets.

According to the optimistic scenario of a Goldman Sachs model, if the economy grew faster than six per cent, unemployment would fall to 11 per cent by 2014. At present, according to a recent report by the South African Institute of Race Relations (September 2006), over the past decade South Africans have been entering the job market faster than the population of working age has been growing.

This has contributed to a rise in both the rate and number of unemployed people. Over the same period, South Africa's white population has declined both absolutely and as a proportion of the total population.
The AfriForum Come Home Campaign estimates that three million jobs have been lost due to the brain drain of the 841,000 whites who have emigrated over the last decade. For a devout free-marketer, this provides me with a bit of an intellectual conundrum because I believe in the free movement of goods and services.

Yet one knows that many whites have left because of their fears about crime and the reckless implementation of affirmative action. My party proposes to hold a widely representative forum to look at why so many whites have left with their skills and what can be done to keep them and encourage those who have left to come back.

In order to achieve these objectives, we need to grant white South Africans a meaningful stake in the existing order. Not only does this make economic sense, it is also in line with our vision of a non-racial South Africa of the struggle days.

Let's be really honest here. If the majority of white South Africans had envisaged in the early 1990s the way affirmative action and racial classification would come to dominate the post-apartheid labour market, few would have voted yes in Mr de Klerk's watershed referendum on constitutional reform.

Endogenous growth theory, a clunking phrase made famous by Britain's prime-minister-in-waiting, Gordon Brown, in the early ninety-nineties, places great emphasis on innovation, new ideas, and the appropriation of skills and knowledge. These are traditional areas of expertise of our currently disadvantaged minorities. Let's make use of them for the benefit of the previously disadvantaged majority. If there was a way to create a knowledge-based society through mutually beneficial socio-economic interaction, this must be it.

At least in theory, we support investment in infrastructure and research and development in fields such as biotechnology, pharmaceuticals and avionics. Many local IT businesses concentrated in and around Johannesburg are fair competitors to their counterparts in Western Europe, North America and the Far East.

In addition, South Africa must also be actively branded as an international high quality food producer and promote the 'Green Revolution', which encourages non-land intensive, labour intensive and high value added crops.

None of these achievements can be credibly attributed to the state and its interventions in the South African economy. They are the results of free enterprise. If the state is to benefit from such excellence, it must let it grow in the most propitious climate, namely in the private sector.

The trends we see now are not always promising. The state continues to own huge sectors of the economy (essentially, almost all the utilities and still controls Telkom, despite its listing). This creates major market inefficiencies. Even the talented Trevor Manuel cannot buck international trends! The government must accelerate the privatisation of all the parastatals and outsource suitable government functions as a matter of urgency.

In order to reverse the trend, the state needs to open up. For starters, it needs to assist with access to capital for Small, Medium-Sized Entreprises (SMME's) and work with micro financial institutions and the Umsobomvu Youth Fund to help set up sustainable credit guarantee schemes, creating in effect a bridge between risk averse banks and young entrepreneurs. Access to start up capital has been a co consistent feature of all success emerging economies.

As President Mbeki prepares for his state of the nation address next week, I urge him to pull out all the stops and set the economy free as he enters the final lap his presidency. Success in creating jobs would be the crowning achievement of the Mbeki presidency.

Yours sincerely

Prince Mangosuthu Buthelezi MP