Boon of the black market

JOHANNESBURG - South Africa's formal economy cannot create enough jobs for the country's many unemployed despite its faster pace of growth, Finance Minister Trevor Manuel says.

Manuel said globalisation and technology had quashed hopes of full employment in South Africa because of the ability to supply goods from markets in different countries.

"I may be called names for saying so, but I'd rather we recognise the difficulty and try to examine how we deal with the sustainability of the livelihoods of the people who aren't in employment, because this is going to be a feature of life going forward," he said.

The informal sector - estimated at about 5 per cent of gross domestic product - probably provided the best avenue for the Government to help poor people make a sustainable living.

"Macroeconomic policy and stability do not create employment. All that they do is create an environment where you've got price stability and in which people can take long-term decisions," he said.

Growth in Africa's biggest economy accelerated to 5.6 per cent in the third quarter, its fastest pace for nearly nine years, spurring optimism over an expected credit rating upgrade likely to attract more foreign investment and create more jobs.

But the country's official jobless rate stands at about 28 per cent - high enough to spark concern over social stability. An expanded definition, including people not looking for work, puts the unemployment rate at nearly 40 per cent.

Manuel said the unemployment problem might not be as bad as official figures indicated, as many people were self-employed in creative ways. Booming retail sales suggested they were able to buy basic goods, like clothes, appliances and furniture.

"The carpenter, the bricklayer, the welder are no longer employees, they are independent contractors. They have no obligation to tell the truth when somebody comes to ask them about their income ... they are off the radar screen," he said.

Manuel said the economy faced supply constraints from a shortage of technical and professional skills along with building materials, which would "impact on growth" in future.

- REUTERS