Unemployment In South Africa – Are Poor Public Policies To Blame?

By Asanda Gcoyi, CEO, Vapour Products Association of South Africa

One in three South Africans is looking for a job. This is according to Statistics South Africa’s most recent quarterly labour force survey, which notes that unemployment in the country has hit a new record high of 34.4%. And it’s not about to get any better, given the ongoing impacts of the COVID-19 pandemic as well as the unrest in the country earlier this year.

The pandemic and unrest are not the only forces at play, however. South Africa’s poor record of developing and implementing sound public policies is an equally, if not more significant, contributing factor. More often than not, public policy tends to be influenced by ideological considerations, rather than scientific and economic evidence. This is despite government efforts to institutionalise processes such as the Socio-Economic Impact Assessment system, which is designed to ensure that policies are rational, implementable, and take the costs and benefits for all affected parties into account.

The Economic Reconstruction and Recovery Plan, introduced in October last year, states that the “government is determined to create more employment opportunities for those who were unemployed before the pandemic or who had given up looking for work. This means unleashing the potential of the economy by, among others, implementing necessary reforms, removing regulatory barriers that increase costs and creating inefficiencies in the economy, securing energy supply, and freeing up digital infrastructure.”

Yet, the government intends to introduce new policies that create more regulatory barriers for industries that should rather be leveraged to assist the government in achieving its goals of both creating more employment opportunities for those who need it most as well as lessening the burden on South Africa’s health infrastructure, which has taken a toll during the COVID-19 pandemic.

One such industry is the nascent vapour products industry.

The government is intent on creating the impression that vapour products are the equivalent of cigarettes, however, this couldn’t be further from the truth. In fact, organisations such as the United Kingdom’s Royal College of Physicians and Public Health England (PHE) have released studies that show vapour products have been scientifically proven to be 95% less harmful than cigarettes and related tobacco products. This is supported by the US Academies of Science which has also found that e-cigarettes have a lower harm profile compared to their combustible competition. 

A new report by the Vapour Products Association of South Africa (VPASA) and NKC African Economics shows that growing industries such as vapour products impact positively on job creation and overall economic growth. In the current economic climate, this is not something that should be disregarded.

According to the study, the industry generated 3,800 jobs, paid R280 million in taxes and had a R390-million gross value-added contribution to the economy in 2019 alone – and that was just its direct impact. A broad overview of the sector shows its support of an additional 4,200 jobs, and a 40% and 31% spend with two adjacent industries – financial and business services and manufacturing. 

These figures are nothing to scoff at, especially as the South African vapour products industry is still an emerging one.

Unfortunately, this significant contribution to both the economy and health sector could all be unravelled by the Control of Tobacco Products and Electronic Nicotine Delivery Systems Bill of 2018 (the Bill) which proposes numerous regulations for electronic nicotine delivery systems (vapes) such as plain packaging, unjustifiable graphic health warnings and a ban on public use. This is on top of efforts by the government to introduce excise duties on vaping products, ostensibly to discourage the use of the products by making them more expensive. Not only is this view misdirected from a health perspective, but it also does not take into account that the industry is still fairly new and needs time to grow to compete meaningfully with combustible tobacco. 

Should the Bill be passed, it will hamper the industry’s ability to create employment while giving combustible tobacco-free reign over the health of South Africans. A ban on online sales and health distribution channels could result in a 17% decline in overall sales. The knock-on effect would be immense: an estimated 5.8% reduction in sales, meaning fewer smokers opting for the harm-reduced alternative of vapour products over cigarettes and a potential return to the latter by former smokers who have already moved to vaping. This, in turn, would contribute to the already heavy non-communicable disease (NCD) burden the country faces.

Data from the Global Entrepreneurship Monitor indicates that SMMEs are responsible for the majority of employment opportunities in South Africa. But it also shows that the country has one of the lowest creation rates of SMMEs. The vapour products industry is built on small and medium-sized enterprises like independent vape shops and retailers. The new Bill is likely to hit them hardest. With fewer sales, the resulting direct job losses could amount to more than 2,300, adding to the country’s already high unemployment rate. This does not account for the additional job losses in related industries that would also be impacted, namely, manufacturing, transport and communication, trade and hospitality, and financial and business services. 

During a Parliamentary sitting earlier this month, Minister of Labour and Employment Thulas Nxesi said, “The unemployment giant will not be killed by the Department of Labour or by the government but requires a collaborative effort.” For the vaping industry to play a meaningful role in the economy of South Africa, there needs to be a collaborative effort and clear, evidence-backed policy that supports economic growth. 

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