JOB CREATION
Government’s role in job creation “We all know that government does not create jobs, businesses create jobs.” That simple statement during President Cyril Ramaphosa’s State-of-the-Nation address in February triggered a debate marked largely by binary “either-or” positions. That is a pointless argument. The important debate is to assess the most effective way for business and government to work together to grow the economy. By Busisiwe Mavuso, CEO of BLSA Of course government creates jobs – it does so through infrastructure development and providing services to the public, among other areas. But it’s primary role should be to create an enabling environment for the economy to grow and it’s in such an environment that businesses increase profits and create jobs. Unless government can grow the economy, public sector jobs are unsustainable because tax revenue will not grow.
An implausible position The one implausible position is the belief that the public sector can somehow create jobs in a shrinking economy, marked by a declining tax base and a deteriorating fiscal position. One of the most important decisions that directors of companies – listed and nonlisted – need to make every year is on what to do with profits. How much should be reinvested
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in the company, how much should be retained as cash reserves and how much should be distributed to shareholders through dividends? Their assessment needs to be based on their confidence in being able to generate higher returns with that money, making it worthwhile for shareholders to forgo a portion of the profits now. They also need to ensure they have sufficient cash
