Day two of the inaugural Public Economics Conference kicked off with an in-depth conversation on the history, aims, objectives and lessons learned from the spending reviews between Mbali Buthelezi, Acting Head: Spending Reviews and Ronette Engela, Acting Head of GTAC.

The conversation offered wonderful insights into the role of spending reviews and the opportunities they offer to those working in public finance. They duo discussed the achievements, innovations and challenges they have experienced since they were first introduced.

Ronette Engela said: “It’s very important that when pulling in the expertise of consultants, it needs to land in government. We need to bring it to government and allow officials to use this methodology. They need to make the decisions and push the insights further within their departments.”

She reflected on the lessons learnt including “Our first innovation was to have deep involvement in the room. Then Covid prompted us to pivot online, it brought down costs, it expanded our reach and we had to quickly learn about all the new technology. In that process we had the idea to develop an e-course, the course is about 100 hours and it equivalent to a module at a masters level and the universities are interested in doing that with us, so that is what we are looking at doing next.”

Mbali Buthelezi then outlined that the Public Expenditure and Policy Analysis Unit is “looking to get into Africa so we can reach out to them more easily [through our e-course].”

During the conversation they reflected on the plans to expand into SADC, Ronette said: “We are trying to understand what are all the systems within SADC? I think there is a very interesting body of work what we could do. It’s definitely something we would like to expand with.”

Finally they discussed how the PEPA team keeps up to date with the latest innovations globally through a partnership with the OECD and how they are pushing to improve their work all the time by committing to having their work published in the well respected Development Southern Africa journal.

Ronette commented: “We decided that we wanted to publish in that journal, take our experience and share it with the peer reviewed world. We have about 10 articles that have been written, five have been published and five are in the process. It has not been easy, it’s been hard to get out of our bureaucratic mind, into the academic mind. It’s been a privilege and through this we hope we can reach a wider audience.”

Mbali added, “It’s great to have an academic base for our methodology, increases the trust and the credibility of the spending reviews.”

This was followed by a Masterclass titled “Policy and programme evaluation in a labour surplus economy: Methodological overview of review techniques for employment type programme evaluations” by Andrew Donaldson, Southern Africa Labour and Development Research Unit (SALDRU), University of Cape Town.

His presentation took a deep dive into employment as a policy objective, and the complementarity and trade-offs in policy implementation. He unpacked surplus labour in economic through reviewing, the dual economy model, the notion of ‘price and value’ in the labour surplus economy and project appraisal using nominal and accounting ‘shadow’ prices. He unpacked shadow wage estimations and the distributional considerations. Concluding with the implications for evaluating policies and programmes and meeting the nominal wage premium.

He said: “The social benefit for low wage, low skilled is entirely different from the social benefit for skilled people, for whom there is demand in the market.”

“Poverty and inequality reduction are complementary benefits of rising employment. What this analysis says is that the assurance of minimum wage can’t be politically wished away, it doesn’t make sense for unionised workers to accept that. If you have high unemployment, workers will be more protective of their jobs.”

He concluded by saying, “Skilled or scarce expertise in public programmes is probably more expensive to the economy than its nominal cost. We need to think about a general wage subsidy because of the social benefit. ”

The masterclass was followed by a spending review case study “The fiscal and institutional realities of SA’s Public Employment Programmes” by Karen Hague, Long Term Advisor, GTAC. This review evaluated a selection of public and community work programmes, as well as the Presidential Employment initiatives. It looked at the scale, reach and contribution to poverty alleviation of the different programmes.

Karen started by outlining the role of Public Employment Programmes, “they are about providing money into people’s pockets but also about providing purpose, a role in communities that is meaningful. A predictable source of funds and it is of course linked to decent work.”

She set the scene outlining the landscape of support to people that includes public work programmes, youth initiatives as well as social grants programmes. She then took a detailed look at all four programmes that are within the landscape EPWP, CWP, PYEI, PES. She outlined the advantages including building communities and building social capital, supporting important work in the environment and education sector, “the benefits are there and sometimes we forget to applaud ourselves for the things we are getting right.”

“We have to continue with these PEPS. We need to decide where we put out money, which are best for our current objectives. We need better prioritisation of government programmes. There isn’t one that is better than the other, we need to look at the suite available and look at our current critical needs and then decide where the current focus is. So that the ones working well can scale up so they respond to the needs we are currently facing,” she said.

This was followed by a presentation from Kate Philip from the Presidential Employment Stimulus Programme. She presented on “The Presidential Employment Stimulus Programme: The stimulus, growth and social value creation effects of the programmes”.

She started by highlighting the benefits of work including respect, dignity, inclusion and skills-based benefits. She also pointed to the fact that truncated transitions into work (and as a result adulthood) are socially damaging “at the scale of our unemployment, the impacts on productivity and economic dynamism are systemic.”

She then provided an overview of the Presidential Employment Stimulus and that it has delivered over a million jobs and opportunities since 2020. She spotlighted some of the most successful programmes including the Basic Education Employment initiative, “the biggest youth employment programme in SA’s history” with 800 000 youth placed since 2020. The programme has been a huge success “with high support from within schools (both from teachers and principals) for value that its adding. This programme is de-risking youth employment for the private sector. We’re acting as a circuit breaker, so the absorption rate can increase. We are activating young people into the labour market. We have 242 000 in 23 000 schools and its offering its spatial equity. What is amazing here is that every community has a school and all schools are participating. Every community has jobs. What we see is the programme provides youth employment in areas where no opportunities exist.”

She also highlighted that it is moving the dial on learning outcomes “This programme is a huge resource in schools. It can make a systemic-level difference. Can we afford not to give it a chance to do so?”

She also touched on the Department of Agriculture, Land Reform and Rural Development (DALRRD) programme supporting farmers and the Social Employment Fund. She concluded by saying: “There is the employment case and what we see here is the social value case. Social stability, the productivity case, work experience which is about labour market entry, skills case and the social value creation. Stimulus effects are significant. Money spent in local economies, supports the informal sector and trickles up to the wider economy.”

Amanda Jitsing, Long Term Advisor at GTAC presented on the National Artisan Development Programme. She provided an oversight of the history of artisan development in South Africa and analysed the approach to artisan training. She unpacked the throughput rates indicating that the first bottleneck is the low throughput rate on the technical training.

She also looked at the demographics of the programme, highlighting that once government put funding towards artisan development the demographics shifted with more young people being trained as artisans. She reviewed the demand for artisans, highlighting that artisan training in South Africa is not cheap, costing approximately R550 000 per artisan trained and that demand for artisans is influenced by economic activity.

She said: “We had a boom in demand for the world cup, then company culture also influences the demand. A company may employ on short term contracts as they are risk averse, this happens a lot in South Africa.”

She shared data on employment rates of artisans, “the employment rate is very high, 63% find employment but they are short term contracts. We are probably on track to meet the NDP target but low economic growth in industries that employ these artisans are declining. We are investing in artisans but there is little capacity from labour market to absorb them; as the sectors who employ them are declining.”

She concluded by reviewing the opportunities including “to optimise cost, we need to increase the throughput rate, we need to improve availability of training workplaces, there is a consequence of fiscal tightening, we have made significant gains but we need to be much smarter about the artisans we train, we need more data on this.”

Fumani Mboweni, Department of Higher Education and Training (DHET) responded, “There are a lot of changes, the new Artisan Strategy captures the policy direction in artisan training. We are moving away from learnerships towards apprenticeships, this is a key policy decision. This allows us to streamline and bring in efficiency into the training system and improve the throughput rate.”

He highlighted the need for an employer-led apprenticeship system, “some of the policy directions like the advisory body is led by employers – so it is more of a demand system. Then it will be relevant trades that are needed by industry. Employers need to start taking the lead. We can reach the 30 000 [target in the NDP] but more work is required. We have achieved a critical milestone with the artisan strategy but there is still a lot of work needed.”

This was followed by a presentation on Farmer support programmes in GP by Donald Onyango, Gauteng Treasury. He started by interrogating the question of whether the Farmer Support Programme (FSP) is achieving its objectives of transforming and modernising the agricultural sector.

He outlined the institutional analysis completed, looking at the key outcomes and outputs of increasing yields, moving farmers from subsistence to commercial farmers, number of farmers supported. He looked at the cost of the programme including farmer support policy, the support of infrastructure like drilling boreholes. He then summarised the findings on the review of programme delivery and performance.

He said: “The Farmer Support Programme is supposed to support farmers but it appears to be quite management and administrative heavy. When it comes to performance information – is it working? The performance measures are ambiguous so it is difficult to gauge the success of interventions.”

He concluded by suggesting a range of actions that could improve the programme including an overhaul of the programme structure, putting a stop to wasteful procurement, extending the invoice verification process, revisiting performance indicators and more judicious procurement so they can do more with the same budget.

Nazeem Hendricks from the Jobs Fund presented on the “The Jobs Fund: A case for Challenge Funds: Achieving impact in the context of fiscal constraints”. He provided an overview of the Jobs Fund its structure and the implementation model. He highlighted where the Jobs Fund fits into the social protection and employment landscape, playing a complementary role to other programmes in country. He also shared the Jobs Fund’s Theory of Change that focuses on providing scalable solutions.

He outlined how Challenge Funds work and their defining features, being that funding is provided on a “competitive basis in order to find new ways of solving challenges with the intention of creating partnerships with new actors as implementors and financiers that are scalable. Challenge Fund target short term outcomes but look for long-term commercially viable and scalable solutions.”

He then reviewed the Job Fund’s performance to date. So far it has achieved 130% of its job creation target and placed 195 000 people into jobs and attracted R13,3 billion in matched funding. There have also been 51 000 jobs created post implementation of the programme, which “shows the catalytic effects and the sustainability of the interventions”.

He highlighted the impact of challenge funds in the context of fiscal constraints which include finding innovative solutions and crowding in the capacity of the private sector to propose and implement innovative and viable solutions and using a competitive process to select the most competitive proposals for funding whilst avoiding market distortions. Another major benefit is building and sustaining meaningful partnerships with the private sector to facilitate risk sharing and leveraging matched funding scales. Challenge Funds also enable the demand and supply constraints to be addressed and enabling scaling of successful models.

Heather Jackson from RBN Asset Managers presented on “Catalysing Systems Change: A Private Sector perspective” . She said: “our problems are vast but our potential solutions are really exciting. If we can crowd funding in, we can invest to scale. If we look at ecosystems with supply and demand with intermediaries in the middle, this is where we find solutions.”

She highlighted that South Africa is richly endowed with savings, with about R7 trillion in savings (on par with OECD levels). She reflected that when working with the Jobs Fund, “we partner with an element of an exceptionally capable state and we work towards the targets together; that is key. We are still blessed to have a strong and sophisticated investment sector coupled with a strong regulatory capacity.”

She shared research RBN completed with investors. “Sustainability is a key concern for South African investors, people especially want to address unemployment and inequality. They want financial solutions that address the social ills we continue to experience including water and renewable energy.”

She shared a comparison of SA Guarantee Schemes using OECD DAC Criteria and highlighted that the “Jobs Fund is highly credible and its sets standards for how we can succeed. If you partner and achieve the results it makes you proud and keen to scale to see what you can achieve.”

This was followed by a presentation by Vuyo Tetyana from the Jobs Fund. His presentation “Demand led Job Creation: Evaluation of SMME support interventions focussing on township economy and agriculture.” In his presentation he shared results from several Jobs Fund projects including the A2Pay Project and the Deciduous Fruit Producers Trust.

These examples showed the potential to revitalise township economies through technology, he said: “Deployment of technology is a useful tool to stimulate growth of enterprises. This is intervening in the informal economy in a catalytic way.” He highlighted that government needs experimentation capability and that challenge funds are effective at uncovering job creation models.

He concluded by saying it’s “imperative that government harnesses its capability to pilot initiatives that contribute to laying the foundation for longer-term economic sustainability and employment.”

Najwah closed the session by saying “The Jobs Fund has driven system change in South Africa.”

The conference ended with a conversation on how government should think about the “costs” and benefits of employment programmes, in a high-unemployment economy between Andrew Donaldson, Kate Philip, Najwah Allies and Steven Friedman. There was robust discussion on a range of topics including youth employment, township economies and trade policy.

Steven Freidman returned to his point about the need for political will. “When government wants to do things effectively it can, its political. There is institutional capacity, if there is the political desire to do them. Whether we have the political capacity at the moment is another question.”

Kate commented: “A key part of strategy is taking into account the structure of the economy and the limitations it brings. In South Africa entrepreneurs are find niches, not being done by big players. We are seeing an explosion of innovation in townships. Digital innovations provide opportunities to overcome spatial barriers, [entrepreneurs are] not bound by physical constraints any longer.”

Andrew added: “When I look at artisan training, it’s about consistency and building on the platforms that have been put in place. So the inconsistency in budgeting and policy creation undermines job growth and progress and this undermines economic growth. We need a strategy that ensures that there is continuous growth. We protect our grants, health and education [budgets] we need to protect our job creation initiatives.”

Najwah concluded by saying: “There are many possibilities in respect of scaling up but a lot of that requires government support. We are going to have to make some trade offs and understand which of those initiatives will be self-sustaining in the long term. The social value of employment, we have expressed the importance of that. I am so conscious that not much of that will happen in the context of low growth. So instead of saying scale up, we need to get the job done on the enabling pieces like ports and trains and the scaffolding, to scale meaningful jobs and livelihoods in our country.”

Ronette closed the conference by saying, “We have had a chance to deal with the ‘wicked problems’ here and I feel intellectually enriched by these two days. Thank you all for being here.”

All the presentations and resources from the conference can be found here.