High wage demands from unions are a notable stumbling block for government’s drive to create five-million jobs in the next ten years, Deputy Finance Minister Nhlanhla Nene said on Monday.

Speaking at the South Africa Summit, hosted by The Economist, Nene said only 40% of the population has regular work, leaving 60% wanting for jobs, something that the government promised to provide.

“However, when government gives in to the higher wage demands from people who already have jobs, there is less money available to create job opportunities for the majority who does not have jobs,” he noted.

Nene added that South Africa’s biggest challenge regarding jobs, which is government’s top priority this year, was to create a new mindset, where productivity and entrepreneurial initiatives were on the forefront.

The informal sector was highlighted as a key opportunity for job creation, with successful examples of this approach seen in India and China. Nene noted that entrepreneurial capacity in the informal sector might be a significant part of South Africa’s solution for creating jobs.

Government’s economic growth plan was an inclusive one, incorporating the New Growth Path, which targets the high unemployment rate and poor education system. Nene pointed out that an effective and enabling regulatory environment was important for long-term growth.

Government interventions to target long-term growth included improving basic education, health services and social security. Other priorities included the green economy and good relations with neighbouring countries.

However, growth was challenged by the volatile currency, on which government has already spent R50-million in an stabilising effort, as well as difficult-to-rectify historic imbalances and infrastructure development difficulties. Nene believed that engagement from all spheres of the population would lead to the best solution to economic challenges.

“Government has proved with the 2010 FIFA World Cup that it can work together towards a common goal. All that is needed is commitment from all spheres and a coordinated approach to tackle our challenges,” he said.

The Economist Africa editor Katherine Pulvermacher said that the most significant drivers for gross domestic product growth in South Africa were likely to be private consumption, government consumption and stockbuilding, as well as gross-fixed investment and external balance.

Nene added that progress has already been achieved in these and other sectors over the past few years, but added that huge challenges still lie ahead.

“While economic growth has recovered strongly at the end of 2010, with a 3,4% growth rate expected for this year, we must work for an even stronger growth in the coming years,” he concluded.