Fin24

Tackling unemployment

2011-08-18 09:22

Johannesburg - The alliance between labour and the ANC was given an uncomfortable warning this week by Finance Minister Pravin Gordhan, who suggested labour laws they had crafted over the years to protect workers could in fact be causing chronic unemployment.

Gordhan's comments annoyed trade union federation Cosatu, but they could spur a much-needed debate about labour laws that have eaten into the global competitiveness of SA's economy.

Firms have shied away from South Africa due to the laws that make it expensive to hire and fire workers, and are ranked by the World Economic Forum's Global Competitiveness Report as some of the most restrictive in the world.

Gordhan told a conference on Monday that unless changes were made, "we will not be able to make the breakthrough we need to create jobs".

He also suggested that regulations should be loosened to make it easier for firms to hire young workers at a reduced wage, to ease their way into the job market.

Unemployment, officially at just under 26% but estimated by some economists as closer to 40%, is a major factor behind an alarmingly high crime rate, and is driving the economic disparity that makes the country one of the most unequal in the world between the haves and have-nots.

"South Africa has among the least opportunities in the world for graduates and those who leave school," said labour expert Tony Healy. "Extraordinary challenges of this nature require extraordinary interventions."

Lost to inefficiency and corruption

President Jacob Zuma has pledged billions of rand for job creation, but his government has also undercut those plans by proposing sweeping changes to labour laws that a presidential report said could actually cause millions to lose their jobs by adding a raft of new costs and regulations on employers.

The ANC has allocated billions over the years for job training only to find the money lost to inefficiency and corruption, with few economists expecting the latest jobs plan to do little more than swell state spending.

Zuma, struggling for support and facing an election next year to prolong his presidency over the ANC, does not want to antagonise Cosatu, a political power broker that has used its might to put pro-labour laws on the books.

Cosatu spokesperson Patrick Craven told Talk Radio 702 this week that cheaper workers will not grow the economy.

"The cheaper the labour, the less tax they pay and the less money they spend in shops," he said.

The problem is that without an inexpensive way to take new workers into the workforce, the unemployed will likely remain unemployed - raising government spending for welfare benefits.

Youth unemployment is at about 50% and a study by the South African Institute of Race Relations said about half of the current generation of those between 25 to 34 years old will never work in their lifetimes.

"Cosatu is not beholden to the unemployed. They are beholden to the employed, which is their membership," labour expert Healy said.

While Cosatu members in sectors such as mining and manufacturing have seen wage increases of about 30% over the past three years, the economy has shed more than a million jobs as employers cut workers to help pay for increasing personnel costs and as a result of the global financial crisis.

South African labour is already more costly and less efficient than in emerging market rivals, with the average South African factory worker earning six times more than a Chinese factory worker and producing far less.

Economists say South Africa's long-term economic viability is at risk unless the country makes it easier and cheaper for firms to take on new workers and dismiss them in a less restrictive manner than at present - where it can take years for government agencies to decide if a dismissal is appropriate.

They would also like to see money earmarked for job creation going to tax breaks for firms that could help grow the economy, such as industries that would process the country's mineral wealth, which is now mostly exported for the value added work.

As Gordhan said: "Given our current growth projections, South Africa may only create 4 million jobs by 2025, not enough to make a significant dent in unemployment."        

 

Comments
  • Nasdaq7 - 2011-08-18 10:17

    "The average South African factory worker earning six times more than a Chinese factory worker and producing far less." Manufacturing investment will just flow to neighbouring countries - COSATU will see it with their own eyes. Labor reforms or not. Strikes or not. The rest will work while South Africans will be on the streets begging. The battle is lost. It is too late now.

  • DirtySamurai - 2011-08-18 11:49

    Unfortunately no country that I can think of has bridged the jump to development and some form of economic parity without first building a middle-class. To build a middle class you need skills and to gain skills you need to first work for less. Imagine an SA where workers earn much less for the next 20 years but everyone has jobs (no more 1 breadwinner per 10 mouths). I don't see a significant drop in overall living standards, just some bleak union bosses. Difference is that in 20 years we'd have a huge manufacturing base and a skilled workforce. Current path of creating far less jobs than there are school-leavers leads directly to blood on the street.

      Nuck Choris - 2011-08-18 14:11

      "just some bleak union bosses". That is all the union bosses care about, there own skins. And what a morose statement by Healy. If he cared more about the unemployed and if cosatu cared, their would be more jobs created, because labour laws would be relaxed and regulations less restrictive. But noo.... its all about the membership funds...

  • dagwood4455 - 2011-08-18 19:44

    Quoting Patrick Craven as per above : "The cheaper the labour, the less tax they pay and the less money they spend in shops," does he actually believe himself? Having a low paying job will at least get him INTO the shop whereas before he had to beg, borrow or steal. We also don't mind if he does not pay tax, at least the rest of us taxpayers don't have to support him. Patrick Craven you are a brainless retard!!!!! You and your idiotic cronys at Cosatu are to be blamed for the unemployment (at least a large part of it)

  • Mandla - 2011-08-19 01:31

    People who are working do not think about other people who are suffering but to be protected in what ever they are doing.If relaxing labour laws will enable the men in the streets get one,i will sugest that Mr Pravin Gordon is right in pushing the governmant to revist the labour laws which are currently in place.But how do we adreess the level of inequality in the country.Barn tenders and employee more people insteady.

  • BigD - 2011-08-19 06:57

    The biggest problem with our government officials is the fact that they have clue of the problems of running a successful business. If is evident in all state controlled entities. How on earth can these people make recommendations on job creation in the private sector. The prohibitive labour laws in place and unions make it almost impossible for small business to grow. Also, to get government contracts the company has to have BEE etc and then that adds hugely to the cost of the contract, in some cases double the price. Let the free market system determine salaries. In the public sector clerks are paid far higher than private sector. Yet they strike for more. This mind-set that people doing same job (in their minds) must earn same salary is wrong. Presently workers that work hard and works that bugger around get same package. That is wrong! Where to from here, well the ball is in the governments hands, mostly they drop it and then the workers suffer or should I say the unemployed suffer.

  • Vince York - 2011-08-23 16:48

    Maladministration in every sphere by state and far too great a concentration on grasping power and centralizing fiscus as well as commercial ventures under guise of being the "state benevolent benefactor" has created the usual and predictable fact that AA and BEE has priced SA out of the productivity market. Most often a country is presented with an opportunity once, and if not properly planned and maintained, this opportunity is lost for ever. SA suddenly swinging it's focus away from western towards eastern interests will be the biggest lost opportunity ever. In short, by staying the long road and increasing productivity and raising price/value of raw materials (western) we would have taken Africa to the top & developed a productive finished goods market too. In effect, what we have done is promote traditional dictators and social & youth impoverishment matters galore, but they have sold out raw materials at lowest bid to the eastern and are now realizing AND feeling the brunt of it. "nondisclosed Kwa_Zuma Inc first in line".

  • Marius Claassen - 2011-08-24 08:41

    what a lot of bull AA and BEE create pressure , a new wave of new disadvantage people(our children) that will create jobs will emerge

  • Marius Claassen - 2011-08-24 08:48

    sjoe mr craven glad that you eventually helped us.more pay more tax spending money great. let the public sector employ every one in our country no problemo.with what will they pay?

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