Slow growth will derail the best laid plans
Crime, education, jobs... If we could find sustainable solutions in these critical areas South Africa would undoubtedly be among the top economies in the world. But as I trawl through the financial press I can’t help but conclude government has no cohesive plan to tackle any of these problems. Every policy document is deeply rooted in an ideological system known to have failed around the globe. I’m talking here about discussions around the nationalisation of mines, the latest thinking on land use – and yesterday’s bizarre economic policy update from our minister for economic development, Ebrahim Patel.
Government’s latest economic strategy – the New Growth Plan – aims to create five million jobs over the next decade. The details remain sketchy, but the grand plan is to establish a broad pact between business, labour and government to create employment, enhance competitiveness and achieve social equity and development goals. And that’s where the commonsense seems to end.
You can’t legislate against unemployment
You can’t legislate against unemployment, but Patel certainly wants to try. He told the National Assembly’s economic development committee the new pact between business and labour would have to include commitments on wages, prices, savings and jobs… Does this sound like limited state intervention to you? Either the reporting on his latest proposal isn’t up to scratch – or the minister actually believes he can legislate “moderate [real] wage settlements” for those earning between R3 000 and R20 000 a month – inflation level increases for those earning over R20 000 a month – and a cap on pay and bonuses for senior managers and executives earning over R550 000 a year. How bizarre.
According to Sapa, Patel said: “There is a proposal, for discussion with business and labour, for moderate wage settlements linked to clear commitments by business to save jobs, create new jobs and address inequality.” Is he talking about government employees? Does he mean the heads of state-backed enterprises such as Eskom, SABC and Transnet? Or is he trying to blanket the entire private sector employment environment too?
Government’s job isn’t to create jobs
Ask an economist how to create jobs and he’ll tell you to create an environment conducive to business growth. Government shouldn’t be obsessing with creating jobs, but rather on creating a “friendly to business” regulatory framework and an infrastructure that works. If they provide this enabling environment the economy will grow unfettered –and private sector jobs will follow.
Patel grasps this concept on some levels. “The centrepiece of the new growth path is a massive investment in infrastructure and people through skills development, together with smart government and better co-ordination with the private sector and organised labour so that we can achieve our national goals,” Patel said. Unfortunately he couldn’t provide any details on where the cash for this massive investment would come from – pointing instead to finance minister Pravin Gordhan, who will apparently conjure up the money when he tables the next national budget. Patel’s other problem is he still thinks new jobs can be “legislated” and that existing jobs should be protected at any cost. He’s wrong.
Slow growth will derail the plan
Right now inflexible labour laws and questionable policy is damaging the country from within, and from outside its borders. Local entrepreneurs aren’t hiring because they cannot face the sea of red tape that accompanies success. Small businesses are downsizing because ridiculous labour legislation wrests commonsense “hire and fire” decisions from their hands. Large business is holding off on critical capital expenditure until land and company ownership rights are cleared up. And foreign firms are simply finding friendlier environments to invest in.
Unfriendly labour laws are magnifying the impact of recession on the domestic economy. South Africa’s Q3 2010 GDP growth was a pathetic 2.6%. And to add insult to injury, second quarter growth was revised down from 3.2% to 2.8%. FNB economist Cees Bruggemans quips: “If there was any World Cup growth dividend, it certainly was hidden in the detail!” He reckons this slow growth is partly a consequence of strike action, slow hiring and budget constraints. He also says we could achieve 2.8% GDP growth for the full year, provided Q4 numbers meet expectations.
Why should we care? Well – every one of us makes our living in the domestic economy. If South Africa grows at 2.8% this year – and between 3% and 4% next – we can expect the net “real” employment statistics to decline further. And that’s not good for any of us.
Editor’s thoughts: Another day, another bizarre pro-poor strategy. It seems government remains focused on taking from the wealthy and making all South Africans poorer for it… What would you think of a policy which capped bonuses and salary increases on those earning in excess of R500 000 per annum? Add your comment below, or send it to [email protected]
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