Can our leaders stop languishing and start clearing reform hurdles?

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It is astounding that there were 660,000 fewer people employed in the third quarter of this year than a year earlier, considering that a year ago we were in a lockdown. There is something seriously wrong in our policy environment and the labour market that is making South Africa unattractive to the long-term investment required for economic growth and job creation. These are structural matters beyond the collapse in business confidence that followed the effects of Covid and unrest in July.

International and local businesses just don’t believe it is profitable to invest and expand in South Africa, given the numerous inefficiencies and structural flaws in our economy and the relative attractiveness of other markets without these issues. The tragedy is that the solutions have been recognised and largely acknowledged as such for a long time but, for various reasons including ideological ones, implementation of reforms to accelerate economic growth and create jobs have been long-delayed.

The infrastructure drive is moving but far too slowly. This was the central pillar of the Economic Reconstruction and Recovery Plan (ERRP), designed to trigger short-term economic growth while benefiting the country in the long term through more classrooms and health clinics and better transport infrastructure, among others. Without a stable electricity supply we simply cannot grow and create jobs.

Our ever-rising unemployment rate increases the demands for government to spend more on social welfare services and this is important but already we are spending more than we earn as a country and have been eating into the budgets of other important services including health and education. More cuts will have to be made in future.

While as a country we do need to make every effort we can to enable unemployed people to live dignified lives, we must recognise that increasing social benefits is addressing the symptom of an inefficient economy, which is unemployment, and not the cause.

The cause, unfortunately, is widespread, starting with our shockingly poor public education system that does not prepare learners for employment. Aggravating the issue is that there seems to be no willpower within government to address the situation. Our health system, our parastatals, our municipalities – they all need urgent attention and measures that have already been introduced to address the problems need to be accelerated.

Also in urgent need of acceleration are the numerous important reforms to the economy that have been approved but are facing too many blockages. One stark example is in enabling telecommunications companies to access more spectrum. SA was supposed to have migrated from analogue to digital television as far back as 2015. Governance of the television switchover programme has been marked by a series of disasters and it’s now scheduled for March next year – yet given past failures, any optimism that it will happen by then would be irrational. Until the spectrum auction is finally held, consumers will continue to pay higher prices than they should for data, which is not a luxury but has become an essential part of our lives and businesses. The delays also inhibit the telecommunication companies from realising the full potential of 5G technologies.

President Cyril Ramaphosa, from the onset of his presidency, recognised the importance of increasing spectrum availability to the private sector as well as numerous other reforms required to transform the economy from one vacillating between low growth and recessions into one that expands fast enough to be able to absorb more than the approximate 600,000 matriculants entering the labour market each year. He integrated these into the ERRP. Yet each essential reform is suffering blockages, similar to the spectrum process. Even in the energy sector where we have made massive strides with reforms to liberalise the market, there are far too many impediments to faster progress including red tape.

And then there is labour reform.

This is a political hot potato, of course, but we’re in an emergency situation and need emergency measures.

Short-term measures to stimulate businesses to hire more people need to be considered in conjunction with long-term planning to address the rigidities within the labour market that specifically discourage employment. Changing some labour regulations will also have the effect of curbing retrenchments and changing the mindset in favour of creating new jobs.

We need to relook at the overall system so we can have a more flexible labour market. At the very least, we should consider full or partial exemptions for small businesses from certain kinds of labour regulation, such as the extension of bargaining council agreements. That would also boost growth in the small business sector that has been particularly hard hit by the Covid lockdowns.

Nearly half of our adult population does not have work. We can no longer afford to just carry on as we are or that number will keep rising.

 

Busi Mavuso is CEO of Business Leadership SA and this column first appeared in Business Day

 

 

 

 

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