How Do We Solve ZA’s Jobs Crisis?

South Africa faces many challenges, but one which came into uncomfortable focus again this week is the jobs crisis.   The latest stats show that one in four of the workforce is out of a job, and the numbers of unemployed are going up, not down. The data from Stats SA show a rise to 25.5% unemployment in the second quarter, from 25.2% in Q1. So, what can be done about it?   ZA Confidential asked a few of our business and economics experts…..

Brand Pretorius. Company Director:

Nothing, and I mean nothing, should stand in the way of job creation. It should become an all absorbing mission for government, labour and the private sector. A concerted effort by all is required to create a climate that will be conducive to job creation. Obstacles need to be removed as a matter of urgency. The recommendations outlined in the NDP have to be implemented with vigour and determination.

Chris Hart from Investment Solutions:

Unemployment in SA is a national emergency and a national scar. The unusually high unemployment rate is due to a multiple of policy mistakes. The job-creating engine of the economy – SMEs – has to operate in hostile conditions and is referred to as the missing middle. SA is one of the few economies to have a higher unemployment rate now compared with its position just before the 2008 Global Financial Crisis. This is due to internal policy direction more than any other factor. The only known route to resolving an unemployment problem of the scale found in SA is investment through a mainly SME platform, funded through a commensurate savings rate that is able to support the investment rate. SA is making triple mistakes that have exacerbated unemployment. The first is the regulatory onion over the business and public sectors that require economies of scale for compliance, which saps the resources of large companies by raising their cost base, and cripples the ability for SMEs to grow. Unnecessary rigidities have also reduced the mobility within the labour market, which has generated a conservative approach to employment practices, another barrier for youth entry. The second mistake is the flaws within the regulatory onion that have allowed labour unrest to proliferate – which creates an investor aversion to exposure to SA labour. Urgent reforms are required for circuit breakers, like a secret strike ballot, to avoid committing economic suicide. The third mistake is the aggressive tax treatment of saving and investment. When a country is capital-deficient with a high unemployment rate, like SA, having taxes on capital formation and investment viability is sheer folly. The macroeconomic mismatch in SA between the 19% investment rate and 14% saving rate has led to a triple deficit, which must be corrected. Higher savings are essential to correct the triple deficit and sustain a higher investment rate. In addition, the savings rate in households must be restored so that the SMEs and start-up businesses can be capitalized.

Mario Pretorius from Telemasters:

Are the unemployment figures real? Are they accurate? I suspect that these figures are constantly massaged by political fingers. Stats SA quoted 3m formal sector employees and some 3m Government employees; plus about 1m ‘students’.   This number makes a mockery of employment stats for 52m citizens. The conclusion is that massive permanent unemployment is upon us. Economically-inconvenient people are doomed to sit out a life cycle out of formal work. How do 40m people survive in ZA? SASSA registered 23m people for benefits. For the rest, perhaps the informal and ‘grey’ sectors exceeds our expectations. Perhaps Stats SA should measure ‘work’ instead of formal employment for a more accurate perspective on our economy.

Ian Cruickshanks from the SAIRR:

My suggestion would be to have a look at education programmes in SA. Stop trying to produce PhDs who are in limited demand and have limited earnings potential.   Re-open Technical Colleges and re-install the apprentice system to enable participants to learn basic trades and become self-supporting within 2 years.   That would produce a huge boost to employment, with a return to self-supporting one or two man businesses.   You can employ people faster if you are more realistic.        

Mike Schussler from economists.co.za:

The first thing I would do is free up the rules on employing people. I would change the focus of the department of labour from protection to employment creation. I would make it law that all trade unions have a compliance officer who has to make sure the union looks after the interests of members first (as firms have company secretaries, and compliance officers in asset managers.). The IEC should run free and independent elections for all office bearers and for all strikes. No strike is to continue without a ballot every month. I would also change the academic research institutions to look at what creates employment instead of looking at inequality etc. All research would have to now be problem solving for next two decades at least, and not further problem statements. Then I would allow ALL SA companies to work together on strategy, pricing, distribution, research for export markets – immediately, with full approval of the Competition Commission. I would spend on transport and electricity infrastructure and get digital migration going tomorrow. No government department may pay later than, say, 45 days – or the person responsible would lose the same amount from their salary!

Professor Raymond Parsons from NW University:

There is no magic wand to eliminate endemic high unemployment in SA, which is mainly structural, but worsened by sluggish economic growth. Much higher economic growth and investment are necessary conditions, but not sufficient ones, for job creation. The cost-productivity ratio in SA also needs drastic improvement. We therefore need to get back to the fundamentals of labour market reform, making labour law more employment-friendly, jacking-up skills and productivity, overhauling the education system and stabilizing labour relations. In the meantime we must expedite infrastructural spending, reduce red tape around access to existing job incentive schemes and promote SMMEs in terms of existing policies and plans.

Azar Jammine from Econometrix:

The figures confirm the inverse relationship between increases in remuneration per employee and changes in employment, with the best payers, such as mining and manufacturing experiencing the worst employment creation.

Adcorp’s Loane Sharp:

It is an enigma why 3.5 million Zimbabweans who flooded into South Africa after 2001, following their country’s economic collapse, are able to find jobs, yet 4.6 million unemployed South Africans can’t. Zimbabweans work for less than the minimum wage, which South Africans are not permitted to do, and Zimbabweans do not enjoy dismissal protections, which South African workers do. This implies that, if we reformed minimum wage laws and dismissal protections, all South Africans who want a job will likely find one. But the South African government is making it more and more difficult for job-seekers to find work: social grants give unemployed people a significant economic incentive to remain out of work; the public education system has been captured by teachers’ unions who have banned inspectors from classrooms and performance evaluations for teachers; and immigration laws have had the unintended consequence of allowing low-skilled workers to flood in through porous borders by paying a bribe. The list of labour laws and regulations that need to be reformed is steadily growing and it seems unlikely that they will be reformed.

Conclusion:    

There are many useful ideas here, but my fear is that the state is currently more part of the problem than part of the solution.   One immediate reform, which has been discussed before on ZA Confidential, would be an immediate dissolution of the ANC’s alliance with the unions and the communists.   Neither of these partners is good for the economy, nor for job creation, and it is absurd that the government is expected to govern while being strangled by these two anti-market anchors.

Tweet of the Day:

Funny Tweets (@Funny_TweetsQ): To do list- (1). Go to pet store. (2). Buy bird seeds. (3). Ask how long it will take for the birds to grow. (4). Watch the reaction

Michael Dawson (@michaeljdawson): I sing along at concerts. If I don’t know a lyric, I take a strategic sip of beer. This is one of the reasons I got so shitfaced at Enya.

Funny Tweets (@Funny_TweetsQ): If you can say these 4 words fast without getting tongue tied, you’re a genius: 1: Eye 2: Yam 3: Stew 4: Peed

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