SA employment’s state of emergency

The 26.7% unemployment rate announced by Statistics South Africa on Monday represents a massive crisis, a much bigger one than the imminent ratings downgrade. The social risk associated with such an increase in our unemployment rate is immense. It is startling that there is not much more private sector and government interaction on this matter, as is the case with the fight against the downgrade.

Listen to this guy

A few weeks ago I spoke to an individual who must rank among that most valuable of South African resources – an entrepreneur who over several years built a business from nothing and currently employs 65 people. He co-owns and runs a firm in Vereeniging which manufactures industrial vacuum vehicles for the mining industry. The company has even started exporting these vehicles and is set to grow even faster over the next few years – despite the current depressed local economic environment.

It is the exactly the sort of business South Africa needs.

Unfortunately, this is where the good story ends. The company recently ordered a second specialist welding robot from Japan for R3 million – a robot that will add another six welders to the unemployed list.

The reason? The robot, although expensive, will improve the quality of welding and reduce labour-induced pressures.

The entrepreneur says further mechanisation is on the cards to reduce the workforce in future.

It is clear that the entrepreneur regards the current labour dispensation as a potential future threat to the business. Government should listen to him.

Zuma’s response

I tuned into President Jacob Zuma’s live announcement on television on Monday night, following his meeting with big business, with great anticipation. He rarely does live television announcements and when he does, it is big news.

I was more than disappointed.

Apart from not doing the right thing, he did not address the massive gorilla in the room that is posing a much greater short- and long-term threat than an imminent ratings downgrade.

Here is the most noteworthy extract of Zuma’s address:

Leaders from labour and business joined the Minister of Finance on a roadshow abroad early this year to promote the country and prevent a possible credit ratings downgrade.

The hard work is paying off, and we saw the evidence this weekend with the announcement by Moody’s.

In affirming the sovereign credit rating on Friday, Moody’s ratings agency noted that South Africa was approaching a turning point after years of weak growth. This is confirmation that our collaborative approach has been successful.

While our economy has recovered from the global financial crisis, the level of economic growth has been much weaker than previously anticipated.

Part of this is due to the challenging global economic environment. At the same time, we recognise as government that there are also some domestic constraints that we must attend to.

The National Development Plan (NDP) sets out the structural reforms that should be implemented to create an enabling environment for job creation and inclusive growth to address the triple challenges of poverty, inequality and unemployment. 

As government we have translated the NDP into an implementable programme, the medium-term strategic framework, which sets out government goals and priorities from the NDP over five years.” 

During the remainder of the address Zuma details a NEW nine-point plan which will accelerate growth, which ironically includes another small- and medium-sized enterprise (SME) development fund.

The unemployed, standing on the roadside with their paintbrushes and hope, barely raised a mention from the podium.

Failed policies

Our failing economy begs for short-term intervention. Government needs to announce a jobs state of emergency and implement special measures to create jobs. Government should then put the following measures in place for businesses with fewer than 100 employees. Allow these SMEs to hire and fire employees at will; abolish prescribed minimum wages and exempt these firms from bargaining council agreements.

Such labour reforms are already mentioned in the NDP, although not as aggressively. The implementation of this part of the NDP, and not the chapters the ANC’s so-called alliance partners agree with, will be a good start.

With this perspective, it is almost ironic that the current rise in the unemployment rate is fuelling Julius Malema and his Economic Freedom Fighters’ (EFF’s) attacks on the ANC.

Unfortunately, the EFF’s proposed solutions will destroy even more jobs, but hopefully it nudges (read forces) the ANC to implement more business-friendly policies, starting with labour reforms.

WEF Global Competitiveness Rankings

Unfortunately, I doubt this will happen anytime soon, as trade unions do not appreciate the damage the labour regime is causing our economy.

In the 2015 Global Competitiveness Rankings South Africa scored 140th position for labour relations flexibility. That is stone last. This perception survey suggests that there is no another country in the world with poorer relations between workers and business owners.

Labour’s response? Irvin Jim, secretary of Numsa, the trade union that represents the workers of the entrepreneur mentioned above, seemed to have been proud of the WEF ‘accolade’. He reportedly said this proves SA has the most militant workforce in the world, and added that mechanisation is the threat to jobs.

Job creation equals economic growth

Any significant job creation will increase economic growth and this in turn will alleviate the other structural problems of inequality and poverty. It will also improve South Africa’s credit rating.

Government should not only be talking to the CEOs of South Africa’s largest companies. They should talk (and listen) to the entrepreneur from Vereeniging.

Lastly, I was amazed at the increased level of youth employment highlighted by Statistics South Africa in its Quarterly Labour Force Survey. It shows that the national labour force participation rate is 58.7%. This means that nearly six out of every ten people who want to work, actually work.

But for those between 15 and 24 (who number 10.3 million people, not in school) the participation rate is 26.7% – that shows that three out of four young people (or 7.5 million) are not working.

I cannot fathom why we are wringing our hands over this issue. From this moment onwards every single government decision – whether it be amendments to the Minerals Bill or municipal demarcation – should be looked at through the prism of employment, ie: “how will this affect employment?”

Source: Stats SA 

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