Opinion  :: Columns  :: Jottings from Johannesburg

Johannesburg - A topic currently enjoying much debate among trade unions, the press and policy wonks in South Africa is the notion of labour markets and the extent to which they assist, or hinder, government’s employment creation and poverty eradication efforts.

Indeed, it’s the old chestnut of labour market flexibility versus job security. It’s an issue which is not exclusive to South Africa by any means, but one can’t help feeling that it is one that is routinely over-politicised and misunderstood.

In the red corner, we have the Big Business lobby. They argue that increased flexibility in the labour market will actually attract investment, thereby increasing employment and alleviating poverty.

Over-regulated labour markets, they say, mitigate against agile businesses, which reduces the ability to compete globally, which leads to unemployment and gloom.

In the blue corner, we have the trade union group, saying that government needs to protect its vulnerable workers against exploitation if it is to achieve its social transformation objectives.

Too much slack, and the bosses will simply take advantage of the situation by paying peanuts and hiring and firing at will.

In an excellent article in South Africa’s Business Report newspaper, Labour Minister Membathisi Mdladlana, makes this very point: “… one of the interesting questions lies in the extent to which labour market institutions have generated unintended inefficiencies that may be the result of resource constraints or (perhaps) cumbersome legislation… it might be helpful to start thinking about tweaking existing legislation to improve efficiency levels, without threatening fundamental rights".

Mdladlana cites a 2004 paper by economists Haroon Bhorat and Rashad Cassim, who argue that “based on a review of the literature on unemployment in South Africa, we can conclude that the unemployment problem is not exclusively a macro-economic problem, or a trade policy problem or, for that matter, a labour market problem”.

Apartheid legacy

Mdladlana argues that colonialism and apartheid contributed to the evolution of South Africa’s economy as an enclave economic structure which marginalised large sections of the population.

It is a valid point. In previous years, and under previous regimes, the entire economy was geared towards the benefit of a small (white) minority, while the majority of the (black) population was relegated to marginal low-productivity activities.

Fact is, this has hardly changed since the advent of the Rainbow Nation 10 years ago. There is still a small elite which scoops the cream and a vast heaving mass which does the grunt work.

The only difference now is that both sectors are now more demographically representative.

This is what irritates organised labour, which lays much of the blame for South Africa’s current unemployment levels – estimated at about 40% – at the door of a government which, it says, forgot about the people once it had made the transition from liberation movement to ruling party.

Mdladlana admits that many of the problems in the labour market cannot be addressed in the absence of development strategies aimed at restructuring the economy to make it more inclusive.

In other words, we need to take a multi-pronged approach to balancing social needs with business needs.

Investment alone does not lead to increased economic growth, but remains one of the key drivers of growth, jobs and poverty eradication. At the same time, wholesale deregulation of the labour market will not solve South Africa’s social woes in one fell swoop.

Either way, we need less hot air and more action from all stakeholders.