- Labour reforms cannot just focus on closing loopholes in worker’s rights, but must improve the economy’s ability to create jobs
- 1ST published in “Partners in Development Magazine,” Q4:2009
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As write, ‘tis indeed the season to be jolly! Early Christmas presents from Stats SA include the end of the recession and CPI returning to within the target range of 3% to 6%. Gold is tearing through the roof and the rand is one of the top performing emerging market currencies in 2009. While the rand’s strength is of course negative for exports, it does point to positive sentiment towards the country’s investment prospects. This flurry of good news however, should not be reason to rest on our laurels. It should in fact be used as an opportunity to tackle one of the four giants that plague the land - unemployment. The other three are of course poverty, HIV/Aids and crime – which are all related in my mind. The fragility of the employment created in the last economic boom has been exposed by the loss of a million jobs in this relatively short recession.
As I look back at 2009, it feels like the end of a tumultuous economic season for the last two or so years, and one of much political change too. From the sub-prime crisis, to recession, from xenophobia to an election that firmly entrenched South African democracy, we have certainly received the Chinese blessing (or curse if you want), of living in interesting times.
The change in the political landscape has brought up old debates on economic policy, including the age-old challenge of job creation. 2014 has been set by the ruling party as the year in which unemployment will be halved. The push to cut unemployment comes with the promise to create not only more work, but “decent work.” The debate is of course, can we create more decent jobs, or is the concept self-contradictory – at least in the short term? In the long term we all agree that an improvement in labour efficiency is the solution to the problem of unemployment, but the legacy of a prejudicial and defunct education system means that we’re possibly decades away from a sufficiently educated and productive work-force. Until then, how do we avoid the temptation to walk down the road of some emerging markets which have filled their landscapes with sweat shops, and rather walk the high road of creating more decent jobs?
According to Statistics South Africa, the country’s official jobless rate increased to 24.5 percent of the labour force in the third quarter of 2009, up from 23.6 percent in the second quarter, while the labour force fell sharply. The latest quarterly Labour Force Survey reports the total number of unemployed people at 4.192 million in the three months to September while the number of employed people fell by 484,000 to 12.885 million.
From a government perspective, the Finance Minister’s MTEF (Medium Term Expenditure Framework) for 2009 indicated that the focus for now is to soften the blow to private sector job creation via R2.4 billion that has been set aside by the National Skills Fund and the Unemployment Insurance Fund for the training layoff scheme. In the longer term, the Extended Public Works Programme is looking to create 4.5 million job opportunities over the next 5 years. In terms of industrial policy, the Minister has promised further reforms to reduce the cost of doing business and the more efficient use of “existing spending programmes, small business support agencies and tax incentives; where that is appropriate.”
One thing the recession has sown is how quickly the government income statement can turn from the black into the red, how Mr. Manual’s surplus can turn into Mr Gorhan’s deficit as corporate and individual tax receipts reel under the pressure of balance sheets that entered the recession with very little equity. It is for this reason I support the Minister’s focus on both the private and public sectors as centers of job creation. Government should not make itself out to be a knight in shining amour, ready to hire the millions of unemployed. That will just be painting itself into a corner that will manifest during the next downturn when there is no revenue to pay a bloated workforce. Government must focus on creating the right environment for the private sector to fulfill its part of the job creation mandate. The tension here is giving the private sector enough freedom for creativity, innovation and growth, but simultaneously protecting weaker economic participants from possible abuses by their stronger counterparts. Whether it’s competition regulation that curbs the creation of powerful and abusive monopolies and cartels, or labour law to protect workers who are clearly victims of employer abuse.
Improving on this regulatory balance to promote growth and employment must be this new administration’s focus. While the promotion of growth has been fairly successful, it is the conversion of this growth into rapid creation of employment that has eluded country. A key 2010 legislative goal for Government includes reforms of the labour environment, principally the contentious labour broking industry. Admirably, the aim of these reforms is to reduce work-place abuses centered primarily on casual employment. The reform agenda includes closing loopholes in the current Labour Relations Act; particularly improved protection against unfair dismissal as well as reduced pay and benefits for casual workers.
There are of course, two sides to every story and the labour broking industry brings some twists to the story that cannot be ignored. In fighting against the banning of the industry, leaders in the sector highlight the turnover of R26 billion per annum, almost 90% of which comes from temporary, flexible and seasonal work. More than 300,000 of their part-time employees are said to turn permanent every year, and over half a million people are introduced to formal employment through the labour broking industry.
What is missing for me in the current labour policy agenda, is concrete plans to improve the economy’s ability to generate private sector employment. Industrial policy must continue to remove the red tape faced by business, especially small to medium enterprises. Asgisa-type thinking will hopefully start to emerge as we head into a new decade. Two aspects of the Asgisa framework that spoke to me were the focus on infrastructure, and the creation of sector specific strategies targeting industries that are labour-intensiveness and have strong global growth projections. The impact of the infrastructure focus is not only felt in the increased traffic on our roads, but in the end of the recession, of which government services and construction were strong contributors. In terms of industry focus, Asgisa started off targeting coordinated interventions in the tourism and Business Process Outsourcing (BPO – the growing practice of “locating back-office activities such as accounts or claims processing or front office activities like call centres in cheaper centres”) industries. The 2008 Asgisa report shows some job-creation progress in these sectors. Tourism growth has been slowed by the global economic downturn, but is expected to cash in on the 2010 World Cup. BPO has shown annual growth of about 30 per cent in since 2003, with the economic downturn expected to reduce this to 10% to 15%. The Government Support and Assistance Programme for BPO has reportedly attracted inward investment of R900 million from nine international investors, creating at least 9,000 jobs. The 2008 report also points out progress in the other target sectors of agriculture, agro-processing, metals fabrication etc.
These sector-focused interventions are in my mind an effective tool to unleash the job-creating power of specific industries by looking to address the specific and unique challenges faced by organizations in that sector. Often the issue is practice and not policy. SARS offers a good example of government becoming more internally efficient and passing on those efficiencies to its clients and freeing the economy of red tape. Surely similar models should be explored in ministries such as Home Affairs, Minerals and Energy, Health and Education. These ministries need to focus on creating internal efficiencies and then exporting such efficiencies into the broader economy. The move cannot just be a horizontal one though. Vertically, the local and provincial spheres of government also have a role to play in plotting a clear path for both growth and job creation. Anecdotally, the traffic department’s move to introduce vehicle license renewals at the post office is the kind of positive efficiencies and externalities that the state should be releasing into the economy. Improvements in business registration turnarounds, mineral rights awards, work permit applications are just a few examples of how to improvements in government processes can free business to grow the economy and hopefully create jobs.
As the South African economy heads out of the dark tunnel of the recent past, we cannot let go of this opportunity to reflect on the vulnerabilities of economy, especially in the area of unemployment. The current push for increased workers-rights must go hand in hand with job creation – specifically job creation in the private sector which would avoid the state being either over-burdened with the task of creating jobs, or facing the increased burden of a wider and more unaffordable social net. The strategy of paying attention to and supporting labour intensive industries seems to be bearing fruit, although the economic downturn has put a lid on progress. The challenge of unemployment demands a focused and coordinated response. Policy must focus equally on decent work and more work if the nation’s development goals are to be met.
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