Business, Politics

Analysis: Time for a fresh look at SA’s global competitiveness

By Osiame Molefe 17 August 2011

Though the two haven’t exactly seen eye-to-eye, trade unions are likely to bristle anew at reports that finance minister Pravin Gordhan called for a change in labour policies. The unions have it plum with South Africa’s pro-worker labour laws and are likely to see Gordhan’s call as a threat to their members’ livelihoods. That said, is the debate on the trade-off between “decent” wages and unemployment a distraction from that which ails the economy most?  By OSIAME MOLEFE.

Speaking at Monday’s national internal audit conference, Gordhan said the economy needed to be repositioned, restructured and reformed if the new growth path’s job-creation targets are ever to be reached. He said the economy needed to grow at 7%, twice the rate forecast for 2011.

For suggested reforms, Gordhan repeated vague platitudes like “increasing labour participation rates” and “lowering the cost of doing business”. But again trade unions are likely to take exception to two things he said.

The first was Gordhan’s suggestion that the cost of young, inexperienced, low-skilled workers be lowered. One of the ways the minister sees this happening is through the R5 billion youth wage subsidy announced in his budget speech earlier this year. From 1 April 2012, the subsidy will compensate employers for taking on and training young employees. The subsidy is to function alongside other job-creation measures such as the R9 billion jobs fund and the R73 billion expanded public works programme.

Cosatu has said the subsidy would encourage employers to replace existing workers who do not qualify for the subsidy with younger, unskilled workers, thus having a zero net-effect on unemployment. All this, it said, on the taxpayers’ buck.

Unions will also not take kindly to Gordhan having said, “We may have to change the way we see the labour dispensation in South Africa.”

The DA on the other hand welcomed the statement. Having interpreted it as a call to relax labour laws, which it sees as an impediment to economic growth, the DA’s Ian Ollis said the minister’s words were a step in the right direction.

Backing the DA’s assertion on labour laws is the 2010/11 global competitiveness index, which ranked South Africa 97th out of 139 countries on labour-market efficiency, one of the 12 pillars of global competiveness. The country’s overall ranking was 54th. Being globally competitive means a country can grow, and growth, as it happens, is a prerequisite for creating jobs. South Africa’s low ranking on labour-market efficiency, which has been blamed on trade unions and the Labour Relations Act, is weighed down by a few of the pillar’s indicators, namely the flexibility of hiring and firing policies (ranked 137th ), poor labour-employer relations (132nd ) and difficult wage negotiations (131st ). Game, set and match, to the DA then.

Of course, what isn’t in these numbers, the unions would say, is the social cost of a labour market ranked as efficient. If employers are able to trade workers like baseball cards, what are the implications for workers’ sense of security and stability? If a worker earning a higher wage can be dropped easily in favour of a low-wage earner, what does it mean for the level of wages from which workers are expected to feed, clothe and educate their families?

If it puts on its thinking cap, Cosatu may ask: If we have accepted that there is an environmental cost to be paid by future generations for the raw material inputs into the production process, why do we struggle to accept that there is a social cost paid by someone else for the labour inputs?

A reply to this would be to point out the social cost of the unemployed, and then off we’d go, right into the same old impasse that has gridlocked thinking over South Africa’s labour market.

Perhaps a change of tack may resolve the impasse. The global competiveness index provides some clues. South Africa is actually almost bang on target on labour-market efficiency compared to other efficiency-driven economies, which are those at a stage of development where they must begin to develop efficient production processes and increase product quality because wages have risen and prices can’t.

At this point, the report says, competitiveness is increasingly driven by the pillars considered as efficiency enhancers. Ignoring labour-market efficiency for now, the other efficiency enhancer where South Africa ranks poorly is higher education and training. Despite the country’s ranking of 75th on this pillar, some of the indicators within it make for woeful reading: 99th for tertiary education enrolment rate, 130th for the quality of the education system, 137th for the quality of mathematics and science education and 100th for Internet access in schools.

The important thing to note here is that working to better the rankings for these higher education and training indicators wouldn’t mean a trade-off with some other hidden social or other cost. Improving the quality of maths and science education only has an upside. And its benefits can improve other efficiency enhancers, like labour-market or goods-market efficiency. A better educated workforce is more productive. A better educated workforce produces better quality products.

There is, of course, a long lead-time before the effects of improving higher education and training reflect in the economy. To improve the quality of the debate, what we need to ask ourselves is who are we saying should bear the brunt of this? During Monday’s speech, Gordhan spoke of the need for everyone to make sacrifices, lead boldly and think creatively to chart a new decade of hope and real change. It is perhaps during the lead time when these things are needed most of all. DM

Read more:

  • SA’s global competitiveness ranking takes a dive, in Daily Maverick
  • Change needed in labour dispensation – Gordhan, in Business Day
  • Youth Wage Subsidy and the Spectre of a Two-tier Labour Market, on NGO Pulse

Photo: Reuters.


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