Labour and the ANC were given an uncomfortable warning this week by Finance Minister Pravin Gordhan, who suggested that labour laws that were crafted over the years to protect workers could in fact be causing chronic unemployment.
Gordhan’s comments annoyed Cosatu, but it could spur debate about labour laws that have eaten into the country’s competitiveness.
Global firms have shied away from South Africa due to the laws that make it expensive to hire and fire workers. The World Economic Forum’s Global Competitiveness Report ranked the laws as some of the most restrictive in the world.
Gordhan said on Monday that unless changes were made “we will not be able to make the breakthrough we need to create jobs”, He also suggested that regulations should be loosened to make it easier for firms to hire young workers at a reduced wage, to ease their way into the job market.
Unemployment, officially at just under 26 percent but estimated as closer to 40 percent, is a major factor behind high crime rates, and is driving the economic disparity between the haves and have-not’s that makes the country one of the most unequal globally.
“South Africa has amongst the least opportunities in the world for graduates and those who leave school. Extraordinary challenges of this nature require extraordinary interventions,” said Tony Healy, a labour expert.
President Jacob Zuma has pledged billions for job creation, but has also undercut those plans by proposing sweeping changes to labour laws that a presidential report said could actually cause millions to lose their jobs by adding a raft of new costs and regulations on employers.
Cosatu spokesman Patrick Craven told Talk Radio 702 this week that cheaper workers would not grow the economy. “The cheaper the labour, the less tax they pay and the less money they spend in shops.”
The problem is that without an inexpensive way to take new workers into the workforce, the unemployed will likely remain unemployed, raising government spending for welfare benefits.
Youth unemployment is at about 50 percent and a study by the SA Institute of Race Relations said about half of the current generation of those between 25 to 34 years old will never work in their lifetimes.
While some Cosatu members have seen wage increases of about 30 percent over the past three years, the economy has shed more than a million jobs as employers cut workers to pay for increasing personnel costs.
Labour is more costly and less efficient than in China, with the average South African factory worker earning six times more and producing less.
Economists say South Africa’s long-term economic viability is at risk unless the country makes it easier and cheaper for firms to take on new workers and dismiss them in a less restrictive manner.
“Given our current growth projections, South Africa may only create 4 million jobs by 2025, not enough to make a significant dent in unemployment,” Gordhan said. – Reuters