Simon Susman, the Woolworths chairman, is the latest big businessman to put the cat among the government pigeons by suggesting that the labour market environment is too constraining.
While he did not go so far as to suggest that South Africa was at a tipping point if the government did not start to listen to the voice of business, Susman said there were two paths to follow. South Africa could achieve “a virtuous circle if you release it (the economy)… but if you keep tightening up the (labour market) environment all the time, enterprises cannot get off the ground.”
On Thursday, Susman told the Woolworths annual report meeting: “Our country needs a fresh economic philosophy to ignite its true growth potential.” He said it would be an oversight on the part of Woolworths’ leadership if it did not refer to the restrictive labour environment in South Africa.
“Like most businesses, we watch with deep concern the flow of restrictive, populist legislation being imposed on commerce in South Africa.”
While he would not be pressed on which legislation he was referring to – such as the restricted environment for labour brokers or the exclusion of a clause which would have obliged unions to ballot workers before striking – Susman said he did not want to get into the nitty-gritty of the legislation.
However, South Africa had a national development plan “which gives an encouraging view of how to build this economy. What actually seems to come out of the legislature (however) is an increasing number of more restrictions (on the labour market) and not less restrictions.
“We really need to sit face to face with government, if you want the economy to grow… free up industry to build an economy to get the unemployed to work. They want to work… what an indignity that they can’t work.” He reported that there were signs of increasing interaction between business and the government.
But he remained concerned that it was almost as if the employed were conspiring to keep the unemployed out of work.
Barely were his words cold when President Jacob Zuma, addressing a BEE summit, pledged that there would be tougher legislation and new codes of good practice aimed at turbo- charging real black economic involvement in the economy.
These have already been included in amendments to the broad-based BEE legislation. The new tough environment would make it difficult for companies to keep their BEE ratings level unless there was quicker and more wide-scale black involvement in business.
Susman said his own company had “a great (BEE) track record” and, indeed, South Africa had achieved a significant shrinking of the LSM 1-4. “It has been a huge success”, but “the real engine to shrink poverty and unemployment” was building private business “big and small” to create jobs, pay taxes and bolster the fiscus. “You can’t create growth by tightening constraints. True empowerment (comes) from a rapidly growing economy.”
Peter Attard Montalto, Nomura International economist, described Susman’s statement as “remarkably bold” as it called for a new economic model.
“It talked about the model, the root cause is the model the ANC employs of the state-led developmental state intervention in the economy, to think the state can solve all the problems, this is the most obvious in utilities, but it is also true in industrial policy and regulations at a lower, micro level.”
It was also significant that the statement was made at all by the Woolworths leader, said Montalto. “The SA corporate sphere is normally so unbelievably quiet despite the regulatory burden it sits under, the labour issues it has to endure (and), the policy uncertainty.”
He said more recently people had started “to stick their head above the parapet” and it would stimulate much-needed debate going into the 2014 election. “If we are wildly optimistic, we might even hope that it could change policy for the better, but we wouldn’t hold our breath.”