The World Bank and the International Monetary Fund (IMF) are pinning the blame for SA’s slow economic growth on the labour relations environment, says Miller Matola.
Johannesburg - Over the past week, the world’s media turned their negative attention on South Africa. The World Bank and the International Monetary Fund (IMF) are pinning the blame for the country’s slow economic growth on the labour relations environment, highlighting the paralysing strikes that have hurt the mining, automotive and transport sectors, among others.
That has been exacerbated by the much-publicised spat between labour and business – the stand-off between the National Union of Metalworkers of South Africa and BMW. As a result, the IMF urged the unions to recognise that, in the interests of achieving much-needed economic growth to safeguard South Africa as an investment destination of choice, a commitment was needed to lower wage demands.
Punam Chuhan-Pole, the World Bank’s lead economist for Africa, says South Africa needs “less rigidity in the labour market” if it wants to attract foreign investors.
As the World Bank launched its latest Africa Pulse Report this week, it also highlighted that the industrial relations environment in South Africa would have a big impact on how much of the total annual foreign direct investment into sub-Saharan Africa (estimated at about $40 billion or R400bn), would flow into South Africa as opposed to other destination countries.
At a time when South Africa is also experiencing the effects of weak growth among its major trading partners in Europe, combined with a perceived burdensome regulatory environment and continuing infrastructure challenges in the country, the added challenge of labour unrest and protracted wage negotiations is in effect holding back growth.
The facts speak for themselves – in 2010, 2011 and last year, South Africa’s growth averaged 3 percent, compared with a rate of between 4 and 6 percent between 2003 and 2008.
Domestic factors are playing a significant role in contributing to the country’s growth rate being below that of other emerging market countries.
The economic bottom line for South Africa in the global marketplace is that labour strikes have the potential to diminish the long strides taken in recent years to build our country’s competitiveness and its reputation as an investment destination of choice on the continent. Productivity and a stable labour environment are key determining factors for global investors looking for a new destination for industrial development or manufacturing projects.
As South Africa is now a member of the Brazil, Russia, India, China and South Africa (Brics) grouping of nations, it needs to recognise that its image, reputation, the productivity of its workforce and labour stability are all key determining factors for any new investment.
Membership of Brics has the potential to be a powerful catalyst to stimulate and facilitate development in South Africa, providing not only access to new and developing markets, but also the opportunity to play a significant role in building new and mutually beneficial commercial links for business and industry, and generating new foreign direct investment for key projects. If South Africa is to beat off competition from other countries, it needs to recognise that South America, Eastern Europe and the East are hugely competitive and are presenting powerful economic cases for global investment based on their productivity indicators and track records.
At a time when South Africa is trying to cement its place as a competitive member of this increasingly powerful grouping, it needs to ensure it sends the right message to the world, that it is open for business and is a safe and dependable investment destination.
One factor that has been apparent over the past year, particularly in the face of labour unrest affecting key sectors, such as the automotive industry and the mining sector, is the overall state of South Africa’s leadership.
If many of the country’s economic challenges are going to be overcome, then business needs to become a more active participant with an eye on the long-term reputational goals, as opposed to being driven solely by short-term profits.
Similarly, the unions need to recognise that global economic times are changing and the investment landscape requires a much more competitive approach if South Africa is to continue to attract and retain much-needed investment, to safeguard and create jobs.
The National Development Plan and the National Infrastructure Plan are critical building blocks in terms of creating a confidence-inspiring road map for global investment in South Africa. However, for these plans to succeed, it needs the country as a whole, including the unions, to work together with the business community, to recognise the bigger picture at play.
The short-term and short-sighted approach to unrealistic and protracted wage negotiations, strikes, and unrest in important industrial sectors in the country offers a no-win scenario in the long term.
It is important for the good of South Africa’s economic development and standing on the global economic stage, that all role-players representing the unions and business manage to find common ground and participate fully in the spirit of progressive nation-building going forward.
Only by these role-players recognising what is at stake for South Africa in today’s increasingly competitive global business environment, can the country send a clear message to the world that we are well and truly open for business and an investment destination of choice.
Critically, though, national interests must be placed above narrow self-interest in the quest to ensure that our country realises its full potential and that we do not squander the opportunities presented by the rise of our continent.
* Miller Matola is the chief executive of Brand SA.
** The views expressed here do not necessarily reflect those of Independent Newspapers