Pragmatism in the job creation quest

Melanie Veness, CEO of the Pietermaritzburg Chamber of Business.

The desire to create a business environment conducive to job creation is what drives me. It is, apart from my alarm clock and a cup of tea, what gets me up in the morning.

When I manage to facilitate growth in some way, it is unbelievably rewarding, but when things go wrong that I cannot fix, like extended power outages, it can be really frustrating.

My struggle relates to our employment environment. I can’t help but wonder if we are knee-deep in hot water with the level rising because we keep trying to arrange a marriage between ideology and pragmatism. It’s a flawed goal because, as Rudyard Kipling said: “East is East and West is West, and never the twain shall meet.”

Ideology is making decisions based on a certain set of goals and beliefs, and sticking to those decisions regardless of what reality is telling us. Pragmatism is the opposite of rigidity, it is about taking stock of reality and reacting to it.

The government and labour seem to believe that they can legislate high-paying jobs into being. This would be wonderful if it could be done, but on-the-ground reality is telling us that it isn’t happening, in fact, the opposite is. So is the answer more prohibitive legislation?

Businesses in some sectors (high-employment sectors) are saying they can’t compete at the stipulated minimum wage, and that no matter how much they agree ideologically with the government and labour, they are pragmatic and the numbers must add up. The reality is that we are bleeding jobs, and if we do not become more practical about things, we will lose more.

I arranged a dinner with the chief executives of our top 50 companies last week, and I have to say that I felt quite disheartened afterwards. Several of them told me that they were considering setting up operations in Lesotho. I was horrified. When they explained to me why they were doing so, I did not have a logical comeback.

I was told that the Lesotho National Development Corporation had given several of them a presentation. Lesotho is desperate to address its unemployment, so it has offered manufacturers real incentives to set up plants in its territory. It is offering tangible benefits that make it very attractive for manufacturers to move there. Let’s consider, for example, the benefits being offered to the metal industry.

Labour cost to company for this industry is R1 450 a month on a |45-hour week in Lesotho. In Steel and Engineering Industries Federation of SA-regulated companies, the cost-to-company labour rate is R6 000 a month for a 40-hour week. This translates into a saving of R5 150 a week for each operator.

Also, the Lesotho National Development Corporation is prepared to build a factory to the investing company’s specifications and then charge it a rental of about R10/m². In SA, rentals range from R35/m² to about R50/m².

Company taxes are extremely low. If product is exported to the Southern African Customs Union, there is a 10 percent tax (in SA, it is 29 percent) and if product is exported with Forex, then no tax is charged.

We all aspire to live in a country that offers all its citizens excellent livelihoods, but we have to be able to compete if we are to be able to offer them a livelihood at all.We need to learn from China to be more ideologically flexible.

Franklin D Roosevelt said in 1932: “The country needs… bold, persistent experimentation. It is common sense to take a method and try it: if it fails, admit it frankly and try another. But above all, try something. The millions who are in want will not stand by silently for ever while the things to satisfy their needs are within easy reach. That is pragmatism we can believe in. Our times demand no less.”

* Melanie Veness is CEO of the Pietermaritzburg Chamber of Business.