An action plan needed to restore credibility
The desperate need to create jobs is being frustrated by the burdens of over-regulation
BUSINESS Day’s front page report of the June 6 speech by Reserve Bank Governor Gill Marcus, highlighted an important point. We are facing, she said, challenges of crisis proportions that require a co-ordinated and coherent range of policy responses that are largely beyond the scope of monetary and macroprudential policies alone to deal with. It needs strong and focused leadership from the top.
News reports on the same day illustrate the point. In the face of the need for what she called “clear actions to stabilise the labour relations environment”, the government announced an irrational ban on all labour broking, which is likely to have a serious effect on unemployment. At the same time the finger-pointing Marikana inquiry is unlikely to solve anything. The legal costs incurred on this inefficient process would keep the families of the deceased miners in luxury for the rest of their lives.
The social benefits of the latest plan to reopen the right to make land claims would be easier to understand if the existing process had been an unqualified success. More than 15 years after the process began the lack of personnel and financial resources and the absence of a rational, coordinated plan have seen many land claims unresolved, with little hope of the government finding the money to finish what has been started.
The desperate need to create jobs by promoting competition and encouraging business is being frustrated by the burdens of over- regulation. In the insurance industry the new solvency requirements that are on the table will inevitably lead to less competition in the marketplace. The requirements are structured in such a way that smaller insurers and mono-line insurers (for instance an insurer providing a single line of insurance) will find it difficult to maintain their independent existence.
The market has already seen one announcement of a merger in the industry and there are many more to come. At the same time, independent brokers are choosing to represent a single insurance company. The burden of reams of compliance laws is fast overtaking the interests of the insuring public.
The perceived failure of the existing credit laws has led to a call for yet more laws coupled with the age-old cry for debt forgiveness and expunging bad credit records, as if making it easier to incur more debt will somehow help. At the same time, proposals to make it more difficult to borrow money will not drive the desperate to a newfound frugality. It is more likely to drive them to unregulated lenders or to desperation and social unrest.
There is no doubt that regulations are needed, that customers need to be treated fairly and exploitation of the public needs to be stopped. But it needs, again in the words of Gill Marcus, a co-ordinated plan of action because this will go a long way to restoring competence, credibility and trust in the South African economy.
Patrick Bracher is a director at Norton Rose Fulbright.