Private sector confidence crucial to boost employment

STATS SA released its Quarterly Labour Force Survey for the second quarter of 2018, revealing that South Africa’s unemployment rate has increased marginally by 0.5%.

South Africa’s unemployment rate is currently 27,2%, up from 26,7% in the first quarter of this year, meaning 6,1 million people of working age in SA are unemployed.

According to local economist Dr Irrshad Kaseeram, Deputy Dean of the Faculty of Commerce, Administration and Law at the University of Zululand, SA’s high unemployment rate is caused by the private sector not investing in the economy.

‘Because of this South Africa is experiencing a very low growth rate and unemployment is remaining stubbornly high.

‘The private sector is not investing because of the uncertainty regarding property rights as a result of the expropriation without compensation drive,’ Kaseeram said.

Last Tuesday President Cyril Ramaphosa announced that the ANC would be looking to change the Constitution to allow for expropriation of land without compensation.

The immediate response to the news was the rand traded at R13.28 on Wednesday morning from R13.10 just before Ramaphosa’s announcement.

Despite the ANC’s stance on expropriation without compensation, previously noting that expropriation would only be done in a manner that would not harm the economy, agricultural production or food security, Kaseeram believes investors are concerned that it will not stop here.

‘There might be a move to nationalise other assets in future, for example mines and certain industries.’

He noted that the other major concern is uncertainties embedded in the revised mining charter, which makes it difficult for mining houses to price in the cost of doing business since payments to community development, worker ownership and future government involvement cannot be easily determined.

Mining was the third largest driver of job growth in Q2:2018, having created 38 000 jobs.

Only transport (54 000) and the construction (45 000) industries created more jobs.

Kaseeram further emphasised the deep distrust between the largely white business community, government and communities that feel economically disenfranchised.

‘The emergence of concepts such as ‘radical economic transformation’ and ‘expropriation without compensation’ is serving to polarise these communities further.

‘Alienation of businesses and the continued disenfranchisement of the largely black communities is a lose-lose scenario.

‘This must be turned around through goodwill and agreements to work together to solving South Africa’s employment

problems.’

Trade Unions and labour laws

Kaseeram said inflexible labour laws and militant trade unions seeking wage rises that are much higher than inflation and productivity gains, are another factor contributing to the country’s high rate of unemployment.

‘Unions and big businesses involved in bargaining councils seek high wages in relevant sectors, which smaller businesses belonging to those sectors cannot afford.

‘Since labour costs are the single biggest cost factor in most businesses, most small businesses cannot grow as they remain small to keep labour costs down. In worst case scenarios they tend to relocate to where cheaper labour exists, such as across borders.

‘The recent minimum wage policy will make it very difficult for many small start-ups to thrive.

‘All of this jointly mitigates against employment from rising significantly.’

Possible solutions

Kaseeram believes there are a number of feasible solutions to fast-track the process of getting South Africans employed.

‘Government needs to provide assurances regarding the protection of property rights so that investors will be willing to commit if return on investment is realised over 20 to 50 years.

‘Inflexible labour laws and minimum wage requirements must be revisited, especially in regard to small businesses and start-ups.

‘Education and training from grade RR upwards must be addressed in a manner that learners are well prepared for the world of work and tertiary education once they matriculate.

‘Private-public-community partnerships are critical for harnessing local resources to create entrepreneurial and employment opportunities,’ he said.