We’re Not Unemployed, We’re Over-Regulated
Nearly half of South Africa’s working population is idle — not because they want to be, but because the state won’t let them work.
South Africa has one of the highest unemployment rates in the world. While the latest figures released by Stats SA are significant, it is more important to examine the underlying causes behind these numbers, particularly the structural barriers to growth that persist in the economy.
South Africans have normalised the abnormal. With nearly half of the working population not engaged in productive economic activity and a welfare state where recipients outnumber taxpayers, the country finds itself in a precarious economic position. Most concerning is the lack of policy innovation from the government in addressing this urgent situation.
The South African economy faces high unemployment due to its lack of growth, to put it bluntly. A growing economy is characterised by its participants – South Africans – engaging in activities that others consider valuable enough to exchange for the products of their own labour.
These activities produce in goods or services that are sought after by various individuals. South Africans must supply one another with the items they desire, whether in the form of tangible goods or services. This fundamental explanation of what drives economic growth is essential for understanding the issues and underlying causes of our unemployment crisis.
If an economy grows when people engage in productive activities, as explained above, then why is the South African economy not experiencing growth? Is it because South Africans lack a desire for goods and services? Or perhaps there are not enough South Africans willing to provide those goods and services? The answer, of course, is no.
The reason our economy is not growing is due to state intervention. The government, acting as a significant third party in all economic transactions through legislation, distorts the relationship between those seeking goods and services and those who are willing to provide them.
An example of state interference can be found in the labour legal framework of South Africa. Our labour laws are often regarded as among the best in the world; however, we simultaneously face one of the highest unemployment rates globally.
An entrepreneur seeking labour and an unemployed individual willing to provide it cannot meet and agree on terms of exchange through an employment contract without state involvement. Both parties must ensure that their agreement complies with various pieces of legislation, including the Labor Relations Act, the Basic Conditions of Employment Act, and, at times, collective bargaining agreements to which neither party was a signatory.
This compliance with legislation incurs costs, including attorney fees for adherence to legal requirements and the time needed to familiarize oneself with the relevant laws and regulations. The time and financial resources that could be devoted to fulfilling societal needs are instead spent ensuring compliance with state mandates.
The impact of this situation is that the hiring and firing processes are hindered and rendered static due to bureaucratic red tape. This process should be as flexible as possible, reflecting only the intentions of the parties involved, to foster a more dynamic labour market, which in turn will contribute to a thriving and growing economy.
One of the insidious effects of an overly regulated labour market, such as that in South Africa, is the barriers to entry it creates for new participants. This situation fosters an economy of insiders and outsiders, where established large businesses can more easily comply with regulations due to their greater resources for compliance.
Resources such as time and money related to compliance are more valuable to startups than to established businesses. Without new entrants into the economy, long-term growth is not achievable, and consequently, our unemployment problem will persist.
The labour legal regime is merely one of the structural factors contributing to our high unemployment rate. Another significant cause is what I refer to as the overarching policy direction and rhetoric of the South African government. This direction and rhetoric tend to favour increased state control over the economic prospects of South Africans, and at worst, exhibit open hostility toward private enterprise.
The South African economy is not regarded as the most appealing investment opportunity on a continent that is projected to experience significant economic growth in the coming years. This can largely be attributed to our government and its policies that hinder growth.
The solution exists; other states have successfully implemented it. This solution involves deregulation and allowing South Africans to engage in enterprise freely, both among themselves and with others. There is no magic wand or government plan that will make South Africa prosperous; rather, it is the initiative and efforts of South Africans themselves that will drive prosperity.
The next time Stats SA releases unemployment figures, unless the issues discussed here have been resolved, it is important to recognise that those numbers are insignificant, and our descent into serfdom continues.
Zakhele Mthembu BA Law LLB (Wits) is Policy Officer at the Free Market Foundation.
 |
|