Trade unions stifling SA's competitiveness

The World Economic Forum’s Global Competitiveness Report for 2009/2010 was released a few days ago and it reveals that South Africa has maintained its 45th spot among 133 countries assessed. It may be reason to feel rather chuffed with ourselves that despite the global economic turmoil, we have managed to retain our position among economies of nations and most importantly are the highest ranked African country.

Countries are assessed based on 12 pillars of competitiveness that are defined as “the set of institutions, policies and factors that determine the level of productivity of a country”. South Africa scored impressively in certain categories, particularly under “financial markets sophistication” where we are ranked 5th ahead of the leading global economic giants such as the US, UK, Canada, France, Germany, Japan etc. However, there are categories where South Africa’s performance is dismal and disappointing and these are categories which explain the structural predicament the country finds itself in. Under “higher education and training” we came at 65th, 90th under “labour market efficiency” and a pathetic 125th under “health and primary education”.

I have heard on various occasions people mention “jobless economic growth” when lamenting the highly depressing level of unemployment. The concept of “jobless economic growth” is absolute nonsense. This is something created by politicians and trade unions with the primary purpose of shifting focus from the real causal factors of this problem of bloated unemployment. Unemployment according to its narrow definition has actually increased from 17.6% to about 23% since 1995 to date. The rate of unemployment in terms of the broad definition is too depressing to even mention.

Historically, the mining and agriculture sectors contributed significantly to the country’s GDP but over the years there has been a considerable shift towards the financial services sector, which now contributes to more than 65% of total GDP. The structure of the economy alone should be telling the measures required to address the socio-economic problems facing the country. The mining and agricultural sectors are largely biased towards unskilled and semi-skilled labour, which may explain the lower unemployment rate during the apartheid era as the majority of black people were and still remain predominantly in this category of labour pool.

Unfortunately, the structural change in the economy coupled with technological advancement ensured that the majority of those with no formal education and training remain on the periphery of economic activity. We should not then act all surprised that the higher rate of unemployment is among individuals with no formally recognised skills. The economic growth has resulted in creating job opportunities which unfortunately are biased towards skilled labour. The unemployment rate will remain at this insane level for as long as the majority of the population are without basic and higher education, as long as the education system continues to produce graduates whose skills are not suited to the demands of the economy.

The primary problem behind the perpetuation of this dire situation is the trade-union movement. Its misguided agenda is biased towards the so-called working class, which is predominantly unskilled and semi-skilled. Cosatu is vehemently pursuing a populist and socialist agenda that ultimately entrenches the structural faults in the economy through the promotion of counter-productive policies. The notion of promoting economic growth that is pro-poor is a bit preposterous because that seeks to suggest that job creation should be biased towards unskilled and semi-labour. This is in direct conflict with the structure of the economy, which is predisposed to skilled labour.

Does Cosatu want government and business to ignore the economic realities of the country, that sectors which are amiable to the “working class” contribute an insignificant proportion to the overall economic growth?

The pursuit of populist policies that are only meant to appease trade unionists and pseudo-communists would have devastating economic consequences because the financial services sector, which contributes enormously to economic growth, would be negatively impacted. The rigidity of the labour regulation has always remained a costly factor with regard to job creation. The lack of flexibility in hiring and firing workers as favoured by Cosatu is detrimental to those they purport to represent. If indeed Cosatu is seriously concerned about the high level of unemployment they should be promoting access to quality education instead of passing conference resolutions that demand a “living wage” and “decent work”.

In terms of the report “more competitive economies tend to be able to produce higher levels of income for their citizens”. This is the self-evident truth that Cosatu and the puppet masters from Luthuli House need to appreciate if they do have the interest of the country and our prosperity at heart. Economic populism cannot extricate the poor and the unemployed from their miserable circumstances. The obsession with immediate and politically expedient gains will not bring us sustainable prosperity and propel us forward to compete in the “Premier League” of nations, confident in the knowledge that the significant majority of our people would reap the fruits of this prosperity. Until reason prevails South Africa will continue to maintain the 45th position in the Global Competitiveness Report, or worse be overtaken by those who take the interests of their people seriously.