Zuma must get a grip on the economic tiller

Much of my focus at the moment is on strategies to reduce and alleviate poverty in our country. Entrenched poverty is, without doubt, the greatest obstacle we must overcome if we are to become a successful and sustainable democracy, in which people can live lives they value.

Sustained economic growth is an essential (if not sufficient) precondition to overcome poverty. This means devising and implementing policies designed to make our economy more globally competitive so that we attract more investment and create more jobs. Every country that has sustainably lifted its poorest citizens out of poverty has done so by becoming more competitive. 

Yesterday we learned that South Africa had slipped 9 places, from 45 to 54, in the World Economic Forum's Global Competitiveness Index. The index measures and compares the competitiveness of 139 countries using indicators such as infrastructure, macroeconomic environment, health, education, labour market efficiency and innovation.

The index reveals that the biggest brake on our competitiveness is the state of education and health. Our education system was ranked 130 out of 139 overall, while the quality of mathematics and science education was ranked third last at 137. When it comes to health, we were ranked 127 out of 139 for life expectancy - chiefly as a result of the widespread prevalence of HIV/Aids (we scored 136 on that indicator).

Our crime rate - although on the decrease overall according to the latest crime statistics - is also having an impact on our global competitiveness. Out of the 139 countries studied, we were ranked third last at 137.

It wasn't all bad. In some areas we performed extremely well, scoring better than some of the world's most developed economies. We were ranked number one in the world for the strength of our auditing and reporting standards, and number one for the regulations of securities exchanges. Unfortunately, it is far easier to maintain a good auditing system than it is to turn around a failing education system or stop the spread of HIV/Aids.

But there are other things that can be done right away to increase our competitiveness, create jobs and reduce poverty.

What emerges loud and clear from this report is how our current labour policies are constraining our global competitiveness, as evidenced by our ranking of 97 for overall labour market efficiency. This low score was a result of our inflexible hiring and firing practices (135th), a lack of flexibility in wage determination by companies (131st) and poor labour-employer relations (132nd).

These findings support the view that I expressed in this newsletter last week that, if we are to become globally competitive, we have to rethink the policies that govern our over-regulated labour environment.  Because what we are doing at the moment is destroying jobs, deterring investors and keeping the unemployed trapped in poverty. If the 3.1 million unemployed young South Africans (under the age of 34) are not given a chance to work and develop their skills in the near future, they will end up unemployable for life - a burden to themselves, their families and the state.  Most of them will remain permanently trapped in poverty.

This is why we support measures such as the youth wage subsidy for first-time job seekers and the establishment of ‘job zones' where businesses are exempt from all but the most basic labour laws required to protect the basic health and rights of workers. I think most people would agree that earning a low starting wage is better than remaining permanently unemployed.  Unfortunately, the Constitution does not allow us to implement these policies in a province.  We have to win power at national level to implement these policies.

But there is a lot we can do at provincial level - ensuring clean, corruption-free government and significantly improving education, for example - that will help create incentives for new business investment and for existing businesses to employ more workers.  Gearing all our policies towards sustainable economic growth would prove far more effective and sustainable than any public works programme.

The role of government is to create an enabling environment for entrepreneurs to invest and for businesses to expand.  This combination creates jobs.

As Barack Obama has said:

"I have always been a strong believer in the power of the free market. I believe that jobs are best created not by government, but by businesses and entrepreneurs willing to take a risk on a good idea. I believe that the role of government is not to disparage wealth, but to expand its reach; not to stifle markets, but to provide the ground rules and level playing field that helps to make those markets more vibrant - and that will allow it to better tap the creative and innovative potential of our people."

We agree. This week, in the Western Cape, we released our plan to create an enabling environment for growth. We want to make the Western Cape the place to do business in South Africa. And, in so doing, we will help to reduce unemployment and lift people out of poverty as they participate in the productive economy. It is central to our vision of an open, opportunity society for all.

In practical terms, we will do this by developing and marketing a provincial economic brand identity to attract investors, by ensuring that our administration is efficient and corruption-free, by removing unnecessary red tape that hampers business development and by investing in infrastructure - including so-called ‘mega-projects' such as the Cape Town Regeneration Project.

We are also going to establish what will be called the Western Cape Development Agency. Staffed by people with proven business experience and expertise, the Agency will work in partnership with the provincial government to identify and exploit economic opportunities for local businesses. We envisage it as an "activist" agency with the mandate to find ways of removing the existing state-imposed impediments to growth.

Overly burdensome rules and regulations that constrain both businesses and local governments are a major obstacle to growth and development. This is why, eleven months ago, I sent President Zuma a list of all national laws and regulations that need to be amended and streamlined if we are to grow our economy. In response, the President personally committed himself to following up.

Nearly a year later, I am still waiting for a response. Ironically, changing any law or regulation is a highly complex and bureaucratic process in its own right.  The difficulty government faces in creating a development-friendly regulatory environment provides a clue as to why entrepreneurs  are often deterred from doing business in South Africa: a survey conducted as part of the Global Competitive Index report cited "inefficient government bureaucracy" as "the most problematic factor for doing business" in South Africa.

I have today requested a meeting with President Zuma to discuss the progress of the project he agreed to undertake. I will also discuss the findings of the Competitiveness Index with him and impress upon him the need for a drastic change to our labour regime. It is time for President Zuma to revisit the proposal for a two-tier labour market he made when he was campaigning for the Presidency - before Cosatu rebuked him and he reversed his position.  Now that he no longer needs Cosatu's support (which he seems to have lost anyway), he can afford to do something bold.

President Zuma must seize the moment now, before it is too late. If he doesn't get a grip on the economic tiller soon, we will continue to drift. And that will mean increasing poverty and inequality in our country.

This article by Helen Zille first appeared in SA Today, the weekly online newsletter of the leader of the Democratic Alliance.

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