President Zuma is right:  unemployment is our main national priority. 

36% of the potential work force and more than 40% of black South Africans are unemployed.  Unemployment is the main cause of the poverty in which almost 40% of South Africans subsist.  It is the reason why we have made no progress at all in combating inequality since 1994.  It necessitates the payment of social grants to almost one third of our population and it is inextricably interlinked with unacceptable levels of crime.  Most seriously, it means that our new constitutional democracy is not working for a substantial section of our society and for a majority of our youth.

The main cause of unemployment is COSATU's insistence on "decent jobs" -  because it fixes labour costs far above the point where the labour supply curve crosses the employer demand curve.  The result?  millions of South Africans, are locked out of the job market.   These South Africans have never been consulted about their wishes and - like the recent case of textile workers in Newcastle - would probably prefer real jobs to the "decent jobs" that COSATU demands but cannot deliver.

 Unemployment levels are also affected by labour regulations - particularly among small and medium size businesses that create 60% to 70% of the jobs in most economies.    Virtually everyone accepts the need for reasonable regulations to protect workers' rights.   However, the more intrusive the regulations, the fewer the jobs.   Employers will run a mile before creating jobs if labour regulations interfere with their ability to run their businesses - or if they are forced to spend too much time and money complying with onerous regulations.  This is exactly what has happened in South Africa - and is the main cause of the growth of labour broking.  

While President Zuma is crusading against unemployment, his Minister of Labour has introduced legislation that will, according to the employment index company Adcorp, lead to the loss of more than a million jobs.

• The primary objective of the legislation is convert the present 3.7 million part time and temporary jobs into permanent jobs. Employers will have to pay former temps equal pay and benefits which will massively increase labour costs. Labour brokers, who currently employ almost one million people, will, for all practical purposes, cease to operate - despite the manifest need for their services and the fact that they are more compliant with labour laws than most companies.
• The Department of Labour's own Regulatory Impact Analysis has warned that the legislation will put jobs at risk - and may also be unconstitutional.
• The legislation will require workforces to be representative of demographic profile of the whole "economically active population" rather than that of the region involved.  This could have dire consequences for coloured workers in the Western Cape and for Indians in KwaZulu-Natal.
• Employers will have to inform the Director-General of Labour within 14 days of any vacant posts -  and again within 14 days of their being filled - or  face a minimum fine of R10 000. 
• The State will create an ‘Employment Services Board' - which is likely to be yet another ineffective, intrusive and unaffordable bureaucracy.
• Employers will be required to provide the same pay and benefits to employees doing the same work regardless of their length of service or performance.  They will no longer be able to cite a skills shortage or financial constraints as defences for failing to meet racial employment quotas. 
• If employees work longer hours than those prescribed by law, their employers could face a minimum fine of R 10 000 or 12 months imprisonment.

This legislation will further discourage foreign and local investment with enormously negative consequences for job creation.  According to the World Economic Forum's Global Competitiveness Report South Africa's labour market is already one of the most rigid in the world.  We were 132^nd out of 139 countries in labour/employer relations; 131^st in flexibility of wage determinations and 135^th in hiring and firing practices.  Why should any investor accept all these hassles when there are dozens of other investor-friendly countries clamouring for their money?

South Africa is already paying the price for its investor-hostile approach.  Its mining industry actually shrank by 1% per annum in dollar terms during the 2000-08 commodities boom while the mining industries of China, Russia and Indonesia grew respectively by 19%, 10% and 8%.  Every time Julius Malema makes a statement on nationalisation, we probably lose another 1 000 job opportunities.

There are many reasonable people within the ANC leadership who must be aware that the proposed labour legislation is irreconcilable with President Zuma's plans to combat unemployment.   Why then is the Government proceeding with such potentially disastrous initiatives - despite the warnings of its own Regulatory Impact Analysis?  The following factors may be relevant:

The contradiction has its roots in the unresolved tensions between COSATU/SACP and the remaining pragmatists in the ANC who favour workable macro-economic approaches.  Also, the subtext of everything that happens this year is the ANC's National Conference in 2012.  No present - or aspirant - leader can afford to alienate COSATU because of the decisive role that it may play in choosing the country's future leadership - just as it did at Polokwane in 2007.

Secondly, the vision of many decision-makers is still hopelessly distorted by ideology - by the racial agenda of the National Democratic Revolution (NDR) and by COSATU/SACP's continuing adherence to 19^th century socialist delusions (their mid-term goal is the imposition of worker hegemony on all sectors of society!). 

Finally, the contradiction rests on a firm substratum of self-interest.  The draft legislation will enhance the employment prospects of chosen cadres by imposing more rigid requirements for demographic representivity on the economy.  At the same time, the doctrine of "decent jobs" will protect COSATU members from the chill wind of wage competition while the abolition of temporary jobs will help with the recruitment of more trade union members. 

Whatever its cause, the proposed labour legislation will further exacerbate our most serious national problem - unemployment - and will fatally undermine President Zuma's efforts to combat it.

Dave Steward is Executive Director of the FW de Klerk Foundation

Click here to sign up to receive our free daily headline email newsletter