Speech by Patrick Atkinson, DA Shadow Deputy Minister of Economic Development in the debate on the Economic Development Budget Vote, Parliament, July 23 2014

Reform inflexible labour regulations to grow the economy

23 July 2014

Chairperson, the Honourable Minister and Deputy Minister of Economic Development, and the Honourable Minister and Deputy Minister of Small Business Development, Honourable Members and Distinguished guests.

It is now a matter of undisputed fact that the World economy suffered serious setbacks as a result of the 2008 Financial Crisis that originated in the United States of America (USA) and Europe. In fact, many of the disappointing economic statistics that have come out of South Africa such as falling Gross Domestic Product (GDP) growth rates and high levels of unemployment have been ascribed to the effects of this crisis. 

Chairperson, irrespective of the 2008 Financial Crisis our peers such as Brazil, China, Chile and India are recording levels of GDP growth that help them make poverty history through  job creation. Much of this is ascribed to the faster pace of economies where employment practices are much less restrictive than those in South Africa.  

The World Economic Forum's Global Competitiveness Report has shown a very worrying decline in labour market efficiency in South Africa between 2009 and 2013 (a period that encompasses the life of this department).  In 2013, out of a comparison of 148 countries, South Africa is last at 148 in terms of cooperation in labour - employee relations, 147th in terms of hiring and firing workers; and 142nd in terms of which pay is related to productivity. 

Clearly if this 5th Parliament is to make any headway in improving the worrying low levels of job creation, the issues of labour market flexibility needs to be addressed.

A correct balance must be found between addressing the protection of worker's rights and providing a more flexible labour market that will absorb the unemployed at far greater rates than it is now doing. The Reserve Bank Governor's announcement this past week of a likely fall in GDP growth to 1,7% shows quite how serious this problem is becoming.

The second issue that needs to be addressed to assist in moving us to a more successful economy is the issue of policy certainty.  The challenge faced by this Government is clearly pointed out in an article by Itumeleng Mahabane in this last Friday's Business Day.

Mr Mahabane says "Two months into the fifth democratic administration there is virtually nothing to indicate that we are going to change our moribund economic course. Little suggests that the government will improve its efficiency and increase the rate of investment in social and economic infrastructure and focus on policies that are adequately stress tested and aligned to the overriding imperative."

While Ministers swear allegiance to the National Development Plan there are still too many policy contradictions at the heart of government. In the latest Report to the Committee on the budget vote the New Growth Path is being represented as the implementation vehicle for the National Development Plan.

While there are points of overlap between the two plans they are conceptually fundamentally different, with the National Growth Plan (NGP) taking a statist view of the economy while the NDP is more aligned with the involvement of the private sector. 

The Rand Merchant Bank (RMB) economist Rudolf Gouws succinctly captures the discrepancy between the NGP and NDP in a slide that he uses at the beginning of his economic presentations. He depicts two large arrows on a road pointing in opposite directions. It is exactly this kind of policy confusion that frightens off investors and retards economic growth.

So Chairperson, South Africa has the choice of remaining in a state of turbo-paralysis, all motion and no progress; or to make the hard choices that will take us to a more successful economy. 

Seriousness about improving the economy will be apparent from these two steps

1. Improving labour market flexibility to encourage job creation

2. An absolute and unambiguous commitment to implement the NDP and to measure all future policies and announcements against how they assist to that end.

These two steps would go a long way to restoring investor confidence and would begin to take South Africa to a place where we can truly start making poverty history

Issued by the DA, July 23 2014

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