C. March

Updated 25 March 2009
* Latest additions

* Labour is a protected, vanishing species
Stewart Jennings of car parts association Naacam suggests that employment should become the new economic vision for SA. As well as anti-dumping taxes and a cheaper rand, he wants government to intervene because the labour movement has far too much protection. With 35 percent unemployment, it’s iniquitous for labour to be a protected species and to have wages like we have. SA’s labour policies are inappropriate for a developing economy, he said, and our labour costs are the most expensive in the world. The industry talked of producing a million vehicles a year so component manufacturers invested to expand. But now immovably high unit labour and raw material costs have crunched into irresistibly lower selling prices. If revenue and costs won’t cross over again, many more companies will fail. The manufacturing sector accounts for 16.5% of GDP but has recently performed much worse than other economic sectors. If we continue like this we won’t have a manufacturing industry. DBSA economist Neva Makgetla responds that simply returning to hiring and firing at the employer’s whim would merely re-entrench a dependence on cheap, unskilled labour and worsen tensions, discipline and work stoppages. But at least such work stoppages would only be temporary. (BR 20.3)

* More flexible labour laws could help
Not everyone sees fuller employment as a national priority. Trades unionists seek better working conditions and rewards for unionised employees, to the exclusion of un-unionised, unemployed and poorer South Africans. Some freemarketers want greater individual liberty for its own sake, while others want greater economic freedom as a means towards the end of faster economic growth. Fast growth certainly brings greater general prosperity and probably needs and creates more jobs. Prof Carel van Aardt of Unisa’s Bureau of Market Research says SA labour policies have succeeded in protecting jobs by discouraging employers from summarily dismissing workers in bad times. For 2009 the BER estimates 0.9% GDP growth and about 230 000 job losses, which could have been much worse lacking a protective labour regime. The price has been two decades of very little job creation. Harvard Group’s growth panel reckoned more flexible labour laws like in other emerging economies would have seen six million more employees by now, making 15.9m formal workers instead of 9.9m. Also only 1.8m low-paid informal, agricultural and domestic workers instead of 4.3m, and only 1.5m (7.8%) unemployed instead of 5.4m (28% of the economically active population). So more flexible labour laws seems worth a try and could also herald greater liberty, growth and prosperity. (BT 22.3)

* Making unsaleable products makes no sense
An article by Prof Frank Flatters ‘dished out easy solutions’ to SA motor industry problems. Unionist Sibanda Mngadi says it’s not so simple as reducing “industry subsidy” which would cost manufacturing jobs but more imports would increase competition, reduce prices and increase sales and sales-level jobs. We should consider social effects of laying off manufacturing workers. The income of each worker employed on the shop floor enables 6-8 other people to put food on the table, go to school and so on. Then add informal traders and taxi routes attached to industrial centres. So a lot of jobs are lost when a worker is dismissed. In Botswana, Ephraim Nsingo describes similar knock-on effects of lost diamond mining jobs on domestic workers, informal traders, herd boys and seasonal village farmers. The problem is that local and foreign consumers are currently buying fewer cars and diamonds. Rather than producing and stockpiling unsaleable products, it makes sense to leave resources like iron ore and diamonds in the ground until needed. So it would be cheaper for shareholders to pay workers not to work – not to feed costly materials and energy into manufacturing equipment to fill product warehouses. But why would they want to do that? (BD 17/19.3)

* Encouraging entrepreneurs is up to the government
Finance minister Trevor told black businessmen the global downturn threatens thousands of mining industry jobs. The country, with the world’s largest platinum deposits, “has not progressed much beyond commodity exports. We must diversify. But that is up to the entrepreneurs. Governments are bad at producing entrepreneurs.” Government previously aired using state-owned development financial institutions to help struggling firms but Manuel did not elaborate. His February budget committed about R780bn in infrastructure spending to help boost the economy. He may be right that enterprise and innovation skills are in short supply, or they may be as plentiful as anywhere else but put off by anti-business legislation. Government could cheaply fix that at the repealing stroke of a deregulating pen. (BD 19.3)

Productive farmland is a good idea
After 1994 the ANC-led government set a target of handing 30% of all agricultural land to the black majority by 2014. The restitution component, returning land to dispossessed black communities, is 95% complete, leaving 5% involving claims on mines, huge forestry projects and conservation areas. Former land affairs D-G Gilingwe Mayende says 85% of agriculture’s GDP contribution comes from 15% of commercial farms. High input costs, interest rates and debt burdens damaged farming balance sheets and deterred capital investment. 4% of the land has gone to land reform beneficiaries, 4% became game farms bringing in hunting and tourist dollars and euros instead of local and export food revenues, and a normal 5% of farms are up for sale. If the highly productive commercial farm sector isn’t disturbed, restored food self-sufficiency and higher exports seem feasible. Selling affordable less productive or fallow farmland to government for redistribution to black farmers and communities seems a good idea. The recent clawback of an ostrich farm leased to, and run down by, Phaphamang Ma-Africa may do little for perceived security of property rights but it makes sense to get the surviving 57 ostriches back on healthy legs. (Star 5.3, ST 8.3)

Over-regulating rural and peri-urban farming is a bad idea
The ANC claims pursuit of household and national food security as a constitutional mandate. It promises a mass emergency food relief plan with food assistance projects like soup kitchens to the poorest households and communities. And a five-year “food for all” plan to procure and distribute basic foods at affordable prices. And implements, tractors, fertilisers and pesticides to help rural and peri-urban areas grow their own food. And more land, technical skills and financial resources into the hands of the rural poor. And promoting agricultural co-operatives, agro-processing and access to markets. And support to organise and unionise farm workers. And enforcing labour legislation better. This sounds like existing heavy-handed state regulation that ‘supports’ high unemployment, dependency on welfare handouts, and inability or reluctance to pay for state services. Positive and hands-off support for informal community efforts funded by individual and stokvel savings might enable more sustainable livelihoods. (ANC Today, 14.3)

Is rural development what rural people want?
The National House of Traditional Leaders wants faster land restitution by the Land Claims Commission. Chairman Fhumulani Kutama told president Motlanthe that government seems to promote cash payouts instead of handing back land. He says that’s against the Freedom Charter’s spirit and money is not important to traditional leaders – land is important. Representative Mzimela said traditional leaders should participate in the entire justice system and mete out restorative justice instead of the punitive justice of magistrate’s courts. The house is annoyed that pressure groups have delayed the Traditional Courts Bill for alleged oppression of women. Motlanthe promised finalisation after the general election. He’ll consider renaming the new department – to be established on April 1 – as the department of traditional leadership and rural development, in line with its priorities. Do rural claimants want rural development? Consider those preferring the money but denied it. Prevented from selling returned land, will they farm enthusiastically and well? Why not let those preferring to seek their fortune elsewhere do so? The worldwide trend is urbanization. (BD 13.3)

A farming free market would work best for SA
SA gold output fell 8.7% in volume terms and total mineral production dropped 11% in January compared with the same month in the previous year, official data showed on Thursday. Statistics South Africa said production of non-gold minerals fell 11.4%. Surviving the global recession and achieving faster economic growth means reversing wealth-creating downtrends in mining, farming, fishing and manufacturing. Explaining the “use it or lose it” principle this week, agriculture and land affairs minister Lulu Xingwana said those not committed to farming must be removed from the allocated farm and replaced by those with a passion for farming. ‘Invisible’ market mechanisms constantly shift productive resources from unsuccessful hands to more motivated and competent ones. State agents don’t exhibit such capable dirigist skill as private shareholders driven by the search for profit to satisfy more customers. So it’s better that would-be farmers freely choose whether to start, continue or stop farming. The ideal farmland situation has all land title freely tradable in a unified market indiscriminately protected by the state. (Cit 14.3)

Stop digging and encourage mining
Canada’s Fraser Institute annually polls roughly 3000 exploration, development and other mining firms. This year 658 responded. Rated on attractiveness of government policies, the top ten mining destinations are in North America and Chile. Botswana remains best in Africa. Behind Tanzania comes SA at 49th of 71 countries. Based only on mineral endowment, Congo would rank 19th and SA 27th. Our environmental regulation and taxation regimes are deterrents, but not so much as uncertainty over interpreting mining regulations, inconsistency in regulations, and uncertainty over land claims. We score particularly badly on labour relations and security. So SA sits among the three least attractive countries in Africa rated for mining exploration, ahead of failed states Congo and Zimbabwe. When you’re in a hole, first stop digging. More investment, jobs and exports seem desirable. It might strike our rulers as smart to scrap policies that discourage mining and encourage mining again. The same can be said about agriculture, forestry, fishing and manufacturing. The incoming ANC regime may show better understanding of the third goal of the National Democratic Revolution policy document. Better lives for all depend on fast economic growth rather than redistributing a shrinking cake to a growing population. (BD 2.3)

Scrap state interference with mining
Despite large increases in fixed investment in 2006-07, SA mining output declines by 1.5% in 2006, 0.9% in 2007 and 7.5% in 2008. Chamber of Mines CE Mzolizi Diliza says despite the global commodity boom several domestic factors materially affected sectoral ability to increase output. Factors he lists represent botched governmental responsibilities. An electricity crisis that needn’t have happened if sensible plans for private sector involvement in power generation hadn’t been scrapped in 1999. Regulatory red tape including ridiculous labour market restrictions. Infrastructure constraints like inadequate railways, roads and ports. Safety-related closure of mines accustomed to investigating accidents with minimal production breaks, by state officials on punitive missions. Rapidly rising costs of services from inefficient utilities and essential imports payable in devaluing currency. Now a clone of rusty-triangle Nedlac comprises miners, unionists and government. This task team will focus on crisis management and repositioning SA for the next commodity up-cycle, proposing ways to cut costs, remove constraints, and save jobs where possible. Scrapping all state interference would boost mining and mining jobs. (BD 5.3)

Liberalise the mining sector
You get less of what you tax, regulate or both. By implication and expressly, however, politicians resist this tautology. Whenever another international survey highlights SA labour market rigidities, some minister or spokesman praises our labour laws – as flexible as Europe’s – and their irrelevance to our high unemployment. Mozambique labour minister Helena Taipo even has a law stopping firms laying off workers while making a profit. She’s able to ‘blank out’ marginal situations where barely profitable firms founder with ‘loss of all hands’. Maybe she blames wicked employers for not trying harder. SA’s new mining royalties, delayed ten months to March 2010, will work the same destructive magic. Even a mining firm making no profit will have to pay 0.5% of gross mineral sales. When faced with more of the same, what will shareholders do? Each extra straw removes camels from the herd. Among many governmental straws that shrunk the mining sector were AA/BEE and nationalising minerals. The royalty tax is another. All should go. (BD 6.3)

Give all private employers massive tax relief
Sectors must get fair treatment, comments a journalist about big US motor companies wanting many billions of taxpayer dollars to tide them over. They’ve long been uncompetitive and need to slim down. And in SA some sectors and companies – auto manufacturing, electricity generation, fuel retailing, Telkom, SAA – have long enjoyed some form of government protection anyway. The issue is not whether government should in principle intervene (he thinks so). It is identifying the criteria. If job losses are to be the measure, why was SA’s agricultural sector – arguably the most risk-prone of all – thrown into free markets where it has had to compete against subsidised imports. The country has lost half its agriculture jobs in a decade, as farmers left the land or mechanised to reduce costs. Why should farms, estate agents, insurers, banks, retailers, entrepreneurs, restaurateurs, small businesses, manufacturers and miners get no relief? Their job losses are just as tragic for the families affected. Give them all the same relief through massive tax reductions. (FM 6.3)

First we need a growing cake
A Grant Thornton report shows private SA firms citing workforce issues as the main impediments to growth for the third successive year. Shortage of skilled workers was named the single largest constraint, followed by shortage of goods and services. A third of surveyed firms cited regulations, and particularly employment laws. Red tape continues to outrank finance costs as a growth-constraint. This is in line with grand comparisons of many ‘emerging’ economies to identify common differences between really fast-growing countries like Armenia, Azerbaijan, Kazakhstan, China and Latvia, and essentially stagnating countries like Guatemala, Italy, Gabon, Portugal and Israel. Key among many differences, fast-growth economies enjoy less tax, more local savings and foreign investment, larger but slower-growing populations, better contract enforcement and more exports. They also impose significantly fewer hiring and firing regulations, lower mandatory dismissal costs, and less centralised collective bargaining. There’s a clear tradeoff between job security and economic growth towards better lives for all – the fixed or shrinking cake versus growing portions for all. (BD 23.2)

Let’s truncate lengthy and costly legal processes
Some US states are considering abolishing the death penalty because it has become so expensive. Appeals cost the state large sums of money in legal fees, so that on average the execution process is now ten times costlier than keeping an inmate in prison for life. Competition court president Dennis Davis refers to a similar ‘general problem affecting the SA legal system at present. All too many cases are run in every single available court on the basis of all manner of conceivable technical arguments that a lawyer can imagine, so as to ensure that matters are never brought to finality.’ Whether you’re trying to live longer in jail, or to stay out of jail and become state president, there should surely be some closure. After all, others await their chance to occupy that electric chair, jail cell or presidential suite. Given the referendum, wouldn’t we the people insist on some limits like a year to decide and no more than a million rand of costs, after which you’re presumed guilty. Even some death row inmates have cried “let’s get it over with” rather than endlessly prolonging the agony. They show some self-respect. (ST 22.2, BR 24.2)

Please privatise potholes
Without a blush, transport minister Jeff ‘vroom vroom’ Radebe tells MPs the road maintenance budget rose from R2.3bn in 2006 to R4.2bn in 2008. Meanwhile potholes repaired fell from 31 469 to 10 233. That would be an increase of 462% from R73 088 to R410 437 per repair! Perhaps they’re also fixing other road problems but judging from the deteriorating state of our roads, probably equally ineffectively. The minister’s dysfunctional department is also responsible for the never-ending taxi-recapitalisation fiasco. That follows the useless public transport that gave informal private taxi operations their start and hugely profitable two-decade growth. Now they move most South African commuters around, which someone must. While Radebe claims his Sanral Roads Agency is contractually obligated to fix every pothole within 48 hours of its being reported, municipalities plant signs warning of them and suburbanites plant saplings in them. Currently our obscene fuel and motoring taxes pour (like all taxes) into the general revenue fund for welfare handouts. Treasury should divert a small proportion of them back to privatise road maintenance if not also road construction. Who couldn’t profitably repair a pothole for a tiny fraction of R410 437? Think jobs creation! (ST 1.3)