Economic Growth & Unemployment

Melanie Veness:  PCB CEO 

International reports show that South Africa is falling behind in global competitiveness, we are experiencing weak economic growth and our unemployment rate is sky-rocketing. Things are not looking pretty at the moment and yet strikes are the order of the day in both the private and public sectors.

Politics aside, the labour situation is making investors bolt for cover and the eventual cost of the current strike action could put pay to any economic growth aspirations that we may be harbouring.  When one considers the backdrop, the fact that unions are demanding crippling double-digit increases way above inflation, is quite frankly, mind-boggling.

Cosatu-affiliated South African Municipal Workers Union (Samwu) and the Independent Municipal and Allied Trade Union (Imatu) declared a dispute with the South African Local government Association (Salga) and are demanding an 18% increase. Salga has said that they can’t afford the proposed increases, and in light of the number of local municipalities in financial difficulty, this is certainly believable. They have offered 6.08%. According to Salga’s spokesperson, if government agrees to an increase of 7.5% instead of 6.08%, they will have to fork out an additional amount of R96-million a year for the City of Cape Town alone and an additional R97.5-million for the City of Johannesburg. The percentages, when bandied about, may seem insignificant, but the burden on the budget is staggering. The Salga spokesman went on to say that meeting the 18% demand, would cost Johannesburg an additional R829-million per annum.

One has to ask whether any salary increases are justifiable in the current economic conditions, especially when one considers that the average wage in the public sector is 44% higher than in the private sector. Above inflation increases obviously compound this disparity, and since one in eight people employed in our country work for the government, how sustainable is this?

Employers in the private sector have responded to the increasing wage bill by shedding more jobs. And this at a time when our unemployment rate stands at an unacceptably high level of 25.7%.  The Adcorp Employment Index shows ongoing job losses, and reports employment dropping for the third consecutive month during July. Adcorp also found that the biggest falls in both permanent and temporary employment was in the unskilled and semi-skilled categories.

We need to heed the warning that wage settlements significantly above the current inflation rate of around 5% will drive up the cost of already expensive and comparatively less productive labour than that which is on offer in rival emerging economies. Labour needs to recognise, that their demands and behaviour have a significant impact on foreign investment and on our global competitiveness, and consequently it directly affects our economic growth. Without economic growth, we aren’t going to be able to address unemployment.

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