This is according to Edward Parker, MD and head of Europe, the Middle East and Africa (EMEA) at Fitch Ratings.
“One of the reasons why unemployment is so high in South Africa is because the labour market is extremely inflexible. Studies by the OECD and the World Economic Forum show that it has one of the least flexible wage bargaining systems [and] the highest level of employment protection,” he told CNBC Africa.
“The labour market is an area where there is huge potential but clearly it’s a very complex and politically sensitive one – government needs to carry people with them but there is potential there if the government can take bold action in terms of making the whole system a bit more flexible.”
Parker, speaking during a panel to dissect and assess South Africa’s National Development Plan (NDP), also stated that the international investor community needs to see short-term wins in order to feel confident about the country’s future prospects.
“An area where it would be possible, perhaps, to have quick results, would be in the labour market. If you look at the shocking level of unemployment in South Africa – 25 per cent, if progress could be made in that area then there would be huge potential gains,” he said.
“There are vested interests involved and the government has to be tougher, it may have to take on those vested interests and force through some change rather than just going along with the lowest common denominator.”
Nonkululeko Nyembezi-Heita, chairperson of the JSE, echoed these sentiments and added that South Africa needs to look at what it is trying to achieve.
“There are many things we can do quickly which require political courage and to me, labour – we’re going in the opposite direction, not only in the immigration sphere, but also in the minimum wage [sphere], and again you think ‘What are we actually trying to achieve here’,” she said.
“To monitor what business is doing, it’s very easy to measure what’s happening – you look at growth, you look at employment, you look at poverty – the things that the NDP wants to achieve are very visible but they do need some brave actions, without which we will not break through.”
Bobby Godsell, commissioner for the NDP, also emphasised the need to make some real progress on more effective dispute resolutions in labour relations in the near future.
“There is actually a national process underway, under the leadership of Deputy President [Cyril] Ramaphosa, with a commitment to some kind of more effective intervention to prevent a strike such as we had in the platinum sector,” he stated.
“These would be milestones in which business is right to say to government, ‘You’ve got to act and you need to act bravely’.”
While he agreed that government needs to be bold, he indicated that bold action is needed from business as well.
“On labour relations, government is a secondary player. The primary players are the employers and the unions. At the heart we need to put global competitiveness back into collective bargaining. Here the challenge is overwhelmingly to business,” Godsell said.
“Business people must take responsibility for labour relations – we forge the relationship. Productive work comes from productive design. Our primary responsibility in business is to grow our businesses and this is one of the ways that we can do it.”