Big business, the ANC and the trade unions support a ‘labour aristocracy’, which leads to an exacerbation of the unemployment rate.

Unemployment has been the most important political and economic question in South Africa since the ANC took power in 1994. While showing slight increases in employment from 2004 until 2007, unemployment has been rising steadily for decades to a high of 27% in 2018. By comparison, at the height of the Great Depression, the USA had an unemployment rate of 15%. South Africa has had a higher unemployment rate every single year since 1996! 

There are a variety of reasons for this but they all dovetail around collusion between Big Business, the African National Congress (ANC) and the majority of the trade union movement.

Special provisions have been made for the employed through state fiat. South Africa has some some the most onerous labour law policies in the developing world. This has created a special class of what RW Johnson calls “labour aristocrats”, workers who are protected by labour laws, minimum wage and powerful unions. Workers are a privileged group that have legal protection and status that is not afforded to the poor who are unable to enter their ranks. Government, Big Business and the unions have colluded to protect workers from the millions of unemployed South Africans who are able and willing to work for lower wages.The creation of the labour aristocracy has led to the creation of a highly paid, but unproductive workforce. 

This in turn has led to investment leaving the country as our labour costs cannot compete with low wage countries like Vietnam, nor can productivity levels compete with highly productive labour forces such as those found in Germany, Israel or China. Entire industries have collapsed due to the labour aristocracy. Big Business pushes for onerous regulations, which their smaller competitors cannot financially absorb. Big Business retains entire legal firms to deal with their labour issues, leaving small competitors to deal with violent unions by themselves. Unions and Big Business have collective agreements that punish and force smaller businesses to close and retrench workers. The ANC, Big Business and the unions have created millions of unemployed people, which the ANC plies with social grants to prevent unrest. 

The irony is that between ten and 15 million South Africans are permanently unemployable, due to the horrific public education system and labour laws that prevent them from entering the labour market. The minimum wage is a barrier for low-skilled South Africans entering the market and up-skill their productivity. The poor masses are dead capital, wealth that will forever remain locked due to policies of the ANC. South Africa’s labour value proposition is essentially null – artificially high wages combined with low productivity has led to a decade long investment strike.

South Africa needs to become a low wage country to become globally competitive. The Labour Relations Act and minimum wage policies will have to be amended or abolished in their entirety. This removes the barriers of entry to the economy for millions of poor people. 

There are a few downsides to this. Wages will fall in a general sense as more people join the workforce. The unions will froth at the mouth as their members lose their legal protections and the competition of the millions of new and non-unionised potential employees. This is a risk worth taking. 

Israel and Germany reformed their labour markets by privatising state assets and cutting social welfare – these measures cut unemployment in half.

It’s time for South Africa to join the globalised economy and become internationally competitive. The labour aristocracy has to be dismantled.

Roman Cabanac is the co-founder of the Capitalist Party of South Africa

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