At the Youth Day commemorations in June this year, held in Pretoria, the President of South Africa, Jacob Zuma, encouraged young people to start their own businesses. He, like most in politics, academia, and the media, are cognizant of the fact we desperately need thriving entrepreneurs to grow our lethargic economy and reduce the current staggering unemployment we endure.
But what President Zuma and many others, completely get wrong, is what it takes, to boost entrepreneurship. You need only look at the bills that have been proposed, and some passed, since he came into power in 2009. In looking into these bills, you will find that government has become even more hostile to business.
The recent SBP 2015 SME Growth Index highlights the quandaries faced by South Africa’s small and medium businesses. It’s an index based on a survey of a panel of 500 established firms, employing less than 50 people and operating in three sectors: manufacturing, business services and tourism.
The report states that South Africa’s current environment impedes business growth. Due to loss in revenues, and the rising costs of doing business, the firms, have had to cut jobs and downsize – which of course has been a contributor to South Africa’s disheartening unemployment.
The firms revealed that burdensome regulations represent the top factor impeding growth of businesses. Also, that the red-tape has increased over the past year – which has caused serious harm on their operations.
In my opinion, the source of this harm is our government’s statist policies. It’s government who enacted these regulations in the first place. The impact has been huge, and tragic. High unemployment and the moribund economy is evidence of the failure of our government’s socialist policies.
But perhaps we should not be pessimistic about the future of our entrepreneurs. The Free Market Foundation South Africa (FMF) is investing so much in an effort to save entrepreneurs from our destructive labor laws. Herman Mashaba spearheads the Labor Law Challenge – which, should it succeed, will save and grow many entrepreneurs in South Africa.
Our constitution is imperfect. And I’m confident that very few people would disagree with me on this opinion. Section 32 (2) of the Labor Relations Act (LRA 1995) highlights one of the many imperfections about our constitution. Under this section, the Minister of Labor “must” extend bargaining council agreements to non-parties. After big businesses have sat in boardrooms, and decided on the wages and conditions of employment in their sector, the agreements are forced upon small businesses – which is unfair.
The FMF wants only one word changed in this section – and that is “must”, to “may”. We believe changing this one word will allow the minister to apply his or her thinking on the impact the bargaining councils agreements may have on non-parties. Most of these non-parties are small to medium enterprises.
How many entrepreneurs out there are stifled by these bargaining councils agreements? How many jobs and future jobs are lost due to this labor law? Add to this the other laws that have made it very difficult for employers to hire, for example the Commission for Conciliation, Mediation and Arbitration; and minimum wage laws that have priced out low-skilled workers.
But politically speaking, to South Africa’s left all this doesn’t mean much. In their perspective, the stagnation of our economy is produced by the fact that government isn’t doing enough. The state should do more – more bills should be passed, we need more laws to protect the exploitation of workers, a national minimum wage should take effect soonest to quell income inequality. This is what they sell to our people, and most South Africans seem to believe this wrong information.
I will speak at the South African Institute of Welding in Durban on the 4th of next month, as a Fellow at the Institute of Race Relations and Director at Free Market Foundation South Africa. My message will be crystal clear – that entrepreneurship is, and ought to, be the driver of our economic growth. That if we want prosperity for our people – then we ought to create a pro-market environment to boost business growth. We need to speak and take action on the challenges faced by small businesses. It is these businesses that are the source of prosperity.
The report by SBP echoes that government should do something to make improvements to the current business climate. And clearly, what our government needs to do is to embark on the liberalization of the economy – opening up our markets, deregulation of the labor market, privatization and free trade.
The Free Market Foundation knows what is needed to speed our economic growth, create jobs, and lift millions out of poverty. Government isn’t capable of driving our economic growth, entrepreneurs are. The recent SBP 2015 SME Growth Index ought to be taken seriously.
Phumlani M. UMajozi is a Policy Analyst at Ineng, Youth Coordinator at Free Market Foundation, Contributing Writer at African Students for Liberty South Africa, Fellow at the Institute of Race Relations, advocate at Young Voices, and Business Analyst.