The finding of an International Monetary Fund (IMF) working paper that the rapid growth of real wages in South Africa, which outpaced labour productivity growth in most sectors, was suppressing employment creation was concerning, said the South African Chamber of Commerce and Industry (Sacci) on Thursday.

The paper, titled ‘Real wages, labour productivity and employment trends in South Africa: A closer look’, which was released earlier this month, examined the dynamics of employment in South Africa, as well as the factors contributing to job losses during the financial crisis.

IMF author Nir Klein commented that during 2009 and 2010, South Africa experienced job losses equating to 5% of the employed in 2008, pushing the country’s unemployment rate to 25%.

Real wages continued to increase rapidly, despite overall soft labour market conditions and economic recovery, while its misalignment with labour productivity reflected the outcomes of the collective bargaining framework in South Africa, the paper said.

“The IMF provides a clear message that the South African labour market is less competitive than other emerging markets in this regard and it is essential for this imbalance to be urgently addressed in order to create more jobs,” Sacci CEO Neren Rau said in a statement.

Meanwhile, Sacci said that the proposed amendments to the Basic Conditions of Employment Act and Labour Relations Act would reduce flexibility in the labour market and further dampen job creation.

A survey, undertaken by Sacci, examining labour market conditions and the role of labour regulations in job creation found that a “simplification” of the statutory disciplinary process would lead to greater employment creation.

Further, over 42% of respondents believed that the economic conditions were the largest impediment to employment, while 26% attributed lack of job creation to “burdensome dismissal processes in the current labour legislation”. About 45% believed that the current disciplinary process under the regulatory framework was a significant obstacle to employing more people.

The survey also shows that smaller firms are more vulnerable to the administrative costs associated with labour regulations, further strengthening the argument in favour of the simplification of the disciplinary and dismissal processes as the small- and medium-enterprise sector was pivotal to job creation, Rau noted.