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Date : 24/03/2004
Source: Democratic Alliance
Title: R Taljaard: Economic policy - what`s your ticket? (24/03/2004)


  Despite recent ANC claims of job creation, studies have shown that we have experienced a loss of some 2 million formal sector job opportunities over the last ten years of ANC rule. The so-called job creation the deputy-minister of Finance and Trade and Industry Minister Alec Erwin speak of is simply an error of comparison between the OHS and LFS surveys which measure employment differently.

The latest figures include informal sector job and, despite the contribution made by this sector, it is challengeable as to whether they constitute long-term sustainable jobs. These jobs will only be sustainable if the informal sector is integrated with the tax system, and when bridges are built for all entrepreneurial SMMEs to be fully integrated in the formal economy. This is the key message of a recent UN study entitled Unleashing Entrepreneurship: making business work for the poor.

South Africa lags behind in the global entrepreneurship stakes (22nd in a recent survey of comparable emerging market competitors) - outstripped considerable by Mexico, India, Brazil and others. We simply must foster a greater culture of entrepreneurship and ensure that both the formal and informal sector promote entrepreneurial activity. This means that government must stop creating regulatory hurdle races for entrepreneurs and listen to their needs to create jobs.

The current regulatory morass in the South African economy stifles and hinders greater entrepreneurial activity. This is worsened by the lack of access to finance which plagues the start-up initiatives of many SMMEs.

There are at least two demand-side interventions the DA believes will make a significant contribution to drive job creation.

The first clutch of policy interventions will stimulate increased investment. DA policies will help South Africans to save more and provide tax incentives to encourage investment. This will provide a more secure savings and investment base than the current 16% of GDP in order to catapult the economy onto a higher growth path.

We will create Export Processing Zones to promote labour-intensive employment and attract investment - only new investment, both domestic and foreign, will drive our rate of economic growth to over 6%. These EPZs can accommodate both lower skills level workers in manufacturing, with a clear skills training spin-off, as well as house possible outsourcing jobs from the US and EU. There is no reason why only call-centres in India and China, for example, should benefit from the outsourcing jobs boom.

South African workers, both skilled and unskilled, are competing with skilled and unskilled workers from India, China, and Eastern Europe in a global economy which is generating considerable productivity increases in the global labor market by virtue of technological advancements. In this competition there can be no sacred, ideologically-inspired cows.

The second demand-side intervention will incentivise employment through tax measures and reforms. Our policies give employers a tax deduction for new jobs created and creates a specific tax incentive for the employment of domestic workers. We will ensure that regulations constraining SMMEs and other business are reduced and that the labour court system is enhanced to minimise the regulatory cost an inefficient labour negotiation system imposes on small business. We will always ensure that workers are protected from contraventions of the ILOs four core labour standards. But we will review South Africas labor law edifice against these four core principles and the standards applied in economies we are aggressively competing with for investment. We will do this not to replicate the labor market abuses that hallmarked our past, but to ensure that our future is clearly geared towards the labor-market demands of the economically competitive present and future.

In addition, the DA believes that our economy needs to be freed from structural constraints by accelerating privatisation and encouraging competition. South Africa needs to be competitive in the cost structure of energy, telecommunications and transport if we are to attract investment.

The no-go areas of the privatisation debate have received a significant blow from the recent success of the Telkom Khulisa share offer. The Khulisa offer has demonstrated how a culture of saving and investment can be fostered via privatisation. The share issuance itself has already added to South Africas pool of savings in the hands of a broader-base of our people.

The recent success of the Khulisa share offer has nearly gone unnoticed. This success must be trumpeted considerably. It serves as a salient example of what can be achieved with a well thought-through privatisation initiative. Not only have those who have made use of the Khulisa offer seen dramatic growth in their investment but it is a broad-based initiative. The DA believes that there is room for a productively combining certain policy steps. We should link tax incentives for employee-share-ownership schemes, privatisation through IPOs, and initiatives to grow a culture of savings and investment. These mutually reinforcing policies must serve to highlight the potential benefits of privatisation that go beyond the clear benefits of increased competition and declining public sector borrowing requirements.

The benefits of DA privatisation and competition policy are numerous. Deficit reduction, increased social expenditure, lower telecommunication, transport and utility costs and efficiency gains are all being held back by the ANC government s ideological blind-side. The DAs focus on employee share-ownership schemes will ensure the benefits from privatisation accrue to the people who need them most and not to those who have lined themselves up for historical and lucrative Strategic Equity stakes.

Our job creation, privatisation and competition policies will help to move South Africa to a higher growth path personified by economic growth of 6% per annum. This will benefit all South Africans and will bring welcome relief after 10 years of ANC ideology straight-jackets.

The biggest difference between the DA and the ANC is an understanding of the global realities in which the South African economy finds itself. We need to understand who we are competing with for job-creating investment in the emerging market universe and adjust our policies accordingly. In the debate about higher economic growth there can be no sacred cows based on blind ideology.

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