Job Growth Stifled by Bureaucratic Intervention

By Glenn Ashton · 1 Jul 2009

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Picture credit: Rob Barret
Picture credit: Rob Barret

Apartheid South Africa was an arcanely bureaucratic, over regulated society. Through laws both petty and detailed, it regulated the lives of its citizens in ways that continue to affect us today. While we have cast off the chains of legalised racism we have not sworn off our national propensity to rely on centralised regulation through arcane legal structures to arrive at the collective goals we visualised when queueing to vote in 1994.

This reliance on the law, while perhaps necessary to correct historical imbalances, has equally tended to retard our development into a functioning, vital economy. On the one hand we have cast out the demons of our most opprobrious laws – the Mixed Marriages Act, the Black Land Act, the Population Registration and Race Classification Acts and so on and so forth. On the other, we have not really managed to eschew the complex regulatory frameworks that enable new businesses to compete against long established corporate monoliths erected during the Apartheid era and strengthened through our entry into a globalised world. Our structural adjustments under policies such as the Growth, Employment and Redistribution policy (GEAR) failed to produce the goods. ASGISA, the latest iteration is dead in the water thanks to both structural and external factors. The failure to centralise job creation has neutralised its effectiveness.

Besides this we have also fallen victim to the pressures of international regulation. We have withdrawn internal protectionist measures from external competition. This has insidiously diminished our ability to compete both within our borders and internationally. 

Bi- and multilateral agreements have undermined our right to protect farmers, the clothing sector and so on from imports. There has been an equal failure to challenge internal market dominance in strategic sectors like the steel industry, electricity supply, and other potentially developmental industries.

It is a daunting prospect to start a business anywhere in the world. In South Africa it is doubly difficult. Instead of having access to micro-credit, those with no collateral continue to rely on the traditional banking sector, only to be frustrated by their lack of creditworthiness. Then one must rely on family if you are lucky and loan sharks if not. What hope is that? In Bangladesh institutions like the Grameen Bank scheme has made micro credit available to 90% of citizens through community based lending systems. Why can we not copy such fundamentally sound developmental concepts?

South African policy makers and consultants are excellent at talking about wonderful ideas and formulating plans devised to reach desired outcomes. The problem comes in implementing these schemes. Too often the end result are complex policies that satisfy drafters but which offer little solace to supposed beneficiaries. For instance even though we have earmarked renewable energy as a policy, the implementation remains needlessly inaccessible because of unwieldy tendering processes and red tape that hinder entry. Ditto for the media that has failed to spread benefits beyond established companies.

The results are starkly evident. Either one makes work for oneself or seeks employment through established companies, reinforcing the illusory 'trickle down' system. In these tough times the men at the side of the road are burgeoning and remain exploited. 

Those who feel capable of helping themselves are of insufficient numbers to develop our economy. It is also inordinately difficult for trained and skilled immigrants from Africa to integrate into the economy or to share their skills. While we export skills through the brain drain we fail to utilise people with existing skills that have sought a better future here.

Ambitious go-getters wishing to make their mark have the odds stacked against them from the outset. This is compounded by our historically poor standards of education. The 'Young Lions' of '76 and onward who gave up school for revolution remain as marginalised as ever. Except, of course, for the best connected. 

One of our supposed developmental master plans is the Services Sector Education and Training Authority (SETA) system, which has in far too many cases proven as clunky and dysfunctional as its name. Instead of receiving proper training people end up being half trained. For instance, in the building trades 'artisans' are turned out after a few months training, often making them more of a hindrance than a help. When artisans are trained they often leave to make their own way, leaving those having paid for training in the lurch.

It would be far more practical to reinstate and support a hands-on apprentice training system that can readily impart scarce skills in an integrated manner. Competent artisans are the backbone of any emerging economy and while we have the people, the skills imparted have been neither sufficient nor adequately defined. Qualified tradespeople grow their businesses and pass on their training, percolating it through the economy. But just as there are obligations to offer employee job security, there should also be a balance so that trained personnel pay back their investment, much as doctors are forced to do through working for the state.

A real shortcoming of the SETA model is that it is really designed to assist those who already have jobs, or at least a foot in the door, to improve their qualifications. SETAs do not sufficiently address the needs of the majority, the chronically unemployed. This is a key flaw. SETAs have been trapped in a scrum of competing interests, caught between the expectations of organised labour on the one hand and mainly corporate business interests on the other. Educational and training consultants are caught in the crossfire, their effectiveness diminished.

We know we are lacking and need to develop our skills base. We are, after all, meant to be a developmental state. But are we?

Far too many indicators show that we are not. We have not actively sought to bring the most needy section of our society, the unemployed, into the fold. Instead we have tapped into the existing business and state infrastructure, effectively denying the most needy entrance into economic activity. 

Those who do develop or acquire skills, ability and drive to create work in the form of new businesses encounter a tangle of red tape as soon as they attempt to formalise their growing business. The regulatory regime, the tax regime, the business licensing regime and the labour laws are all far too complex to be readily managed by a new business. These obstacles are daunting even to someone well versed in the machinations of state. To those who are functionally illiterate they present insurmountable odds.

The result is that nascent businesses continue to operate outside the formal economy. In doing so the state is deprived of income and the nation is deprived of the advantage of vertical and horizontal job creation, economic integration and contribution to the fiscus.

The taxi industry is just one example of a massive industry predominantly outside the ambit of formalised structures. It largely fails to support the very infrastructure upon which it relies. Its associated service industry is equally under the radar; backyard mechanics, panel-beaters and tyre repair agents are the norm. The economic, environmental and social losses are real.

So what solutions do we have to this impasse?

The world economy is a mess. If we are going to meaningfully address our unemployment problem we need to replace empty theories with practical steps to deal with the problem. If we are to build houses we need to encourage communities to do so themselves. Habitat for Humanity has a great model – participate in building five houses for others and then you will get one built for you. This results in more than home construction; it builds communities and imparts skills. It brings people directly into the formal economy.

In a nation with massive unemployment and even more severe ratios of malnutrition, we must encourage peer networks to grow, trade, sell and market food. How many town marketplaces has the state, provinces or municipalities put in place? Where can emerging farmers market their produce? 

The city of Belo Horizonte in Brazil has established kiosks around the city where vendors sell subsidised produce from adjoining districts, improving food security. Local farmers supply 'peoples restaurants' where entire communities can benefit from access to reasonably priced food. 

Instead of marginalising traders as the Ethekweni Municipality appears so keen to do, we need to encourage the reverse, something municipal manager Mike Sutcliffe appears loathe to recognise. Trading forms a backbone of a free economy. The concept that we must adopt westernised economic models to cure all of our ills is misplaced and obscene in its arrogance. Importantly, it has failed to drive sufficient growth to date. Instead of persecuting street traders they should be supported and encouraged. There are endless successful models from South America, India and Indonesia that we could emulate.

We do ourselves a huge disservice by chasing traders off the street at the height of prestigious international events, in favour of big international conglomerates who can afford placement 'rights'. This is nonsense. We all have rights in this land of our birth. Why don't we replace execrable hot dogs and hamburgers with bunnychow, rotis, vetkoek, pap and  wors, gatsbys, perhaps even a smiley on the way to the World Cup venues? Lets get real, this is not Germany or the USA, this is Africa and it is about time we used models from developing nations rather than first world thinking. 

If we continue to attempt to formalise our economy through some complex master plan, secreted amongst dozens of departments that often don't even understand what the others are doing, how on earth can we possibly benefit the man on the street? 

We need to disentangle the red tape, we need to make things simpler, not more complex. We need practical, hands on methods of acquiring and sharing skills, not some theoretical workshops devised by consultants who know nothing of the daily grind. We don't need more laws and regulations, we need less.

If we want a state where the people come first and are beneficiaries of developmental policies, then we need to move away from the madness of our high-faluting ideals and get real. Otherwise reality has a habit of coming back and kicking those who are too arrogant to see it for what it is, hard, in the jack.

Ashton is a writer and researcher working in civil society. Some of his work can be viewed at Ekogaia.

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