Call to change tax not labour laws, to create employers rather than jobs
29 August 2012
Posted by: SAIT Technical
By Nick Hedley (Business Day)
CONTRARY to common perceptions, South Africa's labour laws are not to blame for the country's persistent unemployment problem, and the government's focus should be shifted to small business creation as the driver of employment, says Chris Hart, chief economist at Investment Solutions.
Between 1985 and 2005, 90% of all new jobs in South Africa were created by small, micro and medium companies, according to a report by Trade and Industrial Policy Strategies for the Department of Trade and Industry. The sector is widely regarded as being the largest creator of jobs within economies.
Mr Hart said at a Johannesburg Chamber of Commerce and Industry and Xigo media briefing on Tuesday that, despite having rigid labour laws, skills deficiencies and poor infrastructure, Brazil had managed to reduce unemployment throughout the financial crisis, because of the growing small business sector.
"In South Africa we talk about job creation but never about employer creation,” he said.
Mr Hart said the government's plans to create 5-million jobs would still leave 10-million unemployed, and a "radical policy change” was needed to create 2-million to 3-million small businesses, which could employ 15-million people.
It was up to the government to create a more suitable environment for the sector, which was usually funded through savings, and Mr Hart said South Africa's current tax policies made it difficult for people to save.
"We are taxing seeds, not the harvest,” he said, and the regulatory environment discouraged investments in small businesses.
Mr Hart criticised the Democratic Alliance's (DA) current jobs campaign, which failed to address the issue of household savings despite the party's claims that its policies could achieve 8% growth in the country.
Because of this, the DA was relying on "magic wand stuff”, he said.