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Mar 04, 2011

Stringent SA labour laws not main barrier to international investment

Smartman Consultants CEO Tobie Nel discussing labour and employment in South Africa
© Reuse this

South Africa’s stringent labour laws do not necessarily ward off investors, says labour law consulting company Smartman Consultants CEO Tobie Nel.

“Society is driven by demand. Ultimately, if unemployment is high, labour law regulation will be high. However, from an economics point of view, I don’t believe that this will influence investment in South Africa, because investors prefer to consider the availability of resources in the country, as well the profit they will be able to make. Therefore, I don’t think there is substantial evidence to suggest that our overregulated labour laws are scaring investors away,” Nel argues.

However, he notes that the argument about whether stringent labour laws are directly a result of disinvest- ment in the economy has been ongoing.

“Not everyone agrees with this, how- ever, as the South African economy has been growing steadily for a number of years, if one does not consider the recent recession. I have found that corporations and governments primarily look at the opportunities that exist, rather than the problems,” Nel explains.

By way of example, he cites South Africa’s recent invitation to join the Brics coalition of Brazil, Russia, India and China.

“Many consider South Africa too small to be a member of Brics; however, China is looking at South Africa as the gateway to the African continent, and this is a prime example that stringent labour laws by no means influence solid investment and development strategies,” he adds.

International Standard

Nel notes that, as a member of the United Nations International Labour Organisation (ILO), South Africa attempts to comply with international labour standards, which set a benchmark for labour legislation.

However, he questions how efficiently these labour laws are being managed.

He says that section 232 of the South African Constitution stipulates that customary international law is law in the Republic, unless it is inconsistent with the Constitution or an Act of parliament.

“Being a member of the ILO, South Africa participates in international policies. For example, the South African government is aiming to create decent work for all, which is consistent with the stand of the ILO. This is also the underlying objective of the proposed amendment bill, but when one looks at how government went ahead and initiated the proposal, I find it hard to understand why government seemingly didn’t acknowledge certain key institutions, bodies, or persons that are key to this process,” Nel says.

He adds that the South African Society for Labour Law expressed concern that government did not discuss the proposal with the National Economic Development and Labour Council prior to its publication, and questions whether input from the Judge President of the labour court or Commission for Conciliation, Mediation and Arbitration (CCMA) National Directorate was obtained.

He adds that the “effective ban” of labour brokers is also an area of concern.

“Even though the proposed bill does not outright ban temporary employment services (TES), it does remove the incentive for employers to use labour brokers. Generally, there is agreement that managing labour laws to prohibit the use of TES could result in more unemployment,” he says.

Further, he states that it is the prevalence of crime, corruption and political tension in South Africa, that scares investors away, rather than the country’s labour laws.

“Despite investors being somewhat wary of investing in business in South Africa because the legislative framework allows strikes and protests (within boundaries), this is not what ultimately prevents them from investing,” he says.

However, he says that South Africa continually deploys sound macroeconomic policies that seem to be drawing investors, despite the country’s stringent labour laws.

Meanwhile, Nel notes that South Africa’s unemployment rate continues to raise concern. Current unemployment statistics stand at between 25% and 27% as a result of the roughly one-million jobs that were lost during the recession from 2009 to 2010.

He says that, despite investors being wary of South Africa’s high crime rate and its political complexity, the economy continues to recover from the downturn. However, companies that were forced to retrench employees are not yet in a position to hire staff again.

He believes that the country’s high unemployment rate can be reduced through increased foreign investment.

“Unemployment is primarily connected to the economic state of a country. We need investments from overseas companies in all local sectors to grow our economy and create more job opportunities,” he says.

He suggests that, despite the new amendment bills, which propose increased regulation of South Africa’s labour legis-lation, government should focus on making labour laws less stringent.

Nel believes that less stringent laws will give investors and employers the ability to start businesses with more freedom, as companies will not be regulated by an abundance of laws. He says that this will make investors and employers less wary of employing more people, thus creating more job opportunities.

Know Your Rights

Nel says that it is important for both employers and employees to familarise themselves with South Africa’s labour and employment laws to ensure they are prepared and protected in the event of labour disputes.

Further, he says that employers should also make use of labour law consultants when faced with labour and employment disputes to ensure they get the correct advice and information on how to successfully handle a dispute.

“If employers attempt to resolve an employment dispute without adequate knowledge or assistance, they could take the wrong approach, which seldom leads to reaching a mutual agreement with the employee and resolving the problem,” explains Nel.

On the other hand, Nel suggests that employees must also become acquainted with the labour laws and that they should seek the assistance and expertise of unions in the case of employment disputes to ensure that their interests are thoroughly protected.

He notes, too, that there are several technical aspects of administration that pose challenges to both employers and employees.

He adds that the referral of unwarranted disputes to the CCMA adds further frustra- tion, as some cases are merely a result of employees without the relevant knowledge lodging complaints without legal grounds to support the complaint.

Meanwhile, Nel says that the Labour Relations Amendment Bill aims to assign more power to the CCMA, which will enable it to effectively assist employees.

“The amendments will authorise the CCMA to assist parties to serve notices and documents in respect of conciliation and arbitration proceedings. Currently, these are the responsibility of the applicable parties,” Nel explains.

If properly managed by the CCMA, it could prove to be a successful system,” he concludes.

Edited by: Shannon de Ryhove
Creamer Media Senior Deputy Editor Polity & Multimedia
© Reuse this Comment Guidelines (150 word limit)
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