Removing unusually high barriers to entry for new business, while lowering costs in network industries such as telecommunications, energy and transport, will counter strong wage, salary and price pressures.
This would, in turn, add to growth in employment and the economy, Reserve Bank Governor Lesetja Kganyago said at the twenty-ninth yearly Labour Law Conference, in Johannesburg, on Wednesday.
He further highlighted that even as economic growth and job creation stall, prices, including for food – fueled by currency shocks – and wages continued to increase above the targeted inflation rate of 3% to 6%, which kept inflation higher than economic conditions warrant.
Average wages and salaries have, over the past five years, consistently outpaced inflation.
From 2011 to 2015, yearly headline inflation has been 5%, 5.7%, 5.8%, 6.1% and 4.6%. Wages and salaries, by contrast, have grown 7.6%, 7.5%, 9.3%, 7.7% and 8.5%.
Employment growth has slowed every year from 2011 to 2015.
“The institutions used to negotiate wage pricing should be reconsidered.
“We have very unusual, even unnatural, labour market dynamics. That implies we have vast scope for improvement. Almost every [other] country on earth has a larger share of its people in work,” he said.
Meanwhile, Kganyago pointed out that while government’s National Development Plan goals of reaching unemployment of 14% by 2020 and 6% by 2030 was “perfectly sensible”, the country was still going in the “wrong direction”.
Both the Quarterly Employment Statistics and the Quarterly Labour Force Survey have shown declines in the number of people working. “Our forecasts suggest this will continue, as the public sector achieves financial sustainability and the private sector only slowly recovers from current lows,” he pointed out.
“But if we’re going to get there, given population growth, we need to create 11-million new jobs,” he added.
Kganyago further noted that the share of the budget spent on compensation had also risen markedly. “South Africa’s government wage bill is now one of the highest among emerging markets – not so much because the State employs an unusual number of people, but because it pays them comparatively well,” he said.
He added that the national finances could no longer withstand this sort of wage growth and government has had to implement a personnel freeze, removing one source of job growth in recent years.