Small enterprises key to unlocking local economy but stifled by policy
Certain policies, such as those governing wage-bargaining practices, are hampering South Africa’s economic growth, as they often exclude smaller businesses and keep the “economic pie” from growing, says International Monetary Fund deputy MD David Lipton.
Speaking at a public lecture hosted by the University of the Witwatersrand’s Wits Business School on Tuesday, Lipton noted that the current approach to wage bargaining involving big business and labour, served the interests of established business and employed workers.
Wage agreements that use the process of extension to bind entire sectors to what has been agreed, present significant obstacles to small and medium-enterprises (SMEs).
“SMEs commonly produce with less machinery and equipment, which justifies lower pay and wages, [but] have no place at the negotiating table – yet, they have to live with the deals that are struck,” he pointed out.
Lipton added that the process in South Africa not only suppressed competition to established businesses, but also kept low-skilled workers out of the workforce, with the unemployed rendered voiceless.
He also noted that corruption was an “extremely important aspect of the governance issue” that needed to be eradicated as it reinforced the dynamics of economic exclusion.
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