Any form of ban on labour brokers will destroy jobs - Herman Mashaba

FMF chairman says a substantial number of workers are placed in their first jobs by these firms (June 10)

Unemployed people need the services of labour brokers 

Instead of destroying jobs through unwise labour legislation, the government should be exploring every possible way to increase the demand for labour. In order to increase that demand, South Africa needs high economic growth. Such growth has to come from the private sector; from small and large businesses finding new markets and increasing their efficiency.

Any form of ban on labour brokers will destroy jobs and increase the desperate situation of people who cannot find jobs. Unemployed people face great difficulties in finding jobs. Labour brokers provide a valuable service in finding employment for them. A part-time job through a labour broker might not be the most favoured option of a job-seeker but it is certainly a great deal better than long-term unemployment, which results in a loss of earnings, self-confidence, employability and an opportunity to learn on-the-job skills.

There are an estimated one million labour broker workers in South Africa whose jobs would be endangered by the proposal of ANC members of the Parliamentary Portfolio Committee on Labour to change the Labour Relations Act definition of temporary employment from "six months" to "zero months", which would effectively end labour broking. The office of the ANC Chief Whip, Mathole Motshekga, issued a statement that the portfolio committee had not taken any such decision but we do not know for sure whether they will go ahead and ban brokers.

The majority of labour broking firms are individually owned, about one-third by women. According to a CCMA report, labour brokers account for a very small percentage of disputes relative to the number of workers they place. A substantial number of workers are placed in their first jobs by labour brokers, which reveals that the brokers are an important link between job-seekers and employment.

Some recent events have been very disturbing, not only to the general public in the country, but also to foreign observers. Against the background of the high unemployment rate and the fact that SMEs offer the best chance (as identified in the National Development Plan) to absorb the unemployed, it was totally unbelievable that the Department of Trade and Industry came out with a totally unnecessary and counter-productive licensing Bill that would increase the red tape and costs faced by small firms and reduce their ability to employ labour.

The negative policy shock on licensing was swiftly followed by the report that the ANC members of the Parliamentary Portfolio Committee on Labour are in favour of changing the labour legislation to ban labour brokers. The Licensing Bill and the controversy over labour brokers leave the average observer with the conclusion that too many government decision-makers have no understanding of how businesses or economies function. As a result they take policy decisions that harm businesses, workers and consumers.

How many politicians and government officials have taken the trouble to speak directly to labour broker workers to discover why they make use of brokers and do not approach employers directly? Or perhaps to find out how many former labour broker workers moved on to become permanent employees, and even to hold senior positions in labour unions? The racial mix of labour broker workers is much the same as the population mix. Almost three quarters of their contracts are terminated because the workers have found permanent employment. The one million workers under contract support at least another two or three million dependents so the members of the Parliamentary Portfolio Committee, in making their recommendations to Parliament regarding the role of labour brokers, should bear in mind that the welfare of three or four million people could be at stake.     

Government should recognise that it has the task of creating an economic and regulatory environment that encourages firms and individual investors to tackle new projects and increase their production of goods and services. Even if the world economy is struggling, local pessimism can be replaced by optimism if government makes the correct policy decisions and takes steps towards creating a positive environment.

Unfortunately, recent government plans and policy decisions have displayed an astonishing disregard for the depressed world investment climate, the disturbingly large unemployment numbers in South Africa, the requirement to make this country an attractive investment destination, and the benefits that could be achieved from a changed attitude towards the private sector. They persistently ignore the fact that the private sector produces all the goods and services, provides all the jobs in the productive sector, and pays all the taxes on which government relies to carry out all its activities. It is alarming that so many spheres of government wish to bite the hands that feed them. It makes no sense whatsoever.

The World Economic Forum's Global Competitiveness Report 2013 places South Africa 52nd out of the 144 countries measured on its Competitiveness Index. Unfortunately South Africa is a country of extremes, being placed 1st in such categories as auditing reporting, efficacy of corporate boards, and regulation of securities exchanges, but with extremely low scores in other critical areas. Some of the poor scores (out of 144) are: Co-operation in labour-employer relations (144), Hiring and firing practices (143), Quality of science and math education (143), Flexibility of wage determination (140), Quality of the educational system (140), Pay and productivity (134), Business cost of crime and violence (134), Burden of government regulations (123).

The source of our worst economic problems is revealed in the fact that South Africa is placed 144 (last) in the category "Co-operation in labour-employer relations". Employers and employees are not enemies. In a firm, they make up a team to compete against other firms for the business of consumers. Labour unrest is the result of a regulatory playing field that is not level and is to the detriment of all concerned as it does not take into account economic realities.

Given normal peaceful conditions, the teams that are most efficient in providing what the consumers want will prosper more than those that do not. The rigidity of the labour market is reflected in the poor scores in the other labour-related categories, the poor scores for education reflect how the education system is letting down our young people, crime and violence is undermining confidence in investment and business, and the ever-increasing burden of government regulation is making a bad situation even worse. Job seekers, who need the services of labour brokers, should raise their voices in defence of the brokers.    

Statement issued by Herman Mashaba, Chairman of the Free Market Foundation, June 10 2013

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