Red tape, minimum wage strangle economy - FMF

Temba Nolutshungu, director of the Free Market Foundation. (Rusana Philander)
Temba Nolutshungu, director of the Free Market Foundation. (Rusana Philander)

Cape Town - The government should take a serious look at the red tape curtailing the financial services sector, which is the lifeblood of the economy, the Free Market Foundation urged.

The FMF singled out the Financial Services Board as one of the institutions impeding the operations of the financial services sector. 

“This sector is the lifeblood of the economy and the FSB is compromising the global competitiveness of this crucial sector of the economy," said FMF director Temba Nolutshungu.

"The FSB keeps piling up regulations, seemingly ad infinitum. While they rationalise all this on the basis of protecting the interests of the consumer, regulations have cost implications. Complying with onerous regulations raises the cost of doing business in South Africa,” he said.

Nolutshungu also highlighted the proposed minimum wage as a challenge that will rather hamper than stimulate job creation.

Instead of considering national minimum wages intended to raise the wages of people who already have jobs, government should be giving its full attention to creating conditions that will lead to an increase in the demand for labour, said FMF director Eustace Davie.

In an article published on the FMF website Davie said onerous termination requirements, minimum conditions of employment, compulsory minimum wages and other regulatory conditions imposed on employers, all serve to consign some people to the ranks of the permanently unemployed.

This is because the sum total of their wages and the costs to the employer of complying with the labour regulations exceed the economic value of their expected production, he writes.

Nolutshungu explained evidence shows that the most vulnerable sector of the labour market will again be the young, unskilled and inexperienced youth.

"This occurs because some businesses will not be able to pay their entire workforce the arbitrarily determined minimum wage. At the prospect of the minimum wage, one can be sure that some businesses may already be planning to mechanise as much as this may be feasible. This would be at the cost of labour at a time when we have over 8.2 million people unemployed in the country,” he said.  

Nolutshungu also pointed out that the state’s bailouts of parastatals are a huge cost to the economy. “Over the years, it has cost the taxpayers billions of rands to prop up failing state enterprises such as South African Airways and Eskom." 

He said the government should stop "tinkering with Eskom... by inviting partial participation by the private sector" and instead "sell the entity off to private interests, which would be a great relief to taxpayers".

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