The Economist is the premier business weekly magazine. It is devoured by thought leaders worldwide, often setting the agenda and shaping opinions of those that matter. So when this magazine writes about South Africa, it matters. Especially when the content is less than flattering. At Biznewz, we’ve been focusing a great deal on the country’s dysfunctional labour legislation. So it was appropriate to publish excerpts from a highly critical article published on The Economist’s website today. – AH
An article published today in The Economist’s Baobab section, carries a stern warning to the SA Government. It needs to be aware that the funding might not always be so easily accessible. Especially not if the country allows its labour situation to continue on its current downward spiral.
Focusing on the consequences of a recently ended strike at BMW, the magazine describes SA as “a portrait of a country that increasingly relies on foreign creditors to plug the holes in its finances yet does little to ensure that this much-needed investment will keep flowing. “
The Economist draws from the recent report on the country by the International Monetary Fund and notes: “The crux of the country’s economic difficulties is an “insider-outsider” complex which affects both jobs and goods markets. It is costly to fire workers even with good reason. The protections afforded to insiders with jobs leave employers less willing to hire in case they turn out to be work-shy or incompetent. Meanwhile outsiders, mostly the young, are locked out of work.”
A surprising conclusion follows: “Business in South Africa is part of the racket. It feigns to loathe costly regulations but in fact red tape makes it harder for job-creating start-ups to challenge established businesses. The IMF notes that the rate of creation and survival of new companies is one of the lowest in the world. This is a sweet deal for incumbent firms, which are more profitable in South Africa than their peers in many emerging markets, including Brazil, China, India and Russia. The lack of competition imposes an additional cost (over forgone jobs) on poor households in the form of high prices.”
