OECD puts holes in Asgisa's employment programme
July 16, 2008
By Ethel Hazelhurst
Johannesburg - An effective alliance between big business and organised labour is keeping the poor and unemployed out in the cold.
This is the message in the first report on South Africa by the Organisation for Economic Co-operation and Development (OECD). The "economic assessment" was released yesterday by the secretary-general of OECD, Angel Gurria.
South Africa has worked closely with the 30-member organisation, which helps governments to co-ordinate domestic and international policies. It is a member of the OECD's development centre.
The organisation identified flaws in the accelerated and shared growth initiative for South Africa (Asgisa), the government's blueprint for cutting unemployment to below 15 percent by 2014 and reducing poverty.
It said Asgisa neglected competitive issues that it identified as critical to economic growth and job creation.
And it urged regulatory reforms. "South Africa's overall burden of product market regulation is heavy by OECD standards, and state ownership and interference imposes high barriers to entry," says the report.
It adds that a lack of competition in "network industries" is "impeding their performance, and this has negative spillover effect" on the rest of the economy.
It praises "macroeconomic prudence", which it says will make it easier to tackle the legacies of apartheid. But it adds that since development strategies are intended to improve the lot of historically disadvantaged black people, the outcome has been disappointing.
The report refers to the "emergence and persistence of high levels of unemployment for less skilled young blacks, together with the continuation of widespread poverty and widening inequalities".
It identifies inconsistencies and anomalies in Asgisa.
An example is the contradiction between proposed industrial policy and the need to enhance competition.
The former preserves "the apartheid-era pattern of protected national champions insulated from foreign competition" and enjoying high mark-ups, the report says. It urges more emphasis on competition, saying trade openness has led to increased competitive pressure and helped productivity, but a gap remains.
It blames "weak product market competition in some sectors" for the fact that some of the labour force is excluded from employment altogether, while "employed workers are on average productive and well-paid compared to those in middle-income countries".
The anomalous situation has been created because businesses face weak competition in some markets, earning mark-ups that make it possible for them to pay wages above the competitive level. Because strikes are costly, it is worth their while to pay premiums.
The OECD argued that if returns fell, wage premiums would be affordable. The outcome would be lower wages and higher unemployment.
The existence of the premiums is responsible for the low levels of labour utilisation - in other words, unemployment.
These low levels of employment are in turn responsible for the large gap in gross domestic product per capita between South Africa and most advanced economies.
Another anomaly identified by the OECD in Asgisa is the emphasis on the government, which is at odds with the recognition that its failure in administration and co-ordination capacity is one of the constraints to achieving growth.
The report also criticises Asgisa for its insufficient focus on education.
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