Since the departure of Thabo Mbeki, South Africa’s economy has been in steady decline, struggling to create meaningful employment for its citizens. Economists often attribute this to a lack of foreign direct investment, but I see it differently.
South Africa has a low population economy, which creates a strong demand for labor. While South African companies are in desperate need of human capacity, the high cost of hiring makes it almost impossible for them to absorb job seekers.
South African employees often command salaries above the market rate, effectively locking unemployed individuals out of the job market. This failure to absorb employees leads to lower production rates for companies, ultimately resulting in a lower GDP due to poor output. In addition, reduced production of goods and services contributes to inflation, which is exacerbated by excess cash in relation to limited availability of goods.
To address these issues, South African economic stakeholders must urgently take measures to tackle inflation and create employment.
Here are some recommendations:
Government
Reduce the Cost of Living: Revitalize the railway system to lower transportation costs for workers.
Tax Incentives for Remote Work: Provide tax breaks to companies that promote remote work, thereby reducing the costs associated with commuting.
Unions
Reevaluate Wage Demands: Trade unions should recognise that high wages can lead to lower employment rates. By pushing for excessively high wages, unions may inadvertently contribute to inflation and exclude job seekers from the market.
Employers
Cost-Effective Work Arrangements: Employers should implement measures to make it more affordable for employees to come to work. This could include promoting remote work and establishing centres in townships and high-density residential areas.
By addressing these factors, South Africa can create a more favourable environment for job creation and ultimately combat the detrimental effects of inflation on employment.
SEPTEMBER 2024
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