The saying is clichéd by now that all roads to hell are paved with good intentions. As that loving mother who spoils her child by making her upbringing too easy will learn: a parent could ruin a child's life out of love. Public policy is no different. A government could ruin an economy and exclude citizens from opportunities with well-intentioned policies. As I sat at the Centre for Development and Enterprise offices in Parktown listening to Prof. Hausmann's public lecture on how South Africa could achieve faster economic growth, it was clear South Africa is a big truck stuck in the mud and will remain so until such time as there has been a major political shift in the country. As I sat in the auditorium, I was stirred to ponder about an assortment of policies pregnant with good intentions yet working to exclude the poor and unemployed from opportunities.
The National Credit Act
This piece of law was passed in 2008 and one of its objectives is to protect consumers from reckless lending and over-indebtedness. But in a country that needs more monkeys jumping to open trees in the forest, this law only works to exclude the poor who do not have access to credit and it impedes business formation. A poor guy with a good business idea will never get credit from the bank because he does not have an expensive property or jewellery to put up as collateral. Should the bank or a friend still extend the loan to him because they trust him or are convinced of the merits of his business idea, this law says that is reckless lending and such an agreement must be set aside and the lender barred from collecting the debt.
Naturally, those with money are encouraged to only lend to those who have wealth to provide collateral for the loans. There is another disincentive to lending your money in general: you are required by law to complete long forms in order to register the credit agreement with a government agency. The natural thing those with money will do is hold onto their money or lend it to other rich people who can provide collateral.
Inflexible labour laws
In 2016, the Free Market Foundation lost a court challenge to the collective bargaining scheme enacted in terms of section 32 of the Labour Relations Act. The FMF missed the mark on the law because judges do not decide policy even in the clearest cases of misdirection by a government. This collective bargaining scheme allows the extension of collective agreements concluded at sectoral level to small businesses who are not party to such agreements and who are not members of such bargaining councils. Some of the objectives of this policy are to protect workers who have no bargaining power and to promote majoritarianism.
In a country with our levels of unemployment, this only entrenches the exclusion of the poor from gainful employment. Small businesses are discouraged from employing inexperienced workers at low salaries because collective agreements to which they are not party impose onerous conditions on them which only serve to drive them out of business. This is an old conundrum of people inside the factory who want an extra R500 to their earnings versus people outside the factory who want to get inside. Our government policy chooses those who want a pay hike over those who want jobs. Prof Hausmann commented on Thomas Pikkety's argument that over time returns to capital outstrip returns to labour thus causing inequality which must be solved by taxing the wealthy. But there are many who want to get employed in the first place. Maybe the problem is not the few businesses we have but the many we do not have. Here again, the policy works to exclude those without work.
The minimum wage
This law will take effect towards the end of the year. No employee may be paid below R3,500 per month. The intentions are obviously good. They want to raise the incomes of the working poor among other things. If you run a small business, you risk punishment for taking on an inexperienced youth at R3,000 per month. Even if he may be willing in order to get his feet at the door of the factory, the law says you better close down your business until such time you are rich enough to pay your employees regulated wages but you will never be rich until you start somewhere with your small business. Here again, government policy works to exclude the poor and unemployed. These are probably not the only policies but they provide evidence of a misguided policy blend working to exclude the poor and unemployed.
The ANC government has this message for the poor and unemployed: you are not our problem.