Miller Matola, CEO of Brand South Africa

 
Over the last week, the world’s media has turned its negative attention on South Africa as both the World Bank and the International Monetary Fund are pinning the blame for the country’s slow economic growth on its labour relations environment, highlighting the paralysing strikes that have hurt the mining, automotive and transport sectors, among others in recent times. 

This has been further exacerbated by the much-publicized spat between labour and business in the form of the NUMSA (The National Union of Metalworkers of South Africa) and BMW stand-off.  As a result, the IMF urged the country’s unions to recognize that in the interests of achieving much needed economic growth to safeguard the future of South Africa as an investment destination of choice, then a commitment was needed to lower wage demands. 

Punam Chuhan-Pole, the World Bank's lead economist for Africa, says South Africa needs "less rigidity in the labour market" if it wants to attract foreign investors. 

As the World Bank launched its latest Africa Pulse Report this week, it also highlighted that the industrial relations environment in South Africa will have a big impact on how much of the total annual foreign direct investment into sub-Saharan Africa (estimated at around 40 billion US dollars), will actually flow into South Africa as opposed to other destination countries. 

At a time when South Africa is also experiencing the effects of weak growth on the part of its major trading partners in Europe, combined with a perceived burdensome regulatory environment and continuing infrastructure challenges in the country, the added challenge of labour unrest and protracted wage negotiations are effectively holding back growth. 

The facts speak for themselves – between 2010 and 2012, South Africa’s growth averaged 3 percent, as compared to 4-6 percent in the period between 2003 and 2008.  Ultimately, domestic factors are playing a significant contributing role in the country’s growth performing below that of other global emerging market countries. 

The economic bottom line for South Africa in the global marketplace is that labour strikes have the potential to diminish the long strides taken in recent years to build our country competitiveness and its reputation as an investment destination of choice on the African continent. 

Productivity and a stable labour environment are key determining factors for global investors looking to source a new destination for industrial development or manufacturing projects. 

As South Africa is now a member of the BRICS grouping of nations, it needs to recognize even further that the country’s image, reputation, productivity of its workforce and labour stability are all key determining factors for any new investment in the country. 

The current labour unrest and the negative signals sent out to the global investment community by the NUMSA and BMW row and the negative impact on the country’s automotive sector due to yet another protracted strike, do not help the cause.

Membership of BRICS has the potential to act as a powerful catalyst to stimulate and facilitate development in South Africa, providing access not only to new and developing markets, but also the opportunity to play a significant role in building new and mutually beneficial commercial links for the country's business and industry, and generate new foreign direct investment for key projects. 

If South Africa is to beat off competition from other countries, it needs to recognize that currently, South America, Eastern Europe and the East are hugely competitive and are presenting powerful economic cases for global investment based on their productivity indicators and track records. At a time when South Africa is trying to further cement its place as a competitive member country of this increasingly powerful grouping, it needs to ensure that it sends the right message to the world that it is open for business and is a safe and dependable investment destination.  The time has never been riper for the country to play a strong leadership role in ensuring that we don't lose our competitiveness, whilst at the same time demonstrating to the world that we can be sensitive to decent worker conditions and remuneration.
 
One factor that has been apparent over the past year, particularly in the face of labour unrest affecting key sectors such as the automotive industry and the mining sector, is the overall state of South Africa’s leadership.  If many of the country’s current economic challenges are going to be overcome, then business needs to become a more active participant with an eye on the long-term reputational goals, as opposed to being driven solely by short-term profits. 

Similarly, the unions need to recognize that global economic times are changing and the investment landscape requires a much more competitive approach if South Africa is to continue to attract and retain much needed investment into the country, to both safeguard and grow new jobs.  The prevailing labour relations climate is not in a healthy state and the current round of unrealistic wage demands can only lead to bigger problems for the country’s economy, not to mention its reputation in the global marketplace.

Wildcat strikes, combined with increasing wage demands and growing incidences of violence, particularly in the wake of the Marikana disaster are all contributing factors that inevitably lead to the economy being likely to post only 3% growth this year.  All of this leads to shrinking consumer and investor confidence. 
 
If South Africa is going to realize its full potential and take its rightful place on the global economic stage, and particularly within the powerful BRICS grouping of nations, there is an urgent need for a genuine collective partnership to be formed between business, the unions, government and civil society. 

If the business and investor confidence in South Africa’s future is to be enhanced, and the country is to successfully position itself as an investment destination of choice, then inherent challenges relating to labour and business need to be resolved.  

The National Development Plan and the National Infrastructure Plan are both critical building blocks in terms of creating a confidence-inspiring roadmap for global investment into South Africa.

However, for both of these plans to succeed, it needs the country as a whole, including the unions working together with the business community, to recognize the bigger picture at play. 

This current short-term and short-sighted approach to unrealistic and protracted wage negotiations, strike implementation, and general unrest in important industrial sectors in the country, offers a no-win scenario for South Africa and its citizens in the long-term. 

It is important that for the good of South Africa’s future economic development and reputational standing on the global economic stage, that all role-players representing both the unions and business manage to find common ground and participate fully in the spirit of progressive nation building going forward. 

Only by these role-players recognizing what is actually at stake for South Africa in today’s increasingly competitive global business environment, can the country send a clear message to the world that we are well and truly open for business and an investment destination of choice. 

Critically, though, national interests must be placed above narrow self interest in the quest to ensure that our country realises its full potential; and that we do not squander the opportunities presented by the rise of our Continent.

The author is CEO of Brand South Africa