Strikes risk huge job loss

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South African Reserve Bank governor Gill Marcus yesterday warned South Africa risked major job losses if the trend of violent wildcat strikes and high wage settlements continued.

Speaking at a packed Rhodes University lecture theatre, Marcus said the outlook was “deteriorating rapidly” as investors moved huge chunks of cash out of the country leading to a heavy fall in the value of the rand against the dollar.

Marcus said until a few weeks ago large amounts of investment money poured into the country but this had changed after strikes and waning investor confidence led to R10-billion of outflow equity leaving South Africa recently – including R5.6-billion on Monday alone.

She said a negative consequence of the wave of strikes crippling the country was that it could lead to a shift of investor confidence – with many no longer eyeing South Africa as a “destination of choice” to put money into.

“If we want to nurture a stable democracy, we need to behave in ways that will create trust in our political, social and economic institutions and between social groups,” she told a mixed-bag audience of school and university students, academics and businesspeople.

“Such trust cannot be demanded, it needs to be earned through appropriate actions and behaviour.

“During the current difficult times that we are experiencing in our country, the building up of trust takes on even greater importance.”

Pointing out how the short recession of 2008 had resulted in more than a million job losses, Marcus – who was actually speaking on the crisis of trust in the banking sector of advanced economies at the acclaimed Rhodes University Business School strategic conversation series – said creating jobs was critical to growing the South African economy.

She said the recent “volatile situation” created by increasingly violent wildcat strikes – which started two months ago in the mining sector and spread to the transport industry – were contributing to a “vicious cycle” of currency depreciation, slower growth and likely increased unemployment.

But it was not all doom and gloom, and Marcus explained that South Africa’s banking institutions remained “sound and well capitalised” – unlike advanced economies in Europe and the United States, which had to be financially bailed out in order to “prop up the system” after investors rapidly lost trust in the way they worked.

“The importance of trust in the financial system cannot be over-emphasised, because without it the financial system breaks down, and without an effectively working financial system the economy will not operate effectively.

“A lack of trust in banks or in financial markets can undermine the system as a whole,” she warned.

Marcus said the global nature of the current financial crisis gripping the world economy was indicative of the need to come up with global solutions to the problem.

She said there needed to be a reversal of lax global regulatory policies that emerged in the years preceding the problem but added there were always concerns the regulatory pendulum would swing too far in the other direction.

“There is the danger that their implementation may further impede the slow global recovery.” —

Writer: David MacGregor

  • This article was published on the Daily Dispatch online.