Business Day’s recent front-page lead story might have tricked some readers into imagining they had stumbled back into a pre-Jurassic political age (“Job reservation is on the cards, government confirms”, February 13).
This is a rude awakening for those who thought the apartheid government’s policy menu — on which job reservation was a central feature — had been buried in the rubble of the 1994 transition.
To be perfectly fair though, the demise of apartheid-era job reservation predated the end of the system itself by more than a decade, and indeed hastened its demise. In 1979 the PW Botha government accepted the groundbreaking report of the Wiehahn commission, which recognised black trade unions and, crucially, formally abolished statutory job reservation.
President Cyril Ramaphosa offered in his recent state of the nation response a lecture on the essentiality of the private sector as the creator of three-quarters of the jobs now occupied in the country. In the same remarks, and without a hint of irony, he also quoted with strong approval the aphorism of Chinese leader Deng Xiaoping, “black cat or white cat. If it can catch mice, it is a good cat.”
At the heart of the anti-foreign worker sentiment is a fundamental misconception, one that pervades much of government economic thinking and is at the heart of our hugely overregulated labour market.
It was distilled more than 130 years ago by economist DF Schloss that he termed “the lump of labour fallacy”. It has been updated and indeed critiqued since, but its essential insight remains true: it is a misconception that there is a fixed amount of work in an economy that can be distributed (and redistributed) to create more or fewer jobs.
Just consider the effect of three SA-originating or educated entrepreneurs in the hypercompetitive world of Silicon Valley in Northern California. Elon Musk at Tesla created a company with a current market cap of about $870bn (three times the size of the SA economy), employing 70,000 people. German-born and SA and Namibia educated Peter Thiel founded PayPal (market cap $121bn) and then the proprietary software firm Palantir ($22bn), while his CFO at PayPal was Roelef Botha, who now is a partner at Sequoia Capital (market cap $100bn).
These eye-wateringly huge firms at the frontier of the so-called fourth industrial revolution owe much to immigrants, and to some remarkable SA-originating personalities. Of course, Thiel is an ardent supporter and financier of Donald Trump, whose vow to “build a wall” was not aimed primarily at this cohort but at the lower ends of the labour market.
But as the Brookings Institution noted in a 2017 paper, there is a “positive link” between immigration and economic growth. It found that while immigrants represent about 15% of the general US workforce they account for “about a quarter of the investors in the US, and that over one-third of new firms have at least one immigrant entrepreneur in its initial leadership team”.
The most famous British fermenter of anti-immigrant sentiment was Conservative politician Enoch Powell. In 1968 he railed against the increasing size of the immigrant population, noting: “As I look ahead I am filled with foreboding; like the Roman I see the ‘River Tiber foaming with much blood’. His classical allusion saw his expulsion from the Tory shadow cabinet, but went down mightily well with many working-class people.
While Brexit has made fashionable once expulsion-worthy remarks in the Conservative Party, it is noteworthy that two of the most prominent British politicians nowadays, London mayor Sadiq Khan and health secretary Sajid Javid, are both sons of Pakistani bus drivers, strongly cementing the evidence that the second generation of migrants often enrich their countries of choice.
In SA the top end of the economy has been enriched, literally and in other measures, by individuals from Zimbabwe in particular, from university vice-chancellors and academics to leading employers. Once you legitimise anti-foreigner sentiment at the bottom of the employment ladder, how quickly might it reach the upper rungs?
But neither our home affairs minister nor perhaps even the president is much interested in evidence-based propositions. Indeed, while Ramaphosa peppered his two parliamentary speeches during the state of the nation debate with slogans such as “shared goals” and “a new consensus for change and renewal”, I wonder how many honest conversations he has had with those in the private sector who are the engines of job creation, and retention.
Has he sat down with the leaders and employers in the hospitality and tourism sector, still so enfeebled after the Covid-19 lockdowns, and asked what the effect will be, for example, of legalising the Malema witch-hunt against the restaurant industry? Acquaintances of mine embedded in this sector, which contributed nearly 7% to our GDP pre-Covid-19, suggest it would be “utterly devastating”: more closures, less taxes, greater unemployment.
Of course, it is entirely legitimate to ask why non-South Africans proliferate in some economic sectors and not others. It might, for example, be a consequence of our ruinous education system, which last year managed to produce just 20% of matriculants with a university pass in mathematics, and just 18% in physical science. It could be that foreign workers are prepared to do types of work locals do not enjoy. There are a range of reasons.
Eminent economist Ricardo Hausmann, expert on our economy and interestingly a Venezuelan-born professor at Harvard University, offered this takeaway on a raft of ANC polices aimed at curbing minority participation in our economy: “Know-how can be quickly hired, but it cannot be quickly transferred from one person to another. [It] certainly can’t be extracted like teeth, from the brains that possess it.”
Meanwhile, back at Eskom — battling to keep the lights on — the target to retrench 336 engineers on racial grounds by March 2020 was grimly implemented.
What is economically sensible — even inarguable — often yields to political impulses such as quick-fix xenophobic draft regulations. So much for the “faster economic growth behind an agenda of renewal” that Ramaphosa claimed to place at the heart of his speech. And this was just days after he called on Africa “to speak with one voice”.
The anti-foreign worker policy suggests neither sentiment will survive contact with local realities.
Leon, a former leader of the opposition, now chairs Resolve Communications.
@TonyLeonSA.
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