South Africa needs to pursue productivity-linked labour deals, and not inflation-linked settlements, says Investment Solutions chief strategist Chris Hart.

He says South Africa requires a policy that will see labour mimic the behaviour of highly productive countries, such as Germany or Japan, and not cheaper labour countries, such as China and India.

He says Japan is able to retain its manufacturing sector next to a cheaper labour source such as China, because productivity is increasing, along with labour costs.

Hart says it is essential to allow the price of labour to rise in South Africa, but, in doing so, to also drive down labour unit costs by improving productivity among workers, as well as management.

Labour costs in South Africa are not particularly high by global standards, as they are cheaper than in the US and Europe, but more expensive than in China and India.

“We must be careful to compare the price of labour with the value of labour.”

He regards prolonged and continued labour action as a “serious threat” to South Africa.

In specific reference to the automotive industry, he says this sector of the local economy is “blessed” with dealing with “the worst union you can have”.

He regards the leadership of the National Union of Metal-workers of South Africa as “archaic”, still fighting “the battle of the Cold War”.

“They are battling the system, not any company.”

Hart regards South Africa’s automotive sector as successful, based on the fact that vehicle manufacturers remain in the country, despite events such as the recent seven-week strike in this industry.

“Our blessing is that our backyard is Africa.”

Hart says many African countries show potential in growing their vehicle populations, with South African-made vehicles well positioned to gain market share on the continent.

“After being in the worst neighbourhood in the world, we are now in a growth region.

He warns, however, that none of the local sector’s production decisions are taken in South Africa, with Germany, Japan and the US deciding whether it remains prudent to assemble vehicles in South Africa.

Hart also has praise for the Department of Trade and Industry’s support policies for the local automotive sector, but little for the department itself.

He says support policies are often used to compensate for the hindrances created by government, noting that it is important to first remove the hindrances to effective business.

Government often “ties your legs together, and then offers a wheelchair as an incentive”.

Hart also notes that few parliamentarians understand eco- nomics to the degree they should, with “the level of economic discourse in the country weak”.