This week, South Africa’s political and business elites gathered in Cape Town for the News24 ‘On the Record’ conference to discuss the country’s number one crisis: unemployment. The conference explored ways of generating 5 million new jobs in ten years. A noble goal, but without acknowledging some fundamental realities, South Africa will fail to make a meaningful dent in unemployment.

Misdiagnosis

South Africa’s President, Cyril Ramaphosa, delivered the opening keynote on the morning of the first day.

In his speech, Ramaphosa placed much of the blame for unemployment on South Africa’s apartheid past, where, he said, black South Africans were consigned to being “hewers of wood and drawers of water”. In the next breath, he urged South Africans to “return to the land”.

This tired analysis could easily have been lifted from a Marxist sociology textbook from the 1960s. The underlying sentiment was that employment is somehow exploitative and only beneficial to holders of capital. To this point, the President bemoaned the ‘concentration’ in South Africa’s economic structure, which perpetuates ‘economic exclusion’.

We do have ‘economic exclusion’ in South Africa, but it is precisely the labour market interventions that the African National Congress (ANC) has made over the past three decades that has created that exclusion.

The late Tito Mboweni once admitted that the ‘sins of his youth’ when he was Minister of Labour in the 1990s had made his later role as finance minister that much more difficult.

Many of these ‘sins’ are still with us, including the Basic Conditions of Employment Act, the Labour Relations Act, the Employment Equity Act, and Mr Ramaphosa’s own not-so-original sin: the National Minimum Wage Act.

This legislation and associated regulations are ostensibly designed to protect workers’ rights but end up passing a significant compliance and cost burden to employers. Organised labour tends to benefit from these protections – hence why the Minister of Labour and Employment is usually a unionist – but so too does big business.

The result is a corporatist compact that entrenches the status quo.

One of the little-discussed, but highly damaging features of South Africa’s labour market is the extension of collective bargaining agreements to non-parties. This gives trade unions and large employers the power to set sector-wide wage ‘determinations’, which are subsequently passed on to smaller employers, who must then pay the newly agreed rate. That they were not party to these agreements in the first place is irrelevant to the labour inspectors. Comply they must.

The result is a hidden opportunity cost of thousands of jobs that were never created in the first place. Hence, high unemployment. Very high.

While recent data suggests an improvement of 0.5% in the fourth quarter of 2025, the official unemployment rate still sits at an uncomfortable 31.4%, keeping South Africa’s as one of – if not the highest – formally recorded unemployment rate globally.

There might be many millions of South Africans working in piecemeal, informal jobs not recorded by the official data. We should celebrate those informal traders and hustlers who pursue their vital economic interests despite facing intimidation and harassment from officials and municipal police.

But whichever way you look at it, there are too many people in South Africa who are without work.

Growth = jobs

The President also made some telling remarks about how he views economic growth.

“We know what the problems are; we are not fumbling in the dark,” he said. “But growth on its own will not bring millions from the margin into the fold. It will take time."

I beg to differ. Under Thabo Mbeki, when economic growth reached 5% for three consecutive years in the mid-2000s, job creation was on the rise. You wouldn’t have known it at the time, though, as much of the local media obsessed over so-called ‘jobless growth’.

Jobs are not things that policy makers ‘create’. Jobs are the byproduct of increased economic production. Only by removing obstacles to growth like Black Economic Empowerment (BEE) and Expropriation Without Compensation (EWC) can we ensure greater levels of job creation.

South Africa should pursue growth without conditions, whether ‘inclusive’ or otherwise. This growth should not be measured, as many do, in government spending, but job creation, business activity, and private investment.

Skills pay the bills

The President also spoke about the need to reform South Africa’s skills development system, and the failed Sector Education Training Authorities (SETAs).

“The current SETA system has not delivered as expected and needs to be replaced with a more effective, fit-for-purpose model – one that combines theoretical and practical training, similar to systems used in countries like Germany and Switzerland," he said.

That the SETAs are broken was a candid admission from the President, and he is correct. The SETAs must be scrapped entirely, not merely ‘reformed’.

Levies collected by the SETAs ostensibly for the purpose of skills development and training in different sectors are often misspent on programmes that are not aligned with market needs. Often funds are allowed to accumulate in vast pots without being dispersed, sometimes to the tune of billions of rands. These ringfenced funds are ripe for abuse and corruption.

Even if they are not formally corrupt, the waste and inefficiency that SETAs breed are a handbrake on the economy. I once worked in an office park where one of the larger SETAs was a tenant next-door. Hardly a day would go by without seeing the delivery of large buckets of Kentucky Fried Chicken or bouquets of flowers.

Ultimately, the SETAs have created jobs for the bureaucrats who administer these systems and not where they are needed most: in the productive economy.

The state has little business in formal skills training, particularly in technical skills which are highly specialised and dependent on the vicissitudes of the market. No central planner in the Department of Labour and Employment or the Department of Trade, Industry, and Competition can determine what the many diverse and complicated needs of an economy are or should be.

I recall hearing an anecdote about the Technical and Vocational Education and Training (TVET) colleges, where students in a mechanics course were instructed on how to fix an automobile. The only problem was that the vehicle they used for the practical tests was 30 years old and no longer common in the South African market. You might graduate with a technical diploma, but whether you can repair an actual car that people drive is not so clear.

Real skills training happens on the job. Even my lawyer friends admit that they learned more about law from their first few weeks of legal practice than they did throughout the entire duration of their LLB degree.

Opting out

Learning-by-doing is the philosophy behind the Job Seeker’s Exemption Certificate (JSEC), the Free Market Foundation (FMF)’s flagship labour policy initiative.

An idea first developed by FMF President, Eustace Davie, the JSEC would, if implemented, enable job seekers to voluntarily exempt themselves from South Africa’s onerous labour regulations, empowering them to freely contract with employers on terms mutually agreeable to both parties.

As FMF Policy Officer, Zakhele Mthembu, argued in a recent paper for the FMF’s Liberty First series, the JSEC would be a temporary, non-renewable measure that would enable new entrants to the job market to learn on the job through lateral skills transfer thus improving their future employment prospects.

Eligible applicants would have to demonstrate that they have been unemployed for six months or longer to qualify. The JSEC would be valid for two years and would act as an indirect subsidy to the hiring company by reducing its compliance costs.

The beauty of the JSEC is that it would not require a wholesale revision to South Africa’s onerous labour law legislation (although that would be better). It’s time to embrace some bold solutions to South Africa’s perennial problem.

Ansara is CEO of the Free Market Foundation.