Spend a week driving around South Africa and the irony in the government’s celebration of International Workers’ Day last week stands out. In every urban centre there are street corners where scores of young men stand waiting to be picked up for a day’s work. Public works programmes are prominent, often featuring large crowds of people leaning on their shovels or brooms watching a colleague weed a road verge or sweep a street.

The data bear out the irony. If you think the official 30%-plus national unemployment rate number is high, just read the next sentence. Among young people that rate rises to above 50% and among young black women it rises again, to above 70%. Those are astonishing figures of such very high levels of formal economic exclusion that it is remarkable to think that South Africa has not yet slid into some violent revolution.

All the more so when you consider that the global rate of unemployment for this year is estimated at just below 5%.

Why no revolution? Well, there are more people who receive welfare grants now than those who work, which means that everyone has quite a lot to lose if the country goes to pot.

Government communications around the day were careful to skirt the contradiction between the celebration and the data, justifying the day instead as a commemoration of the fight against apartheid. In a statement, the government said that, “Originally born from the protracted struggle for workers’ rights and social justice of the late 1800s, Workers’ Day has been an international holiday in many countries since 1891. The holiday serves both as a celebration of workers’ rights and as a reminder of the critical role that trade unions, the Communist Party and other labour organisations played [in the] the bitter battle against Apartheid in which trade and labour unions played a key role”.

There is something skulduggerous in that, as if the struggle for freedom and the millions of men (they are mostly all men) sitting on those street corners (or the crowds of public works beneficiaries leaning on their shovels) could somehow be separated from each other.

The statement also went further to say that the day celebrated the achievement of “the long road toward fair employment standards”. That is just closing your eyes and pretending reality does not exist.

To a very great extent that is the government’s approach to much of the economy. Statements of revolutionary intent that run into the hard wall of economic reality, with, as in the case of the celebration of Workers’ Day, the statements being repeated year in and year out.

Can the deadlock not be broken?

It has been popular to think that South Africa’s labour market is too heavily regulated, but that might only be half true. The horizontal application of bargaining council agreements has certainly contributed to stunting employment, as has South Africa’s difficult hiring and firing regime, especially when read against what the school system produces in terms of marketable skills. Small firms without human resources and legal departments struggle to handle the administrative costs, while large firms use bargaining council agreements to smother competition from their smaller peers.

The national minimum wage, however, the baseline of labour costs, sits at around R5 500 per month. Could it viably be lower? Well, assume a person has to spend R100 a day on transport to and from work (not far-fetched, given South Africa’s urban geography), that works out to almost R2 000 a month, leaving just over R3 000 in earnings. There is not much room to cut wages before that number becomes unviable or at least falls below what a household might more cost-effectively earn in social grants.

The government’s own Expanded Public Works Programme exempts itself from that minimum and sets the wage floor at roughly half that it requires of the private sector (not quite as far down that “long road toward fair employment standards”), but in many cases poor people simply walk to those jobs and hence don’t have transport costs.

Also, technology has helped South Africa’s businesses adapt to rising labour costs, as have market forces. A wandering albatross remarks that in his industry labour was historically so cheap that it was poorly managed and to some degree therefore wasted. As minimum wages lifted that wastage became unaffordable, so labour was better managed, keeping firms viable.

Cutting nominal labour costs is not really a way out then.

So what is?

Fixing education would be a good start, but the state, both in ANC and DA guise, appears unmotivated to do that, with the DA essentially just continuing to administer what the ANC was administering before the DA joined the Cabinet. The big bold idea of selling government schools to communities for R1 and then allowing those to administer them via a voucher system, thereby placing parents in charge of schools – the obvious way out as it short-circuits unions and bureaucracy – is nowhere to be seen. Even if it was, it would take years to produce a crop of graduates.

Dealing with the horizontal application of bargaining councils would help. So would easing hiring and firing, and some of this is belatedly happening.

The most practical solution would be to raise the demand for labour by raising the fixed investment rate and therefore the rate of economic growth. Do that and many firms, incentivised to invest, will find a way through the regulatory quagmire laid by lawmakers and then do the skills training that the state has failed in themselves. Firms are good at that sort of thing. Raising the investment rate should not be so hard, because at just 15% of GDP it is very low, about half the rate of South Africa’s peers.

An estimate seen by this newspaper is that if the investment rate lifted to 25% then the unemployment rate would fall by two thirds over 20 years even in the absence of labour law reforms.

The reason why it is low is that South Africa taxes investor capital on arrival via what it calls, again an irony, empowerment policies. The effect, on top of everything else, is to make the return on capital invested too low to justify that investment. A risk made worse by the threat to expropriate that investment.

The practical thing to do, therefore, it would seem, would be to stop taxing capital. That will increase fixed investment levels and growth and thereby incentivise firms to take on more labour despite the obstacles the state puts in front of employers.

So why not do that? Because the empowerment racket is too strong a lobby to break. The premiums that connected firms stand to earn as intermediaries, and the political heft they wield, is greater than the incentive to reduce the unemployment rate.

That’s the final irony, as the unemployment rate is the central driver of the ANC’s diminishing electoral performance – even as the ANC remains the primary political impetus for the empowerment regime. And so, in a sense, the thing starts to eat its own tail. Empowerment reduces investment, which increases unemployment, which reduces ANC support, which in turn ratchets up empowerment regulations. It is a destructive cycle in which that party ultimately suffers the biggest losses – losses it seems blithely unwilling to staunch.