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South Africa and the IMF

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Not IMF's Way
A Letter to the Editor
By Saul Lizondo, Senior Advisor
African Department, International Monetary Fund
Business Day
(South Africa)
October 3, 2005

Neva Makgetla's assertions in "IMF's annual labour drill out of step with reality" (September 23) about the International Monetary Fund's policy advice to South Africa, are misleading. The IMF does not provide the same recommendations in every country. We base our views on careful research, appreciation of individual countries' situations and broad international experience.

In South Africa, the fund has consistently argued that high unemployment is a complex problem, which probably results from several factors. We have always recognised the tragic role of the apartheid legacy, most notably the depletion of skills and entrepreneurial opportunities for the majority of the population. We have long appreciated the important efforts made to address unemployment, including the skills development strategy, public works programme, and measures to support small businesses.

We argue, however, that several additional factors may also contribute to weak employment generation. Centralised collective bargaining stifles small business growth and employment, and cumbersome labour market procedures impose an especially high cost on small businesses. These are plausible reasons why South Africa has not had the small business-led growth seen in many other developing countries. Makgetla's assertion that the IMF does not point to any factors that may impede small business growth is not supported by the facts.

We can all benefit from public discussion of unemployment. But such discussion must surely be based on a faithful representation of all perspectives.




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