From Gareth Stokes, MoneyWeek editor,

Dear Money Morning Reader,

Do labour regulations make it impossible to fire persistent wrongdoers? Call us naïve – but we believed that criminal misconduct warranted immediate dismissal – even with South Africa’s obsession for procedure. It  seems we were wrong. In a recent Sapa article posted on iafrica.com we learned of a director at Gauteng’s road and transport department being paid a year’s salary to resign. The details of this deal will make your  jaw gape! The suspended official received this lifeline after allegations of his involvement in irregularly awarded tenders was confirmed. In the words of one iafrica.com reader: “Whatever happened to you’re fired? These two simple words made the US economy strong…”

To sweeten the parting ‘gift’ the department of transport agreed not to proceed with any criminal charges against the director. Why the ‘gloves on’ approach? The department decided it would be too difficult to ‘fire’ this employee. “It could not go on and on – it would [have] become very expensive,” said department spokesperson Philemon Motshwaedi. He then issued a statement typifying government’s ‘pass-the-buck’ stance on corruption: “We wish to reiterate that the department will in no way prevent law enforcement agencies from undertaking any process against any and all employees of the department involved in maladministration and corruption.”

This incident makes an absolute mockery of government’s recent call to root out corruption. It also explains why – after a raft of anti-corruption initiatives – South Africa’s progress on the world corruption index has been in the wrong direction. A couple of years ago Jacob Zuma (now President of SA) was head of a so-called moral regeneration campaign. And earlier this week he called for an “inter-ministerial committee to formulate new strategies on dealing effectively with the rapidly growing scourge of corruption!” But Zuma’s call for a strong crackdown on corruption is blighted by the one-sided Shaik corruption conviction and his subsequent decision to appoint Menzi Simelane as Director of National Prosecutions. Your credibility goes up in smoke when you appoint a ‘party man’ as the gatekeeper of future corruption-inspired court action.

It’s time you asked some tough questions about South Africa’s labour policies. While protecting the union worker from money-hungry bosses is commendable these regulations have created a platform from which employees can conduct white collar criminal activities without fear of prosecution or dismissal. Private sector productivity is severely impinged by an overprotected workforce too. Labour costs and productivity are essential to manufactured exports, meaning these policies hurt GDP and the country’s ranking in world trade. Manufacturing as a total of exports jumped from 30% in the 1980s to 63% in 2008. Just imagine the progress if we applied the easy hire – easy fire principle!

The private sector may outperform government on the hiring and firing front, but they have plenty to do to comply with stringent employment equity targets. If government follows through on its threat to ‘criminalise’ directors of companies that fail to comply with these targets, the private sector faces uncertain prospects. Thus far they’ve dismissed their lethargy as a result of the country’s skills shortage – but they’ve done little over the last decade to tackle the problem. What should investors do to avoid the fallout from ongoing government intervention in private business? Some argue that index trackers, such as exchange traded funds, will provide secure long-term returns regardless. MoneyWeek's featured article explores some of the pitfalls. 

Turning to the markets...

The JSE all share index advanced 0.28% on Friday. The gold mining index slipped 2.99%. Resources added 0.16%. Banks and financials traded flat, up 0.04% and 0.4% respectively. Industrials bounced 0.75% and the platinum mining index jumped 0.5%.

London's FTSE100 climbed 0.18%. The Dow Jones collected 0.22% and the Nasdaq closed up 0.98%.

Tokyo's Nikkei gained 1.36%. Hong Kong's Hang Seng lost 0.62%.

Brent crude is currently trading at $77.86 per barrel.

Spot gold's trading at $1,158.60 and platinum was last quoted at $1,440.00.

And here's how the rand is performing against the major currencies:
R/$7.43
R/₤12.26
R/€11.08