Responding to questions at business breakfast organised by the ANC's Progressive Business Forum on Sunday on the sidelines of the party's electoral conference in Mangaung, Davies said the country could simply not compete with the "sweatshops of the world".
"If you're talking about lower wages and relaxed labour laws, South Africa simply can't do that," he said.
Davies argued South Africa's organised labour movement would also prevent such a move from happening.
"As we have seen in the past year, that is the reality of Marikana, that is the De Doorns of this world. We simply don't want to head in that direction," he added.
Debate over direction
Over 4 000 delegates from branches around the country have converged on Bloemfontein to debate the policy direction the ANC will pursue over the next five years, as well as elect new leadership for the ruling party.
In the mid-morning delegates began queuing to enter the conference marquee ahead of the ANC's political report that will be delivered by president Jacob Zuma.
Zuma will square up against his deputy Kgalema Motlanthe for the presidency of the ANC.
Opposing factions were quick to show their support for their chosen candidate for ANC president. Supporters of the incumbent danced and sang his name while thrusting a two finger peace sign, indicating a second term for Zuma.
Motlanthe's supporters also danced and sang, but rolled their index fingers over one another — the sign for substitution in football — as sign of their wish for a change in leadership.
Due to get under way at 9am, Zuma's address is running late and is due to now start at around midday.