Dave Steward on three factors that have contributed to the current state of affairs

WORKERS DAY

Workers Day - earlier this week - provided us with an opportunity to assess the state of employment and labour relations in our country.

The picture does not look good.

According to StatsSA's Quarterly Labour Force Survey for the 4th quarter of 2013 unemployment was at 24,1%. If one includes discouraged work-seekers the unemployment (expanded definition) rate jumps to 34%. However, even these statistics do not reveal the whole picture. The bottom line is that our labour absorption rate of only 43,3% means that only 43,4% of people of working age (15 - 64) are in employment. This compares with labour absorption rates of more than 60% in most advanced societies. The labour absorption rate among black South Africans is only 40,1% compared with 63,1% for whites.

Unemployment rates also vary significantly between population groups. Among black South Africans it is 27,1% (38,5% - expanded definition); among Coloureds 23% (26,8%) ; among Indians it is 12,5% (17,1%) and among whites it is only 7,2% (8,4%).

According to StatsSA, 3,728 million South Africans (registered to pay tax) belong to trade unions and 8,95 million do not. Of the unionized workers about 2 million belong to Cosatu - after the defection of NUMSA and its 290 000 members.

South Africa's labour relations are generally regarded as being among the worst in the world. In the World Economic Forum's Global Competitiveness Report South Africa's cooperation in labour-employer relations was the worst of the 148 countries that were surveyed. Its hiring and firing practices were the second worst. It was in 144th position in terms of flexibility of wage determination and 142nd with regard to pay and productivity.

Potential investors cited our ‘inadequately educated workforce' and ‘restrictive labour regulations' as the most problematic factors for doing business in South Africa. Together with the Marikana incident in 2012 and the current AMCU strike -which has crippled the platinum sector for three months - the signal has gone out to all and sundry: be very wary of investing in South Africa.

Three factors have, I think, contributed to this unhappy state of affairs.

The first is that Cosatu has been captured by the South African Communist Party. At its 9th Congress in 2006 Cosatu adopted "an official position that rejects the separation of the NDR from socialism and asserts that the dictatorship of the proletariat is the only guarantee that there will be a transition from NDR to socialism." At its 5th Central Committee meeting in June, 2011 its president S'Dumo Dlamini unambiguously spelled out Cosatu's position:

"We want to make it clear that COSATU may be a federation of unions but it is a federation of a special kind: We are a Marxist-Leninist formation not in words but through our commitment to the struggle for socialism and in that context we encourage our members to fill the front ranks of the SACP and we subject ourselves to the discipline of communists. We accept the SACP as our vanguard towards the struggle for socialism. It is for this reason that we will do anything within our capacity to strengthen the SACP."

This does not mean that Cosatu members necessarily support the SACP. In a 2012 survey by Cosatu of trade union attitudes approximately 10% of unionists said they supported the DA. More than 25% of Cosatu members reported that they were active in their local ANC branch - but only 6% said that they were active in SACP branches.

Cosatu's radical orientation has far-reaching implications for labour-employer relations and may help to explain why, according to the WEF, we fare so badly in this area. The simple reality is that communist trade union leaders do not accept the right to existence of employers and of business owners. In a radio debate that I had last year with Irvin Jim of Numsa, he admitted that his goal was to establish a communist state in South Africa and that he viewed Cuba as the model toward which we should strive.

The second factor that has led to the parlous state of labour relations is the evident lack of any understanding of the realities on which modern economies are based. There seems to be very little grasp of the need to match wage increases with increases in productivity. Radicals imagine that they can raise minimum wages in the agricultural sector by 52% with no effect on employment levels. AMCU thinks that it can demand an entry level monthly wage of R12 500 without any reference to the economic constraints of the platinum sector.

Their demand on a PPP basis is about US$ 2 000 which is the average wage in first world countries like Israel and Poland and double the average wage in competitor countries like Chile and Malaysia. Radical labour commentators blandly call for a national minimum wage of R4 500 without considering the impact that this would inevitably have on employment levels.

That background noise that you hear is the sound of mine owners, farmers and business owners mechanizing their production processes as fast as they can. All this will inevitably discourage employment and deepen the crisis facing our economy and our society.

The third underlying problem is the symbiotic relationship between labour and government within the ANC's tripartite Alliance. Jacob Zuma became president of the ANC at Polokwane in 2007 because of the support of Cosatu and the SACP. It was the culmination of what Zwelinzima Vavi called ‘the battle for the heart and soul of the ANC' after the left wing had been sidelined by President Mbeki. The result is an incestuous relationship between government and trade unions in the formulation of labour policy and the complete domination of a cowed and divided business sector in organizations like Nedlac.

The National Development Plan makes some sensible - but timid - proposals to improve the labour market. It calls for ‘balance between enabling faster expansion in employment and the protection of human rights.' It makes proposals to make it easier to dismiss employees on probation; it calls for an approach that simplifies dismissal procedures for performance or misconduct; it proposes a relaxation of onerous labour regulations for small businesses.

However, the NDP is under increasing pressure from Cosatu and the SACP - and it remains to be seen whether any of these proposals will ever be implemented.

In the mean time the legions of the unemployed will grow and will, understandably become more angry, more discontent and more desperate. We really do need a new approach to labour relations:

one that finds a proper balance between government, employers and unions;

one that is based on pragmatic approaches that have worked elsewhere - rather than on outmoded and disproven ideologies;

one that will attract local and foreign labour intensive investment; and

one that will genuinely create long-term jobs - rather than destroy them.

Dave Steward is Executive Director of the FW de Klerk Foundation.

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