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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.

South Africa: Labor Statement (Excerpts,1)
Date Distributed (ymd): 960507

As the timetable for approval of South Africa's constitution
enters its final day, among the few disputed items is a
provision for employer lock-outs during strikes, which last
week provoked the largest strike since installation of the
post-apartheid government in 1994.  Whether this issue is
resolved in a last-minute compromise or moves to a referendum,
the dispute is an indicator of a continuing debate about
economic policy in South Africa, which is likely to intensify
this year.

Labor, government, business and civil society are all
represented in a discussion forum called NEDLAC (National
Economic Development and Labor Council), one of the arenas in
which the debate will be focused.  While the government and
civil society have not yet presented full framework documents,
the South Africa Foundation has issued "Growth for All"
representing business viewpoints, and the three major trade
union federations have issued their framework statement.

The labour statement is available on-line, in html and plain-
text versions at
http://www.anc.org.za:80/cosatu/docs/jobs.html
and
gopher://gopher.anc.org.za:70/00/cosatu/docs/equity.txt

Brief excerpts from the 95K document are presented below.
Further and updated information is available at the ANC Web
Site (http://www.anc.org.za/) and at other South African
sites, including the new South Africa search engine and
catalog at http://www.ananzi.co.za/ and the Weekly Mail &
Guardian at http://www.mg.co.za/.

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Social Equity and job creation, the key to a stable future
1 April 1996 -- Released by Cosatu, Nactu and Fedsal.

Labour's proposals on growth, development and job creation
-----------------------------------------------------------
Introduction

Two years after the 1994 elections, South Africa remains a
society characterised by vast inequalities, in wealth,
economic power and incomes.

Much progress has been made to build a common nationhood, to
normalise political processes and to create a culture of
freedom. We now face the challenge of addressing the glaring
inequities in our country.

In the process, some hard choices need to be made. As the
white population had to give up its monopoly of political
power in order to usher in the new democracy, so the economic
elite should now be challenged to share the wealth and
resources of our country to the benefit of all.

This critical requirement for the new democracy - the active
promotion of social equity - is the key objective organised
labour sets for itself during 1996. We do this because too
many South Africans are poor, underpaid or unemployed,
homeless and with their basic needs and requirements not
satisfied by the economy. ...

Labour puts forward this framework as a first contribution to
the current debate ...

A very unequal society

According to the HSRC, the poorest 40% of households in South
Africa earn less than 6% of total income, while the richest
10% earn more than half the total income. While africans make
up 76% of the population, the african share of income amounts
to only 29% of total income. Whites, who make up less than 13%
of the population, take away 58.5% of total income. (Source:
HSRC. A Profile of Poverty, Inequality and Human Development
in South Africa. 1995).

... South Africa has, in the words of the recent study on Key
Indicators of Poverty in South Africa, "among the highest
income inequality in the world." ... The poorest 53% of the
population account for less than 10% of total consumption in
our country, while the richest 6% of the population account
for over 40% of consumption.

Of the poorest part of the population, a third live in shacks
or 'traditional dwellings'. Of the poorest 53% of the
population, about 80% have no access to electricity, about 70%
have no access to piped water to their premises, and more than
80% no access to modern sanitation.

Inequalities in education and health care are as striking.
Every indicator, from attendance at university, to the
incidence of TB or stunting rates among children, tell the
same story : the wealthy have a great quality of life, and our
community pays the price for their lifestyle. ... "For those
who become parents, the maternal mortality rate is 70 times
higher among Africans than among whites. The cumulative effect
of such inequity carries through life. Per capita, whites earn
9.5 times the income of blacks and live, on average, 11.5
years longer. In sum, South Africa exhibits that most bitter
of social outcomes: destitution amid plenty." (Source:
Reducing Poverty in South Africa, The World Bank, June 1994.)

These inequalities are not accidental: they are the natural
outcome of the low wage policies, followed by the private
sector, and the deliberate policies of the old state to
under-spend on social services for black people. ...

Powerful conglomerates

Our country has a very high concentration of ownership and
control by a few large corporations. ... The concentration of
economic power has been helped by the weak competition
policies followed in the past, and the use of pyramid
companies to grant control to holding companies far in excess
of the actual equity invested. ...

The current holders of economic power have acquired their
wealth over the last few hundred years through land
dispossession, the conquest of black people and the
exploitation of black workers. ...

In more recent times, business has engaged in speculative
activities, which have served to foster unproductive economic
activities, and instead of investment in plant, equipment and
people, it has invested in shopping malls, and huge glass and
concrete towers as monuments to the sterility of the corporate
and financial sector. This must change now.

Economic growth and development

The debate about growth is important, for with the wrong
policies, we may achieve either no growth, or growth which
benefits shareholders, but offers no equity to workers and the
unemployed.

The relationship between growth and equity is complex. It is
certainly not true that increased growth leads automatically
to increased equity. Indeed, the experience of the
Reagan-Thatcher years has shown that growth in those societies
came at the expense of the poor.

The U.S. has developed into a society where greater numbers of
people have insecure tenure of employment, working in the
casual, part time and low wage sectors, and where the success
of a company is now measured by the numbers of people it is
prepared to retrench. ...

Social equity programmes may enhance growth in a number of
ways. Investment in public infrastructure can significantly
reduce production costs (as studies show was the case for
Germany, Japan, Mexico, Sweden, the UK and the United States).
The World Development Report of 1994, published by the World
Bank, concedes that "many studies ... have concluded that the
role of infrastructure in growth is substantial, significant,
and frequently greater than that of investment in other forms
of capital."

Land reform policies have played a major role in stimulating
economic growth in many countries. In China, land reform has
allowed for new surpluses to be generated in agriculture. This
has been complemented with a "minimum package" of transport,
telecommunications and power at village level, which led to a
massive expansion in the productivity and performance of rural
enterprises.

Wage policies which sought to increase earnings of workers,
combined with programmes to increase contractual savings, have
been used in Singapore as a key means of generating domestic
savings to finance the expansion of economic activity.

Investment in health can contribute to raising the overall
productivity and output of the economy. The World Bank itself
reported a 9% rise in national output in Sri Lanka through the
programme to eradicate malaria in that country.

In our country, the Key Indicators of Poverty in South African
Study (produced by Saldru and published by the RDP office),
draws attention to this relationship. Not only are the intense
levels of poverty highly inequitable, they also constitute a
brake to improving economic performance. The study records:

"The rural african poor, who make up the vast majority of the
poor, face a number of specific barriers that prevent them
from increasing their economic productivity. On average, these
households spend more than three hours a day fetching water.
..."

The World Bank study on Reducing Poverty in South Africa
argues "Redirecting public expenditure on urban infrastructure
and services towards the black community would have an
immediate and rapid impact on poverty and inequity. Such a
strategy would also contribute to economic growth. In the
short run, an intensive programme of broadening access to
basic services will directly create employment opportunities.
Over a longer horizon, a network of urban services and
infrastructure would improve the workings of the urban economy
by facilitating ready communication among firms and people."
...

Growth can in turn enhance social equity. It can do this in
South Africa when it is labour-absorbing growth ... Recent
economic growth, following the trend in certain liberalised
markets elsewhere in the world, has been jobless growth.
During 1995 for example, while the GDP grew by 3.5%, much of
this was jobless growth. ... only 55,000 new jobs were created
in the formal non-agricultural sectors during the last year.
This is substantially below the number of new entrants to the
labour market, and means therefore that, notwithstanding the
growth performance, unemployment increased both absolutely and
proportionately. So, for organised labour, as indeed for the
majority of people in our country, it is not growth per se
which is the measure of the economy's success - it is growth
which fosters job creation which is critical. ...

Growth is fostered by investment, training and technological
innovation.

These key engines of growth both contribute to, and are
encouraged by, rising productivity. An important part of
stimulating sustainable growth is to improve productivity and
efficiency in the workplace. This includes labour productivity
but is by no means confined to it. ... It is regrettable
however that the debate on growth has been used by sections of
the business community to launch a systematic attack on
organised workers and on social equity, as if the goal of
economic growth is not precisely to foster social equity.

The role of the state in the promotion of economic growth
needs to be addressed. One perspective asserts, without any
evidence, that the best role for the state is no role at all
(other than combatting crime and keeping macro-economic
balances). The other perspective, put forward by the trade
union movement, draws on the experiences elsewhere which
demonstrate the economic value of particular types of state
intervention in the economy.

Japan, Korea and Taiwan intervened strongly and systematically
in markets with industrial, trade and financial sector
policies, to advance economic expansion, productivity, growth
and export performance. Even Singapore, Malaysia, Thailand and
Indonesia previously used, and China today uses, active
industrial policy measures by the state to influence the
pattern and rate of economic activities. With such widespread
evidence, it is surprising that Anglo-Saxon economic orthodoxy
still seeks to limit, rather than enhance, the role of the
state.

Organised labour does not argue for the wholesale copying of
these countries - indeed, their record on worker rights and
human rights, have generally been poor. Many of these
countries have lacked democratic institutions of governance,
and multi-party democracy. Yet, when they are cited with
approval by local businessmen, their interventionist policies
in the economic arena are not mentioned. Their labour policies
however are strongly supported by such commentators.

Market deregulation, or the 'rule of the free market' is often
put forward as the main engine to develop the society. In
theory, the immediate freeing of markets would allow capital,
labour and other resources to flow to the areas where they can
most productively be used. In practice it is not so clear, nor
so simple. Societies which have deregulated their markets have
not necessarily grown fast.

Many market failures - particularly the failure to allocate
resources to education and training, or to investment in
infrastructure and big capital projects - have led to poorly
performing economies. The premature and unco-ordinated removal
of tariffs, without attempts to address structural weaknesses
of local industry, has wiped out employment. The failure to
have financial market regulation has led in some countries to
the collapse of major financial institutions, and of public
confidence in the financial system. The system itself has
often been inadequate in allocating capital to new economic
activity. ...

Markets have been inadequate in responding to the social needs
of human beings - in setting decent wages and fair standards,
in protecting the poor and the marginalised, in correcting
imbalances of wealth and inequality and in addressing the
problems of exploitation. ...

The alternative is a coherent development plan, based on
market realities, and seeking to marshall resources towards
the building of an efficient, dynamic economy.

All governments intervene in economic decision-making. Some do
so through the blunter tools of fiscal and monetary policy
only. Others have active industrial policies which create a
strong support environment for companies to do business in,
and thrive. Such policies address the flow of investment, the
capacity of production and the availability of people and
capital... through a system of incentives and requirements.

South Africa needs a set of active policies, which builds a
partnership for growth between the public and the private
sector.

We put forward the alternative economic vision set out in this
document as a challenge to an economy, which, whilst under the
stewardship of big business, has failed our society.

A sterile business response

It is telling that the business community represented by the
SA Foundation has launched a well-financed and well publicised
campaign to cling onto their wealth. They do so by creating a
range of red-herrings, such as the alleged "inflexible" labour
markets and the alleged "labour elite". In so doing, they seek
to let poor people pay for growth and development, whilst
keeping the wealth and power of the privileged intact.

Their policy prescriptions consist of a restatement (with
graphs and graphics) of ideologically driven 'solutions'.
Behind the gloss lies the oft-repeated programme of economic
deregulation, lower tariffs, privatisation, weaker trade
unions, lower corporate taxes, reduced labour standards and
financial market liberalisation. This has become known as the
"neo-liberal" programme. It is a programme which has been
advanced by the International Monetary Fund and the World
Bank, and by international capital. South African business has
merely repeated the stale and simplistic formulae underpinning
this programme.

It is a programme to cut back the capacity of a democratic
state to moderate the use of market power. It fails to
acknowledge the real weaknesses in the economy, and the
potential benefits in an active public sector fostering
policies to promote growth.

It is a programme to weaken the trade unions, one of the
important institutions in society which seek to advance social
justice.

It is a programme which will divide society, strengthen the
wealthy and reduce the prospects of negotiated agreements on
the key challenges facing society.

In the process, big business seeks to repudiate key elements
of agreements reached by their representatives with labour and
government, on centralised bargaining (at the National
Economic Forum in 1993) and on the Labour Relations Act (at
Nedlac in 1995). ...

The unemployed and business

The cynical attempt by business to blame workers for high
levels of unemployment needs to be challenged.

* First, it is the business community (not trade unions or
workers) which retrenches thousands of workers each year. They
do this simply in the chase for higher profits. Many companies
continue to retrench ('downsizing and rightsizing', they call
it), even when making above average profits. Yet these same
companies now blame workers for unemployment!

* Second, the uncompetitiveness of sections of the economy is
precisely due to the low levels of investment by business in
education and training of the majority of workers. The partial
exception to this has been the resources put into training of
white artisans and professionals, by the business community,
and the public sector in the past.

Successive editions of the World Competitiveness Report have
placed South Africa at the bottom of the league of nations in
human resource development. In the in-company training
category, we are nearly at the bottom, ranked 40th in a list
of 48 countries. In contrast, in areas such as infrastructure,
finance and science and technology, the Report rates us as a
mid-ranking country.

* Third, the cosy cartel of conglomerates which dominate the
South African economy, have engaged in collusive and
price-fixing practices which have blunted the ordinary
competitive pressures in a market economy. The entry of
foreign firms to the South African market has so often exposed
the weaknesses, indeed the managerial incompetence of these
large companies. ...

* Fourth, it is the employed workers which provide the social
security net for the unemployed. ... Given the absence of a
publicly-funded welfare net in South Africa, workers provide
accommodation, food and other help to unemployed family
members. In addition, employed workers, not the owners of
capital, buy from the informal sector in the townships, use
the taxis and support spaza shops. The wages of the employed
workforce therefore sustains the informal sector and the
unemployed.

In practice, Jabu Xulu who works in a metal factory, is the
sole breadwinner, in a family which includes Cynthia Xulu, an
ex-clothing worker recently retrenched. Cynthia's brother,
Jonas Gumede, lives with them - he has been unable to find
work since he left school. Their neighbour, Sipho Loro, sells
meat at the taxi-rank, and Jabu buys from him once a week.

* Fifth, wages of many employed unionised workers are
extremely low. ...

Even the study by Saldru into poverty concedes that 44% of
those covered by their definition of the poor (the poorest 53%
of the population) are wage earners (regular and casual
wages). In addition, 19% of the income of the poorest 53% of
the population is derived from remittances, principally from
earnings of migrant workers sent to dependents. (Source: Key
indicators of Poverty in South Africa, RDP Office).

This means therefore that up to 63% of the income of the
poorest 53% of the population are from regular and casual
wages, and from the earnings of migrant and commuter workers.
So, on any definition of the poor, the earnings of workers
form the bulk of income of our country's poorest people. Yet
now business seeks to cut this income. ...

(continued in part 2)
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This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC's primary
objective is to widen the policy debate in the United States
around African issues and the U.S. role in Africa, by
concentrating on providing accessible policy-relevant
information and analysis usable by a wide range of groups and
individuals. APIC is affiliated with the Washington Office on
Africa (WOA), a not-for-profit church, trade union and civil
rights group supported organization that works with Congress
on Africa-related legislation.

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