Tel: (011) 339-4911
Fax: (011) 339-5080/339-6940
Email: donald @ cosatu . org . za
For comments on the website email: email@example.com
Publications | Parliamentary Bulletins
Parliamentary Bulletin Number 4, April 2002
Table of Contents
Looking back to the last quarter of 2001, it is clear that the new Parliamentary session finds us in a significantly changed political environment. Domestically, important political discussions took place in the run up to the Alliance Summit of 3-7 April 2002. Unhealthy tensions which had developed in the Alliance last year have begun to ease, allowing for us to focus our energies on resolving some of the serious policy and organizational questions which have emerged in recent times.
Critical amongst these is how the Alliance partners, individually and collectively, relate to each other in the processes of governance; how to address fundamental policy differences on socio-economic questions; how to move the country forward on the HIV/Aids question; and how to relate to capital in our attempts to transform our country. The latter question has become particularly urgent, given the massive capital flight engineered by SA business, the destabilization of the currency, and the failure of current economic policies to induce business to invest in job-creating economic activities.
The Alliance will have to agree on how to tackle this problem in the light of proposals for the Growth and Development Summit later this year between government, labour and business. We need to learn lessons from the shortcomings of the 1998 Jobs Summit, and recognize that the forging of a national consensus on a new development path for the country is not an event but a complex process. There is agreement in the Alliance that our Alliance formations, together with labour and government in general, will have to lead this process, and that we require agreement in the Alliance before we engage with business.
The possibility of an Alliance platform emerging from these engagements has profound implications for COSATU’s interaction with processes of governance, including parliament, government departments and processes in Nedlac.
It opens up the possibility for the emergence of a new situation which would reduce the necessity for COSATU to continually react to government proposals. If the Alliance, and ultimately government, develops a joint approach to critical areas of policy, the space is then created for us to focus our energies on helping to formulate and drive implementation of these agreed policies. This will have a profound impact on COSATU’s relationship with all levels of governance and organs of state, even if it doesn’t entirely eliminate contradictions and tensions.
In the Southern African region, the need for a dynamic collaboration between progressive organs of civil society, labour, and the national democratic state has been underscored by developments in Zimbabwe and beyond. The dangers posed by a statist top-down political culture, the corruption of former national liberation movements in some of our neighbouring countries, and the space it opens for other forces, emphasise the importance of a people-driven transformation process.
There are a number of countervailing developments in the region, and it is difficult to discern a clear political trend at this stage. Nevertheless, there are significant positive developments, including the possibility of peace in Angola, Congo, Burundi and other war zones. A heavy obligation rests on the democratic forces in South Africa to demonstrate that a democratic route doesn’t automatically imply neo-liberal social and economic policies.
The stance we take, both domestically and internationally, will be closely watched to see whether this democratic, developmental ‘third way’ is feasible in today’s globalised environment. We need to scrutinize whether our proposed policies and programmes, including Nepad, meet these standards we have set for ourselves.
In the context of the 2002 parliamentary session, this challenge of advancing a people-centred social transformation project will be measured concretely by the stand our representatives take on a number of key issues, including:
- Questions relating to transformation of the state, defence of the public sector, promotion of developmental local government, and delivery of affordable services;
- Issues related to economic transformation, including elaboration of a developmental job-promoting industrial strategy, proposed legislation on economic empowerment, prescribed assets, regulation of the financial sector (inter alia through community reinvestment legislation), the promotion of the co-operative sector, and legislation to give parliament the power to amend the budget;
- The approach to the development of a comprehensive social wage, and security net for the majority, including national health insurance, public transport and housing, and the proposed Basic Income Grant;
- Ensuring together with labour, the effective implementation of progressive labour legislation, the setting of decent minimum standards for the most vulnerable workers, including domestics and farm workers, ensuring that the immigration dispensation protects labour and human rights, and the protection of workers in companies facing insolvency.
This edition of the Parliamentary Bulletin, and the Shopsteward, touch on some of these issues.
One of the challenges facing us is to ensure that the critical questions outlined above are not allowed to fade into peripheral and technical debates which sometimes dominate parliamentary discourse. Achieving this political focus requires a mobilised labour movement and progressive civil society actively engaged with processes of governance. This indirectly raises the debate around our electoral system, and whether the introduction of a formal constituency element to our system would not provide for more dynamic interaction than is currently the case.
This question is certain to arise during the course of the year. Ultimately the acid test facing the labour movement, and our representatives in parliament, is the practical impact our decisions have on the shared constituency we represent.
By Neil Coleman
Parliamentary schedule for 2002
First Term Second Term Third Term Fourth Term 14 January- 20 March 22 April - 28 June 29 July- 27 September 14 October- 15 November Constituency 25 March - 19 April Constituency 29 June - 26 July
29 September 11 October
18 November - 13 December
Bills that will be introduced to Parliament by June 2002 Bill Department Status Co-operatives Bill Agriculture COSATU's 2001 submission was on a previous version of the bill Collective Investment Schemes Control Bill Finance Bill Bill not published yet Development Bank of Southern Africa amendment Bill Finance Bill Bill not published yet Prevention of Corruption Bill Justice Bill not published yet Health Donations Fund Repeat Bill Justice Bill about to be tabled Constitutional Amendment Bill/relating to the crossing of the floor Justice Bill published Restoration of enrolment of certain legal practitioners Communications Bill published Electronic Communications and Transactions Bill Justice Bill about to be tabled Child Justice Bill Insolvency Amendment Bill Agriculture Bill has been published Land and Agriculture Development Bank Bill Mineral and Energy Bill not published yet Minerals and petroleum resources development Bill Sport and Recreation Bill published National Sports and Recreation Amendment Bill Welfare Bill not drafted yet Probation services amendment bill Transport submission made by SATAWU bill not published yet National Railway Safety Regular Bill Public Works Draft Bill State Information Technology Agency Amendment Bill State Property Management Company Bill Not known Bill not published Occupational diseases in Mines and works amendment bill not known bill not published yet prevention of illegal eviction and unlawful occupation of land amendment Bill Justice Bill published Retention or loss of membership bill
** This is the official list release by the Leader of Government Business. No comprehensive list is available yet for 2002. Bills ,marked with an asterisk* are potentially of interest to COSATU.
Other policy and legislation which may be debated or introduced in 2002
As indicated above the official list is not a comprehensive one. Further it doesn't include policy issues. Legislation and policy issues which may, in addition to this list, be introduced or debated in 2002 include:
- Energy Bills relating to electricity, gas and energy provision;
- National Health Insurence;
- Social Housing Bill;
- Post Bank Bill;
- Community Reinvestment Legislation (compelling investment by the Banks);
- Various 'technical amendments' to retirement legislation.
- Development and Planning White Paper
- Policy on Municipal services partnerships
- Money Laws Amendment Bill/Budget Reform;
- Prescribed asset requirements for retirement funds
- Basic Income Grant (awaiting Cabinet decision on Cttee of Inquiry)
This is an edited and shortened version of an article written by Anton Roskam, of lawyers Cheadle, Thompson and Hatson, who was an adviser to the team which negotiated the amendments.
In the past employers have found retrenching workers relatively easy. This was despite the old section 189 of the Labour Relations Act (LRA), which required employers to consult with workers when considering retrenchments. However, most merely go through the motions of consulting without meaningfully attempting to reach consensus or considering proposed alternatives to save jobs or minimise the devastating effects of retrenchments on workers.
Trade unions in turn lacked the leverage to compel employers to participate meaningfully in consultation processes on retrenchments. These obligations are more likely to be meaningfulif employers are required to negotiate and workers allowed the right to strike. This situation has been considerably improved amendments to section 189, which were included in the recently enacted package of labour law amendments to the LRA and BCEA. It should be borne that although these have been passed by Parliament, they are not yet in operation.
Broadly set out the section 189 amendments involves two major changes. The first entails changes to the current provisions by increasing employers’ obligations and strengthening workers’ rights in respect of the consultation process. The second entails the addition of a new clause, section 189A, which gives workers the right to strike in workplaces where there are more than 50 workers, subject to certain requirements explained below.
Consultation under Section 189
Section 189 sets out the various procedures to be complied with in cases of retrenchments and in particular regulates the consultation process that employers are required to initiate.
This section applies to all retrenchments, regardless of employer size or the number of retrenchments being considered and includes retrenchments effected under section 189A.
1.With whom and how the employer must carry out the consultation process
Firstly the employer is required to consult with any person as required in terms of a collective agreement. Where there is no collective agreement, then consultation is required with a workplace forum. If there is no workplace forum, then there must be consultation with a registered trade union whose members are likely to be affected by the retrenchments.
Finally if there is no trade union, then consultation directly with the affected employees is required. Employers must allow trade unions to make representations on any matter for consultation.
The amendment now requires employer to:
- Consult any registered trade union whose members are likely to be affected when consulting with a workplace forum.
- Give a written notice inviting other parties to consult (a section 189(3) notice); and
- Give a written response to any written representations received.
2. The nature of the consultation process
Employers in consulting must attempt to reach consensus on a number of issues. These include measures directed at avoiding or reducing the number of retrenchments and minimising the impact on workers, severance pay and the method of selecting workers for dismissal. The amendment now requires that the consensus-seeking process must be "meaningful".The underlying intention behind the amendment is to ensure that employers do not merely go through the motions of consulting. Although this does no go as far as requiring actual negotiations with workers, this may provide a greater level of protection than the previous provisions. At workplaces with more than 50 workers and to which section 189A applies, a facilitator may be appointed by the CCMA. This may substantially increase the effectiveness of this section.
3. Disclosure of information
Section 189(3) requires employers to disclose relevant information relating to a range of issues. This includes issues such as reasons for the proposed retrenchments, the alternatives considered, severance pay, the number and categories of workers to be affected, and the proposed method for selecting which employees to dismiss.
The amendments now provide that employers:
- Must provide information on the number of workers employed;
- Must provide information on the number of retrenchments in the preceding 12 months. Have the onus to prove that any information is irrelevant in the event of a dispute.
The right to strike under Section 189A
In general, strikes are not permitted if the matter may be resolved by the Labour Court or through arbitration. Therefore the most important aspect of section 189A is that it provides certain employees with a choice between:
- Employing the right to strike; or
- Referring a dispute concerning the substantive fairness of the retrenchments to the Labour Court.
- This choice is subject to the following restrictions:
- Once a notice to strike has been given, then relevant trade unions and workers may not refer a dispute to the Labour Court; and
- Trade unions or workers may not embark on a strike, if they have referred a dispute to the Labour Court.
Other general restrictions applicable to strikes under section 65 of the LRA also apply.
A trade union is entitled to call a secondary (or sympathy) strike, provided that it gives at least 14 days notice of the strike. During this 14-day period, the CCMA must appoint a commissioner to conciliate if requested to do so by the employer.
However, this will not affect the right to strike once the 14-day period has lapsed. Employers have the right to lockout. However, this is limited to a defensive lockout (or in other words the lockout must be in response to a strike notice).
Who does section 189A – the right to strike- apply to?
Section 189A applies to workplaces, which have more than 50 workers and fall into any one of the following categories:
- Employs 51 to 200 workers and is considering at least 10 retrenchments;
- Employs 201 to 300 workers and is considering at least 20 retrenchments
- Employs 301 to 400 workers and is considering at least 30 retrenchments;
- Employs 401 to 500 workers and is considering at least 40 retrenchments; or
- Employs more than 500 workers and is considering at least 50 retrenchments.
In order for section 189A to apply the specified minimum number of dismissals must correspond to the size of employer as described above. For example, this section will not apply to an employer with 240 employees but who is considering the retrenchment of 18 workers only.
However, if 25 dismissals are being considered then section 189A will apply.
The conditions attached to the specified minimum number of retrenchments may also met by counting in any retrenchments that occurred in the 12 months before the employer issued the section 189(3) notice to consult.
For example this section will apply to an employer with 240 employees who is considering 18 retrenchments provided that there were at least 2 other retrenchments in the 12 months before the consultation process.
Before giving notice of a strike the following steps must be completed:
- The consultation process must be initiated by the employer giving a section 189(3) written notice
- (At this stage either the employer or trade union may decide to involve a CCMA facilitator. If so then the CCMA must be notified within 15 days of the section 189(3) notice. This has certain other implications for the steps to be followed.)
- The employer must disclose all relevant information;
- If a CCMA facilitator has been appointed:
- Facilitation begins once the facilitator has been appointed.
- The employer may give notice to retrench employees after 60 days have lapsed from date that the section 189(3) notice was issued.
OR If NO facilitator has been appointed:
- A dispute may only be referred to a council or CCMA after the 30-day period allowed for consultation has lapsed.
- An employer may give notice of termination of contracts only after a further 30-day period has lapsed from the date that the dispute was referred to the council or CCMA.
4. The trade union or dismissed workers may either give notice to strike OR refer a dispute to the Labour Court to decide whether there is a fair reason for the dismissal.
Remedies against employers
If an employer has not employed fair procedures or has given a notice to dismiss before the completion of 60 days from the date that it issued the section 189(3) notice, then the trade union is entitled to apply to the Labour Court. Where a notice to dismiss has been received this must be done within 30 days of receiving the notice.
Failure to comply with the 60-day period also entitles a trade union to immediately give notice of a strike.
The court may make any of the following orders:
- Compel the employer to comply with a fair procedure;
- Interdict the employer from dismissing an employee until fair procedures are followed;
- Require the employer to reinstate an employee until it has applied fair procedures; and
- If any of the above is not applicable, compensate an employee up to a maximum of 12 months remuneration.
The People’s Budget Coalition, comprising COSATU, SANGOCO and the SACC, again responded to the budget announced by the Minister of Finance this year. The People’s Budget’s overall take on the budget was that, while it was moderately expansionary, it however came with a very low deficit, and tax cuts biased to middle to upper income earners.
The expenditure growth fell short of what is required to address backlogs and put South Africa on a new developmental growth path. The budget deficit fell to 1.4% of GDP in 2001 – the lowest in South Africa’s recent history – and between 1.7% and 2% over the forthcoming MTEF period. The People’s Budget views this as completely inappropriate for South Africa, given the massive social and infrastructural backlogs we face.
This year’s deficit target is extremely low even in comparison with developed countries facing fewer such challenges. This emphasis on fiscal austerity and the ruthless cutting of the budget deficit, even way below previously targeted levels, deprives South Africa of much-needed resources which could be channelled to delivery.
The People’s Budget believes that a deficit - GDP ratio of up to 4%, if spent appropriately, would be more conducive to growth and development (a deficit of 4% would make available another R22 Billion for social expenditure - this would be roughly enough for example to finance the Basic Income Grant, even without levying a solidarity tax).
Overall real expenditure growth is 4.1%, meaning around 2% in per capita terms (after population growth). While this growth is welcome, it is still inadequate in the face of the massive backlogs and recovering the lost ground of the extreme fiscal austerity of the late 1990s. While the Minister paid lip service in his speech to job creation, this was not matched in the budget by any major new interventions which would have any significant new impact on the unemployment crisis.
In terms of social services, while noting the increases in social grants above CPIX this year, the People’s Budget would have liked to hear some signals from the Minister around the introduction of a comprehensive social security system for South Africa. MTEF projections will need to be revised upwards to fund this, pending the conclusion of the process around the report of the Commission of Enquiry.
In particular, the People’s Budget has proposed the introduction of a Basic Income Grant for all South Africans, as the most effective social security measure in alleviating poverty. Further, health expenditure does not appear sufficient to fund key health initiatives which the People’s Budget has proposed, such as the National Health Insurance System and a comprehensive HIV/AIDS strategy.
The water budget appears far too low. We also expressed concern about the cuts in the land budget, given the massive demand for redistribution of land. We would have hoped to see an announcement that government will decline further options on the arms deal. This would have diverted unnecessary military expenditure into areas where it is badly needed.
Instead, the costs continue to rise, going up by 14% this year. We note that this year, government will be spending more on the military than on police. We welcomed the commitment to job creation in sections of the public service such as health and police. We also welcome the allocation of R3.3 bn from the contingency fund to meet shortfalls in the public service wage bill.
The People’s Budget noted that revenue projections have once again been overshot. We welcomed the success in raising more tax revenues. We believe that these resources should be channelled into social spending and infrastructure, where huge backlogs still need to be addressed.
We are concerned that the consistent underestimating of revenue year after year means that revenue end up being channelled into deficit reduction rather than being spent where it is needed to meet our people’s needs. In terms of income tax cuts, while we welcomed tax relief for lower-middle income earners, we are concerned that the wealthy have once again benefited from undeserved tax cuts. This deprives the fiscus of resources for national economic development.
We are disappointed that the bottom marginal income tax rate is unchanged at 18%, whereas South Africa’s top income earners will benefit from a tax cut from 42% down to 40%. We do, however, welcome the raising of the income tax threshold from R23 000 to R27 000. Given that income tax cuts only benefit about a fifth of the population, we would have wanted to see more broadly based tax relief through the VAT system, given that this is a highly regressive tax.
In particular, we have called for the extension of VAT zero-rating to all basic foodstuffs and other goods predominantly consumed by the poor, and the introduction of a higher VAT rate on luxury goods. The People’s Budget is very concerned that privatisation revenues are again being factored in to the budget. R12.2 bn is projected for this year, to be channelled into debt reduction rather than infrastructure development. This will place undue pressure to accelerate the privatisation process to meet fiscal aims, rather than looking at a more appropriate and developmental state asset restructuring strategy.
Proposals for a People’s Budget
Shortly before the announcement of the budget by the Minister of Finance, the People’s Budget publicly released its own budgetary proposals. These were geared towards the 2003/04 budget, in the hope that this gives sufficient time to take them on board in government’s processes.The proposals of the People’s Budget are situated within a theoretical paradigm geared towards sustainable development, in contrast to the neo-classical approach.
The People’s Budget 2003/04 analyses the trends in the economy since 1994, and takes on board lessons from this in our proposals for the budget.The core spending proposals which we put forward this year are for:
- The introduction of a universal Basic Income Grant for all South Africans from cradle to grave;
- An accelerated land redistribution and restitution programme with measures to support productive utilisation of land;
- The rollout of free basic services including water, electricity, refuse and sanitation;
- Expanded and improved skills development and education, both for schools and in the workplace;
- The introduction of National Health Insurance to provide quality healthcare for all our people; and
- An integrated and comprehensive treatment and prevention plan for HIV/AIDS.
The People’s Budget has also put forward various proposals to enhance the capacity of government departments to spend the money they are allocated, to avoid rollovers of funds.As the People’s Budget is not just a spending wish list, funding mechanisms are proposed to finance these expenditure proposals.
- Moderately more expansionary macroeconomic parameters to free up additional resources in a sustainable manner;
- Ring fencing and better management of historical debt;
- More progressive taxation, notably on upper income earners and companies;
- Restructuring of the VAT system, with zero-rating of additional basic goods predominantly consumed by the poor, combined with higher VAT rates on luxury goods;
- Redirecting military spending; and
- Restructuring of the Government Employees’ Pension Fund (GEPF).
The Peoples Budget also put forward proposals around the reform of the budget process to make it more democratic and participatory, through the involvement of both civil society and Nedlac in the process, and through empowering parliament to be able to amend budgets placed before it.
In addition to the publication of People’s Budget proposals last year and this year, other activities of the People’s Budget thus far have included:
- Bringing out a popular version of the People’s Budget and a leaflet introducing the campaign.
- Responding publicly to last year’s and this year’s budgets, and the Medium Term Budget Policy Statements of the last two years.
- In terms of educational activities, producing an education manual to empower people to engage with the budget, as well as consultation and information meetings in certain provinces.
- The People’s Budget has also met with a number of Study Groups in Parliament to present our proposals.
- We have linked up with the civil society initiative around reform of the budget process.
- In terms of mandating of positions, the three constituent organisations have discussed proposals in their respective constitutional structures.
The People’s Budget also convened Consultative Conferences in February 2001 and 2002 to broaden discussion and mandating of positions to be put forward in the People’s Budget.
The Current Situation
Escalating unemployment and poor job security is a feature of daily life for most workers in South Africa. A significant number of job losses are due to the high incidence of liquidations of companies. Of concern is the failure of current insolvency laws to provide adequate protection for workers in order to mitigate the losses that they have to bear.
Workers face a number of problems when businesses are liquidated. Employers often do not inform workers timeously of the potential liquidations. In fact notice of provisional liquidation applications are rarely served upon workers, with most only being informed once the provisional order has been granted.
This prevents trade unions from intervening in order to save businesses.The granting of a provisional liquidation order has the immediate effect of terminating workers’ contracts of employment. This has caused severe hardship for many workers who lose their wages, leave pay and long service bonuses.
In addition owing to insufficient regulation specifying when employers should pay over medical aid and pension contributions, employers in financial difficulties often do not pay over these contributions to the relevant funds. As a result workers frequently lose not only their contributions but also their benefits. Workers’ rights associated with dismissals for operational reasons are also severely affected.
This includes requirements for employers to consult with workers under section 189 of the Labour Relations Act (LRA) to pay severance pay in terms of section 41 of the Basic Conditions of Employment Act (BCEA).
Proposed insolvency law reform
In order to address these problems the Department of Labour proposed certain amendments to the LRA, BCEA and Insolvency Act of 1936.
These were included in the broad package of labour law amendments first introduced in July 2000. As a result of negotiations on the amendment Bills at NEDLAC there were various agreements specific to insolvency reform. In relation to the LRA and BCEA the following have been agreed to:
- Insertion of section 197A to the LRA requiring employers to notify trade unions or employers if there are circumstances, which may result in insolvency;
- Insertion of section 34A to the BCEA requiring that medical aid and pension contributions be paid over within a 7 day period; and
- Amendment of section 41 of the BCEA providing workers with the right to severance pay in cases where employers are sequestrated or liquidated.
These amendments were recently passed by Parliament and have been forwarded to the President’s Office for assent. They are therefore not yet in operation.
There has considerable delay in processing the amendments to the 1936 Insolvency Act, although this was to have been included in the overall package of labour law amendments. The following amendments to the Insolvency Act were agreed to at NEDLAC:
- The applicant for a provisional sequestration order must notify relevant trade unions and employees;
- A granting of a sequestration order would suspend (and not terminate, as is the current situation) the contract of employment; and
- Provision should be made for consultation with trade unions in order to assist with saving companies facing insolvency.
According to the Department of Justice it is intending to gazette an Insolvency Amendment Bill in March this year. We are concerned that draft versions of the Bill do not provide for notification of an application for a provisional sequestration order, in contradiction to the NEDLAC agreement. The motivation for this is that these amendments would require concurrent amendments to the Companies Act and Close Corporations Act. The intention is to include this in a later package of amendments to be included in a comprehensive overhaul of the insolvency legislation.
Although the intention is to deal with this at a later stage, we believe that more immediate action is required. Leaving this provision to a later process will effectively deny protection to those workers who are likely to be affected in the short term.
It is likely that the more comprehensive review process will not be finalised before the end of 2002. Admittedly amendments will also have to be made to the Companies Act and Close Corporations Act. However, we do not believe that the extent of these amendments is so onerous that they cannot be accommodated within the current process. We will continue to engage with the Justice and Labour Departments in relation to this matter.
Content of the Insolvency Amendment Bill
In summary the Bill provides for the following:
- Sequestration orders will have the effect of suspending and not automatically terminating employment contracts;
- Trustees may only terminate employment contracts after consulting with trade unions and employees and attempting to reach consensus on measures to save the business;
- All suspended contracts will be terminated within 45 days of the appointment of a trustee;
- Despite "suspension" workers will be deemed to be unemployed and may therefore claim benefits from the unemployment insurance fund; and
- Provision is made for the entitlement to severance pay in line with concurrent amendments to the BCEA.
COSATU is currently considering the Bill with the intention of eventually presenting a submission to the Justice Portfolio Committee setting out our concerns.
We also intend raising our concerns at the Nedlac Management Committee in April to ensure that the Nedlac agreement is taken forward.
The President announced in his State of the Nation speech last year that a wage subsidy would be introduced. Draft legislation was finally published by Treasury/South African Revenue Services this year, which COSATU has made a submission on.Government is basically proposing that companies which sign a learnership agreement with an employee will have their taxable income reduced by R25 000, and by a further R25 000 on completion of the learnership; and can claim additional R50 000 reductions for further learnerships entered into and completed. COSATU has consistently drawn attention to the unemployment crisis facing South Africa.
We do believe that wage subsidies, if properly designed and implemented, can be one of a package of measures to promote job creation. However, it is important to note that a wage subsidy can never be a panacea nor can it be expected to create jobs on anywhere near the scale needed.
COSATU does not believe that the level of wages of South African workers is one of the major factors that have contributed to the loss of jobs over the past few years. Job losses in the past decade have been particularly prevalent in sectors such as agriculture, mining and domestic labour, which tend to have the lowest wage levels and the most flexible labour markets. We believe that the root causes of unemployment are related to structural problems of the economy which have developed over a period of time, but in some cases have intensified in recent years.
A subsidy can potentially have a broadly redistributive effect in favour of labour.
Further, there are positive externalities of employment creation which accrue outside of the directly contracting parties – for example, the positive contribution of additional jobs to economic growth and investment, savings levels, social stability, and so on. Because the individual employer does not directly capture these benefits, however, the market has an inherent tendency to create employment below the level which would be optimal for the economy at large.
The wage subsidy can play a useful role in bridging this gap and making it economically viable for individual employers to take on additional labour. However, if business just uses the subsidy to lower the labour costs of workers that it would have employed even without the subsidy, or simply to subsidise existing employees – and both of these scenarios are compatible with the Draft Bill – the subsidy would represent a net transfer from the fiscus to business and a boost to their profits.
Furthermore, if the subsidy is not financed through progressive measures, its effect would not necessarily be redistributive. As with any item of expenditure or foregone revenue, the wage incentive has opportunity costs in terms of what the money could otherwise have been spent on. Its introduction must be able to be justified, therefore, in terms of the "value for money" of jobs created for the resources invested in the programme – as opposed to, for example, large-scale public works programmes. Concerns which the Federation has raised with the draft legislation include the following:
3.1 Concerns around process
In addition to the time taken in publishing the draft legislation, we are also concerned that the draft legislation has not gone to Nedlac, despite clearly being of a socio-economic nature. COSATU has thus proposed that the issue should be referred to Nedlac for consultations and negotiations. On the basis of agreement at Nedlac, a revised draft could be circulated for public comment and referred to Parliament for processing.
Furthermore, it may be advisable to set up a task team to look at some reworking of the legislation before it is presented to Nedlac, and COSATU has indicated its willingness to participate in such a process.
3.2 Targeting the subsidy at employment creation
A major concern with the wage subsidy as proposed in the Draft Bill is that there are no features of the Bill which restrict the subsidy to new employees, or even focus the wage subsidy towards newly created jobs.
It is quite possible, in terms of the Draft Bill, that employers would benefit from the subsidy for existing employees who register for learnerships, which would simply provide a windfall gain to business without creating any new jobs. It should thus be structured in a way that targets new job creation – to avoid subsidising existing jobs – but in a way that avoids displacement. A related concern is that there does not seem to any way under this Act to stop employers from firing people the moment they complete the learnership and hiring someone else.
This would undermine the very purpose of the programme: to create sustainable jobs by integrating new labour market entrants into the workforce.
3.3 Level of the subsidy
The value of the wage subsidy, as proposed in the draft legislation, may in many cases exceed the wages of the employee. The employer’s taxable income would be reduced by at least R50 000 per employee, more if further qualifications are completed. This amounts to a direct transfer of at least R15 000 where the employer is registered as a company (given the company tax rate of 30%).
For learnerships at all levels of the NQF, weekly allowances start at just R120 per week. Even if the learner works all 52 weeks of the year, the wage subsidy is still more than double this. Further, the wage subsidy is in addition to the cash grant which an employer can access from a SETA to fund a learnership, which are generally in the order of about R15 000. This grant would tend to fund many of the costs directly associated with the training, and even some wage costs as well.
Combined with the proposed wage subsidy, this would be a sizeable effective transfer to employers. The proposed wage incentive thus cannot be regarded as a subsidy – it would actually be paying the wages of someone employed by private business or even paying business a handout on top of these wages.
This strange scenario would result in a double windfall for business – free labour and a net profit – at the expense of the fiscus. A related concern with the subsidy as proposed in the draft legislation is that a high subsidy (relative to wages) would be allocated to a fairly small group of employees.
We believe that the resources could be better utilised by allocating a somewhat smaller subsidy to a greater number of employees.
3.4 Budget for the wage incentive
If the wage incentive were properly structured, in order for it to make a significant dent in the unemployment crisis the allocated R600 m would be insufficient. It would reach only a small proportion of the jobs being lost every year, let alone the backlog of those already unemployed. If the concerns raised by COSATU were to be addressed in the reworking of the legislation, we would support an increase in this budget.
3.5 Funding of the wage subsidy
For the wage subsidy to serve a broadly redistributive purpose it should be funded through corporate taxation (excluding payroll taxation), or progressive income tax on upper-income earners.
If, for example, the wage subsidy is effectively funded (or compensated) by increasing regressive taxation such as VAT or income tax on upper income earners, the overall effect could be a transfer from the poor to business.
We would obviously oppose this, given that it would further deepen poverty and inequality in South Africa.
We have proposed that the sources of funding for the incentive should be explicitly specified in the legislation.
The Need for Clearer Commitment to Health Care Transformation
It is commonly accepted that conditions related to poverty impact harshly on the health and overall quality of life of those affected.
The general overlap between poverty and inequality, combined with factors such as backlogs in infrastructure development and service delivery, means that many people, mostly black, continue to be denied access to basic services and needs such as food, clean water, sanitation and electricity. These are essential to the promotion of appropriate health standards.
The South African health system continues to reflect wide disparities between the public and private health sectors especially in respect of the quality and levels of health care available. A minority _ less than 20% of the population- who can afford private care, are able to access services of a quality that compares favourably with international standards.
This leaves the majority of the population to contend with services of a considerably lower quality provided by an under-resourced public sector. Here it should be borne in mind that private health care constitutes more than two-thirds of total health spending. The urgent need for the transformation of the health system, particularly within the context of the crisis that South Africa faces in relation to the HIV/AIDS pandemic, calls for a far more active and dominant role of the public health sector.
The National Health Bill, as an overarching piece of legislation, has a fundamental role to play in driving transformation in this regard and must therefore be evaluated against these considerations. The urgency of this is underlined by the fact that the current situation is governed by the 1977 Health Act, which is not equipped to deal with the implementation of progressive health policies.
The Department of Health released a Draft National Health Bill for public comment in November last year and intends to table a final version in Parliament by June of this year. The overall purpose of the Bill is to provide the framework for a national health system. This includes making provision for the regulation of public, private and non-governmental health care providers. In relation to the public sector specifically it provides for the overall structure and coordination of health care at national, provincial and local (district health system) levels. It also sets out the rights and duties of both health care providers and users.
COSATU has forwarded an initial submission to the Department of Health and intends engaging with the process in Parliament as well. The Bill has been through numerous different versions over the past few years and has been subjected to many delays. We therefore welcome its publication as an indication that the process will finally be taken forward. Having said this we nevertheless believe that the Bill is fairly weak in substance and fails to address the objectives of transforming the national health system. In certain instances commitments under the 1997 White Paper for the Transformation of the Health System are not reflected in the Bill.
We are particularly concerned that the Bill is silent on core issues such as "Health Care Financing and Financial Management". Appropriate provisions on health care financing would be crucial to setting out the enabling framework for the implementation of a National Health Insurance, which we believe will ensure access to quality health care for all.
Despite the problems of chronic understaffing in many public health facilities, the Bill does not contain any substantial provisions on human resource development. We believe that more substantial provisions should be inserted into the Bill and should provide for conducting skills audits and developing skills plans. There is a need for stringent regulation of the private sector especially taking into consideration the wide disparities existing between the private and public sectors.
However, the Bill adopts a minimalist approach in this regard. We are also concerned that while the Bill does contain some provisions on the regulation of private health establishments (for e.g. hospitals) it is virtually silent on the regulation of individual private health practitioners. These provisions must be tightened up in order to ensure effective regulation of the private sector.
Further although the Bill provides for the contracting out of public health services to the private sector, it does not set out appropriate criteria to regulate these arrangements. We believe that the contracting out of services should be kept to an absolute minimum. The public sector must be the first option considered in all instances. Any contracting out must be tightly monitored and regulated, which is the approach adopted under the 1997 Water services Act and Local Government Municipal Systems Act of 2000.
A summary of our other comments is set out below:
- The Bill should make provision for a National Health Information System in line with the commitment under the White Paper to do so.
- The Bill places far too much emphasis on the "limited" resources available instead of emphasising the need to ensure appropriate budgetary allocations that are relevant to actual needs and achieving transformatory goals;
- The Bill should make more explicit the National Government’s responsibility and commitment to addressing inequalities in the health system and promoting universal and equitable access to all levels of health care;
- Health establishments should be required to develop, in consultation with trade unions, workplace policies covering discrimination on the basis of health status, including HIV;
- Discrimination against patients on the basis of HIV should be taken up as a concern within the context of the Bill;
- Appropriate measures for stakeholder input should be provided for by allowing for civil society representation on the National Health Authority and setting up a national civil society forum;
- Municipal health services should be broadly defined to include the provision of the core primary health package that covers district hospitals as well;
- In line with the commitment under the White Paper, provision should be made for occupational health services under the district health system;
- The Bill should set out clearly the role of statutory health institutions such as the Medicines Controls Council (MCC) and Medical Research Council (MRC) within the health system;
- Regulations under the Bill should allow for greater public consultation and should be subject to the approval of Parliament; and
In line with the comments noted above we believe that extensive redrafting is required in certain instances. According we have called for a redrafted version of the Bill to be sent to the NEDLAC Development Chamber for consideration. We await the response of the Department for further engagement.
After much controversy the Immigration Bill was passed by Parliament. In a letter to the Select Committee on Social Services, COSATU registered its concern that despite amendments introduced by the Home Affairs Portfolio Committee, the Bill retains the fundamental flaws initially drafted by the Department of Home Affairs.
The amendments in substance amount to little more than a rearrangement of the Bill’s original provisions, in the face of considerable intransigence and obduracy by the Department. In some cases this has further complicated existing problems in the Bill. Up until March this year there had been no significant substantive developments in the Home Affairs Portfolio Committee, with the Committee having focused on familiarising its members with the content of the Bill.
However, problems surfaced when opposition parties and the Home Affairs Ministry objected to the pace at which the Bill was being processed. The main concern was that as a result of two constitutional court judgments, certain sections of the current immigration legislation – the 1991 Aliens Control Act – would become invalid on 2 June this year.
These relate to sections regulating work permits and temporary residence permits for foreign spouses or partners of South African citizens. A special meeting of the National Assembly Rules Committee was convened in order to assess the Portfolio Committee’s handling of the Bill. This eventually agreed on a programme that would process the Bill in order to comply with the Constitutional deadlines.
COSATU, in its joint submission with FEDUSA and NEDLAC, raised a number of concerns with the Bill and suggested that the Parliamentary process be extended. This would have been possible either through an application to the Constitutional Court for an extension of the deadline or by passing amendments to the Aliens Control Act as an interim measure. However, this suggestion was not taken on board.
The Bill in its current form does not address any of our concerns, some of which are outlined below:
1. Labour Standards: The Bill provides for the certification of labour standards by Chartered Accountants, whose training and qualifications are of no relevance and are likely to be biased towards employers. Taking into consideration the exploitative working conditions that migrant workers are subjected to, this responsibility should rest with the Department of Labour.
Further, a newly introduced quota work permits does not require certification of labour standards, despite this being an express requirement for general work permits and corporate work permits.
2. Corporate permits: A new corporate permit system has been introduced. This will allow employers with corporate permits to in turn issue work permits to foreign workers. This is a delegation of a core departmental responsibility, which will create opportunities for corruption and abuse by employers.
3. Vulnerability of Work Permit holders: A general work permit will automatically lapse, if the work permit holder (foreign worker) does not submit the necessary certification on an ongoing basis.
This effectively penalises a worker for failing to provide certification, which only an employer is able to provide.
4. Compulsory Deferred Pay: The Bill provides for the continuation of the system of compulsory deferred pay. This system has in the past been the subject of substantial abuse and has impacted harshly on the lives of migrant workers and their families.
In accordance with relevant bilateral agreements with other SADC States, this requires the remittance of a portion of the earnings of relevant migrant workers to the sending country.
We believe that a consultation process, involving all stakeholders, should be initiated. This should be directed at renegotiating relevant bilateral agreements.
5. The Quota System: The Bill provides for a quota system giving almost total discretion to an old style Department which still retains many of its apartheid-era characteristics, and is still influenced by xenophobic and racial mindsets. This is a recipe for problems.
Further, it is unclear how the quota system will impact on the
Renewal of current work permits, which although granted originally under the Aliens Control Act, will now have to be renewed in terms of the new Immigration Act.
6. Skills and quotas: COSATU believes that skills shortages should be addressed through broader consultative process involving NEDLAC social partners and the National Skills Authority. This is not catered for in the Bill.
7. Regional Southern African Development: The Bill fails to integrate a regional dimension into the Bill, which would make linkage between immigration policy and regional social and economic development.
COSATU strongly believes that there is a need to replace archaic, discriminatory legislation such as the current Aliens Control Act (ACA) with more progressive immigration policy. Unfortunately the attention on the Immigration Bill has almost exclusively focused on addressing skills shortages in the country.
However, immigration policy must address a wider range of considerations, of which skills is just one component. It is widely accepted that the ACA has perpetuated discriminatory, xenophobic practices, which have primarily been directed at black foreign nationals. This calls for the introduction of an immigration policy that reflects South Africa’s democratic transition.
We do not believe that the Bill addresses these broader concerns especially since it merely incorporates the provisions of the ACA in many instances. For example, the Bill allows for the arrest and 30-day detention period of an illegal foreigner without a warrant and without an automatic right to be brought before a court.
COSATU notes with interest that the Select Committee on Social Services has already called on the Department of Home Affairs to draft an Immigration Amendment Bill to be tabled in the near future. This would include a "comprehensive" list of amendments in order to addressing the numerous concerns that have not been taken board during the public hearings.
This we believe vindicates our original suggestion that the Parliamentary process be extended. Nevertheless, COSATU fully intends to engage in future processes around immigration policy in order to ensure that our concerns are addressed.
Position Role Person National Assembly Speaker The National Assembly elects the speaker. The is the spokeperson and representative of parliament and has overall responsibility for the functioning of the National Assembly. The speaker oversees debates and maintains discipline within the Assembly
Speaker Frene Ginwala
Deputy Speaker Balrka Mbete
Chief Whip and Caucus Each political party elects a Chief Whip who is responsible for the smooth running of the affairs of their party within parliament, and acting as their spokesperson. This includes the organisation of the party's members and the planning of the parliamentary programme. The party Caucus, comprised of all MPs of a party, is the forum for discussing parliamentaty issues.
ANC Chief Whip Nkosinathi Nhleko
Deputy Chief Whip Geoff Doidge
ANC Chair of Caucus
Leader of Government Business The leader of Government Business is appointed by the Cabinet and works together with the Speakers and the whips of parties to decide on the programme for parliament Jacob Zuma Chairperson of Committee The chairperson of Committee facilitates between the various chairs of the committees in the National Assembly MJ Mahlangu Secretary to Parliament The Secretary to parliament is responsible for the administration and logistics og the day to day running of parliament. This includes managing the staff and resources of parliament Sindiso Mfenyana
National Council of Provinces
Chairperson The Chairperson of the NCOP is elected by the Council and is responsible for the effective running of the council. Overseas debates and discipline within the council.
Chairperson Naledi Pandor
Deputy Chairperson M Mushwana
Chief Whip Is responsible for assisting the Chairperson to maintain the rules of parliament and oversee the effective functioning of the council. Assists with the planning pf programme for the council
ANC Chief Whipv Enver Surty
Chairperson of Select Committee The chairperson of select committee facilitates the chairs of the varoius select committee to ensure the smooth and efficient running of the committee. S. Ntlabati
The following article consists of edited extracts from Parts 3, 6 and 8 of the "Spotlight on Parliament" series produced by the Public Participation and Information Section of Parliament. The full series can be found on the Internet at:www.parliament.gov.za/pubs/spot.htm
Parliament is elected to represent the citizens of South Africa. It is the place where laws are passed and where important issues of the day are discussed. It is the place where the views of citizens can be heard directly by parliamentary committees. Parliament also keeps the executive and state institutions accountable. Parliament is made up of two 'houses' - the National Assembly and the National Council of Provinces (NCOP). The National Assembly represents the people, chooses the President, provides a forum for debate, passes laws, and oversees the executive.
The NCOP represents the provinces to ensure that provincial interests are taken into account in the national sphere of government, participates in passing laws, provides a forum for debate of provincial issues, and ensures that local government is represented at national level. Both houses participate in debating and voting on the Budget. Most of this work is done by Members of Parliament (MPs) sitting in parliamentary committees. MPs also have responsibilities outside Parliament. They must consult with the public and serve people in their constituency areas.
The lawmaking process
Parliament makes new laws, changes existing laws and repeals laws which are no longer needed. Laws can be made in different ways. The most common way is for a government department to prepare a bill (a draft law) which is debated in parliamentary committees in both houses of Parliament and amended if necessary.
A bill can only be introduced in Parliament by a minister, a deputy minister, a parliamentary committee, or an individual MP. Most bills are drawn up by a government department under the direction of the relevant minister or deputy minister. The bill is published in the Government Gazette, often in draft form for public comment to the department, unless it is very urgent. Bills drawn up by Departments must be approved by the Cabinet before being submitted to Parliament. Bills introduced by individual MPs are called private members’ bills.Before it can become a law, a bill must be considered by both houses of Parliament.
Once it is introduced, the bill is referred to the relevant committee. It is debated in the committee and amended if necessary. Once it has decided on its version of the bill, the committee submits it to a sitting of the house for further debate and a vote. If the bill passes through both the National Assembly and the NCOP, it goes to the President for assent. Once the President has signed it, it becomes an Act of Parliament – a law of the land.
Parliament has a responsibility to keep the government (the executive - the President and the Cabinet) accountable to the people. State institutions like the Auditor-General are also accountable to Parliament. MPs keep the executive accountable through:
- Asking parliamentary questions
- Having parliamentary debates about important issues
- Proposing and voting on motions
- Requiring the executive and state institutions to report to Parliament
Parliament and its committees have strong powers. They can summon any person to give evidence or to produce documents, and they can require any person or institution to report to them.
A state of emergency can only be declared by an Act of Parliament, and it can only be renewed if Parliament agrees. If Parliament passes a vote of no confidence in the Cabinet (excluding the President), the Cabinet must be reconstituted. If Parliament passes a motion of no confidence in the President, the entire Cabinet must resign.
Each Cabinet minister is responsible for a particular government department. For example, the Minister of Health is responsible for what goes on in the national Department of Health. MPs can ask ministers questions about their departments and expect a reply. Because these questions must be answered and because what goes on in Parliament is public, this is an important way of keeping the executive accountable to the people. Questions are a way of making issues of the day public.
A snap debate may be held when an issue of national importance must be discussed urgently. Debates are held around the annual Budget, and around bills which the Parliament has been asked to approve. When a government department submits a White Paper (a statement of its policy programme), this will also be debated in Parliament. The various political parties are each given time to make speeches and time is allowed for debating the points which have been raised.
Committees in Parliament
Parliamentary committees have a duty to take the views of the public into account when they discuss a bill or important issue. If the issue is of great public interest, committees may ask the public to make written submissions or to present their views directly to the committee. Most of the work of Parliament is done by committees. Committees are the places where members of the public can express their opinions directly and try to influence the outcome of Parliament's decisions. Their meetings are open to the public, although they may be closed if there is a very good reason to do so.
Working in committees allows Parliament to:
- Increase the amount of work that can be done
- Ensure that issues can be debated in more depth
- Increase the participation of members of Parliament (MPs) in discussions
- Enable MPs to develop expertise and in-depth knowledge of the committee's area of work
- Provide a forum for the public to present its views directly to MPs
- Provide a forum for Parliament to hear evidence and collect documents which are relevant to the work of the specific committee
Once a committee has considered a bill, the bill must be debated and voted on in the house. Committees have the power to summon any person to appear before them, give evidence or produce documents, they may require any person or institution to report to them, and they may receive petitions, representations or submissions from the public. They play a crucial role in the lawmaking process.
Portfolio and select committees
The National Assembly appoints from among its members a number of portfolio committees to shadow the work of the various national government departments.
Portfolio committees consider bills, deal with departmental budget votes, oversee the work of the department they are responsible for, and enquire and make recommendations about any aspect of the department, including its structure, functioning and policy. The work of committees is not restricted to government - they may investigate any matter of public interest that falls within their area of responsibility. For example, in 1999 the Portfolio Committee on Trade and
Industry held an investigation into bank charges and interest rates.The National Council of Provinces (NCOP) appoints from its permanent members a number of select committees to shadow the work of the various national government departments and to deal with bills.Because the NCOP has only 54 permanent members compared to the National Assembly's 400, the select committees shadow the work of more than one national government department.
The National Assembly's Standing Committee on Public Accounts acts as Parliament's watchdog over the way taxpayers' money is spent by the executive. Every year the Auditor-General tables reports on the accounts and financial management of the various government departments and state institutions. Heads of these bodies are regularly called to account by this committee. The committee can recommend that the National Assembly take corrective actions if necessary.
Ad hoc (temporary) and Joint Committees
Whenever there is a need for a specific task to be done, Parliament or one of its houses may appoint an ad hoc (temporary) committee to do the work. When the task is complete, the committee is dissolved. Examples of issues dealt with by ad hoc committees are investigations into specific laws (like the Open Democracy Bill) or specific issues like gender equality or alleged breaches of parliamentary privilege.The National Assembly and the NCOP together appoint a number of joint committees, for example the Constitutional Review Committee.
The Joint Committee on Ethics and Members' Interests keeps a register of MPs' financial interests to help prevent corruption and conflicts of interest.When the National Assembly and the NCOP are unable to agree on a bill, the Mediation Committee tries to reach a compromise.
During the parliamentary sessions for 2001, 85 bills were submitted for consideration. Of the bills submitted 69 were processed and assented to by the President to become acts for the year 2001. For a full list of Bills submitted to parliament during 2001 visit the www.parliament.gov.za website.For a complete list of the 69 Acts passed in 2001 visit the www.polity.org.za site. The gov.za site also has listings of Bills and Acts passed for 2001.
Note: Amendments to the BCEA and LRA have been passed by both houses, as have the UI Bill and UI Contributions Bill
2002 Submissions and pending submissions
Title of submission submitted to Date Comments on draft 2002 division of revenue bill National Treasury 21 January 2002 COSATU Submission on the Draft National Health Bill Department of Health 8 March 2002 Submission on Municipal Finance Management Bill Portfolio Committee on Finance 12 March 2002 Submission on Draft Wage Incentive Legislation National Treasury South Africa Revenue Services 13 March 2002 Submission on Insolvency Bill Justice Portfolio Committee Pending April Submission on Immigration Bill Home Affairs Portfolio Committee Pending April Submission on Electronic Communications and Transaction Bill Communications Portfolio Committee Pending April Submission on crossing the floor legislation Justice Portfolio Committee Pending April Submission on Draft State Property Management Bill Department of Public Works Pending April Submission on Industrial Strategy Department of Trade and Industry Pending April Submission on Financial Services Ombudsman Bill Finance Portfolio Committee Still to be determined