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Shopsteward Volume 27 No. 2

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Conferences  |  COSATU Speeches

Notes for an input BY Sam Shilowa, COSATU General Secretary at the Labour Law Conference 13 July 1996

It was Marx, I think, who said something to the effect of: 'we change the world, but not under conditions of our own choosing.' ( If he didn't say it, he certainly should have!)

We face a situation in South Africa today where we are attempting to transform our country. Yet we face various constraints, which we did not choose. Neither are they of our own making. They have been thrust upon us by history.

These include:

  • Firstly, the legacy of apartheid: Along catalogue which includes mismanagement of our economy, the debt burden, destruction of our human resources, a deformed public sector, vast unemployment and poverty, marginalisation of the majority from economic activity, massive income and social inequalities - the list goes on.
  • Secondly, the new world situation into which our democracy has been born. Politically, this situation has been characterised as a unipolar one in which there is no serious alternative to the power wielded by the G7 countries, and their international financial and trade institutions. Economically, the process of globalisation has trampled the sovereignty of nation states. Capital has unprecedented mobility, aided by new technology and the new information age. The world economy has been organised into powerful trading blocs. We are told that those who don't play by the rules of the new game, will be forever marginalised and fall by the wayside.

The question therefore arises: Is it possible to achieve equity and growth under the constraints inherited from apartheid and imposed by the new world order?

Two dangers arise in answering this question. The first is falling into the trap of fatalism - passively accepting that these forces ranged against us are too powerful to counter and we must simply accept our fate. The second is that of blind idealism - pretending that these constraints don't exist - and that we can impose our agenda of change, without factoring these objective realities into our transformation equation.

The Reconstruction and Development Programme, and more recently labour's Social Equity document, are an attempt to say, despite all these obstacles, we can take our destiny in our own hands. The decades of brutalisation, division and racism, did not prevent us from uniting our country and building a democracy. These documents attempt to show that the same can be done in the sphere of the economy and the development of our people. Where there are constraints and the need to adjust, these must be debated. They should not only be shared with the DBSA, WB, IMF and university academis. After all it is us who will make the sacrifice, not them. When the USSR collapsed and was unable to suppy certain commodities to CUBA, CASARO went to the people. Once they understood, they were willing to endure the hardships, based on a better tomorrow.

Those opposed to transformation are quick to rubbish these programmes as 'wish-lists', 'wooly thinking' or 'out of line with modern realities'. This is to be expected.

We need to seriously ask ourselves whether the RDP and Social Equity proposals are realisable, and take into account these realities I have outlined. I believe that not only are they realisable, but that they are the only serious proposals able to propel our country forward. Where we are failing, in areas such as housing, human resource development, and others, it is because we are attempting to build on the basis of past, failed policies, or vested interests are blocking real change. We are succumbing to blackmail of the "market".

As a country, we are today in danger of digging ourselves into a trap which will almost be impossible to escape from. That is, to abandon the path of transformation which we have set ourselves, by relinquishing our national sovereignty in the sphere of economic decision-making and sacrifice them in the alter of profits.

It has become widely accepted that the implementation of the economic policy prescriptions of Thatcher, Reagan, the World Bank and the IMF, have had devastating consequences on countries where they have been imposed. These harsh facts are acknowledged, if not by all economists, then certainly by the vast majority of people living in these countries!

Yet there is enormous pressure on South Africa, not least by 'the market', to adopt precisely these policies which failed elsewhere. This neo-liberal framework has by now become familiar. It includes, wholesale privatisation; slash state spending; rapid deregulation of the labour, trade, and financial markets; contractionary monetary policies; and export orientation.

While these prescriptions are ideologically driven, and applied regardless of conditions which countries are facing, we do not reject them only on ideological grounds. We rather reject this package because it would be a disaster if applied in our country.

We do not reject opening up our economy, if this is done in away which promotes our industries. We do not reject fiscal discipline, if it is subsumed to the task of economic development, rather than the other way round, and so on.

The attempt by powerful domestic and international interests, to force us to accept laissez-faire, unfettered capitalism, flies in the face of the entire developmental experience of the 20th century. All successful examples of reconstruction and development in Europe, America, Japan or East Asia, have entailed massive involvement by the state, the creation of domestic demand, huge investment in human development, and policies to direct investment and industrial activity. Some, if not all, even introduced todays' dreaded drastic measures, such as nationalisation of key sectors (South Korea), running of massive deficits (eg. Malaysia, more than 20%) and other measures which we are now told are heresy. None have relied exclusively on the market or attempted to remove the state from leading the development process.

A number of proposals have recently been made in South Africa which appear to reflect, at first reading, the agenda outlined above. Without going into the detail of these proposals, which we are drawing from different sources, I want to raise some crucial problems which they pose for social equity and economic development. Finally I will briefly outline the proposals in labour's Social Equity document which attempts to concretely map out an alternative growth path.

I am not going to attempt to 'negotiate' with government or business proposals from this platform - our Executive will be discussing a formal response next week. What I want to do is raise some broad concerns with the direction some of these proposals are likely to take us.

Labour Market Policy

A disturbing tendency is emerging for the now fashionable concept of 'regulated flexibility' to be interpreted to mean the undermining of the already inadequate basic standards for the most vulnerable and low paid workers.

In a devastating attack on the notion that the S.A. labour market is rigid, Guy Standing of the ILO pointed out that "the labour market is flexible, in most senses of that overused term. Most workers face unemployment and income insecurity, while wages at the bottom are low and unprotected by the standards of many countries... Most claiming that economic growth is impeded by an 'inflexible labour market' are affluent, and it ill - becomes the privileged to advocate making wages and working conditions of the poor more flexible, unless they are very confident of their evidence."

He also slams the idea of introducing a dual labour market as "misguided ... distortionary and a prescription for more regulation." Any proposals which wittingly or unwittingly promote the segmented character of our labour market, will be entrenching the core features of the apartheid cheap labour system, and will be rejected by COSATU.

The attempt to roll back the LRA, centralised bargaining and basic employment standards would be a recipe for conflict on the shop floor and the economy at large. Politically, the idea that we can somehow compete with the Indonesia's of this world through a 'race to the bottom', is to misread the consciousness and determination of working people in S.A. to protect and advance their rights.

At an economic level such an approach would completely undermine the success of the RDP growth strategy. This strategy depends on the existence of strong representative trade unions, able at an industry level to negotiate and implement a programme of restructuring, human resource development and workplace democratisation. As long as we have capital, unfettered, it will continue to pursue jobless growth, speculative investment and short-cuts in terms of industrial restructuring. Perpetuation of the apartheid wage gap and old managerial practices will continue to act as a barrier to the unleashing of our productive potential. Instead, wage moderation linked to productivity (whatever that means) will be translated into wage restraints by the low paid while the bosses grow fat.

Trade and Industry Policy

The active involvement of the millions of our people who have been excluded from the mainstream of the economy is seen as a cornerstone of our new growth path. The unleashing of this untapped power of the domestic market, through infrastructural provision, the raising of peoples living standards and the resultant cycle of demand and expansion, is one of the key underpinnings of the RDP growth strategy.

Despite this, there seems to be growing emphasis placed on a one sided strategy of export-orientated growth. While increasing exports are important, not least to stabilise our balance of payments and to finance the technology we need, an expanded and dynamic home and regional market should be considered as the foundation for sustainable growth.

A one-sided obsession with exports will not create the jobs we need. A study by the National Institute for economic Policy (NIEP) has established that between 1960-1996 the vast majority of production (over 80%) in the USA, Europe, Asian countries was geared towards domestic use, despite vigorous promotion of exports for many years. Further, NIEP has shown that increased production for export in a number of countries has created 2-4 times fewer jobs than similar increases in production for domestic consumption.

Our industry policy needs to be proactive and dynamic, rather than concentrating on or reacting to world pressure. Current indications that we are anxious to lift tariffs faster than our international obligations in all sectors of the economy, send the sign that we are more anxious to please the international community than to build our own industries.

World trade is a ruthless monster we are dealing with- as we saw with the EU negotiations. No one is going to look after our interests as a country if we don't do so ourselves. Indeed France is sending that message in regard to agricultural products.

Another dangerous route that seems to be tempting us is that of EPZ's. Proposals for tax exemptions to attract business to economically depressed regions may on the face of it seem attractive. This is however a short cut to regional industrial development which international experience shows has many hidden pitfalls. This approach: undermines the integrity of the tax base; fragments national economic policy; and is a slippery slope towards undermining of labour standards and trade union bashing in those zones. Poor regions will increasingly be trapped in a race to offer cheaper and more exploitative conditions. Problems facing these regions need to rather be addressed through other incentives. Otherwise we are going to repeat the disaster of the failed bantustan border industry experiments. We hope that this is not an attempt at asking the poor to finance job creation while business go on as usual.

Fiscal Policy

Without going into the complexities of fiscal policy, it worries us that fiscal discipline appears to becoming an end in itself, rather than a tool for development. Enormous pressure has been brought to force government to rapidly cut back its fiscal deficit, irrespective of the role which deficit financing could play in development. Our friends in government sem to have swallowed this lie, hook, sink and liner.

This approach could have several detrimental consequences including - cut backs in social services, cuts in public sector employment (particularly low paid workers); limitation of public sector infrastructural investment; and greater pressure to privatise and commercialise public enterprises. Whatever the motives, this is the route that Chirac and Kohl are wanting to impose in the rush to formalise the single European union currency.

This would seriously undermine the developmental role of the state, retard economic growth and undermine delivery of the RDP.

Instead of going this route we believe that government should explore more creative approaches to the debt problem; introduce a pay as you go system for public pensions (which could immediately reduce the deficit by half); and deal with the problem of high interest rates, which are inflating our debt repayments. We must also reject the attempt to place the public pension fund into pravate hands in the same way that other pension funds are run.

Further, a carefully targeted programme of expanded public expenditure, particularly on capital investment, would play an important role in promoting faster growth, broadening our tax base, and thereby creating a virtuous cycle. The opposite, restrictive approach, on the other hand, threatens to choke off growth and ironically, worsen the squeeze on our budget.

Monetary Policy

The present trend is towards what has been called Sado-monetarism or Thatcherite monetary policy, combined with the liberalisation of exchange controls and devaluation of our currency.

The current policy of keeping interest rates high stifles growth, raises the level of debt, frustrates the housing programme, and hits small business and the person in the street. The only beneficiaries appear to be the booming finance industry, financial speculators, and the 'hot' short term foreign investors. This also makes our economy particularly vulnerable to capital movements, and the danger of a Mexico type scenario.

This is worsened by exchange control liberalisation, which both enables foreign investors to withdraw capital at will, as well as domestic business incrementally moving capital out of the country. It is hard to understand this approach when we are facing severe balance of payments problems, and low foreign exchange reserves.

Social Equity and Job Creation

I now want to briefly summarise the proposals of the labour movement, which attempt to harmonise and integrate the objectives of social equity and economic growth. Where shortcomings are pointed out, we remain ready to adjust

1. Job creation

We propose a comprehensive programme of measures to create jobs in South Africa.

    1.1 Public works and mass housing programmes

    We propose that 300,000 housing units be built over the next three years We propose an accelerated programme of public works in the provision of electricity, piped water supply, sanitation, child care facilities and health care clinics to black areas.

    These programmes should: use labour-based construction methods and be designed to maximise employment; target the long-term unemployed, women and youth; place special emphasis on rural infrastructure and include a training component.

    The sources funding such programmes are the fiscus, the corporate sector and prescribed investment requirements on the retirement and long term assurance industry.

    1.2 Modernise our industrial base

    A major means to foster job creation is through the modernisation of our industrial base. A more efficient industry is able to win back parts of the domestic market that have been lost to imports. A greater share of the domestic market and increased exports will lead to job creation, and the drawing of currently unemployed workers into gainful employment.

    We also propose:

    • expansion of fiscal measures to encourage reinvestment of corporate profits,
    • a National Restructuring Fund (NRF), to finance the introduction of new technology and work organisation where companies are able to show expanded output and the creation of new jobs.
    • policies to expand the savings rate in South Africa, as a critical means of financing new investment.

    1.3 Share the jobs

    • We propose that the current high level of overtime work be strongly discouraged and, where possible, replaced by full-time new employment.

    1.4 Don't export our jobs

    We propose:

    • A series of active industrial policy measures to improve efficiencies and the performance of companies.
    • A pragmatic programme which lowers tariffs carefully, and not faster than required under the terms of GATT;
    • Simultaneously, a set of social adjustment programmes which will absorb, retrain and then place into new jobs, workers displaced by restructuring.
    • The Social Plan Act proposals submitted by labour to Nedlac be implemented without delay.

    1.5 Expand domestic demand and promote local purchasing policies

    We propose:

    • Policies which will expand the income of workers, hence stimulating domestic demand.
    • The introduction of additional incentives through the procurement policies of national and provincial tender-boards, the SANDF and parastatals, to further encourage local job creation.
    • The use of locally manufactured raw materials should be encouraged and preferences granted to companies which are expanding production for the domestic and the export market.
    • We should launch a `buy local, buy fair labour standards' campaign to encourage consumers in the spirit of the `new patriotism', to purchase goods made in South Africa, under fair labour standards.
    • The introduction of a label of origin requirement on all consumer goods sold in South Africa.

    1.6 Train and develop the workforce

    We propose the introduction of a levy on companies of 4% of payroll, to be used to finance the retraining of workers, with supporting grants from government.

    1.7 Increase productivity

    We propose a national productivity and equity framework agreement to be negotiated through Nedlac, to cover all industries. This could be a basis, in industry-level negotiations, to address concrete targets of productivity improvement. Productivity issues should become a matter for collective bargaining.

    1.8 Create jobs in labour-intensive processes

    There is a vital role for the state in leading productive investment, through the policies of the parastatals and the public sector.

    The IDC should shift from its fixation with capital-intensive mega-projects, and use its resources to invest in labour intensive processes in industry.

    The private sector too, should be required to invest in job-creating projects. A substantial expansion of output requires investment in new productive capacity by the business community.

    1.9 Stop retrenchments now

    A major cause of unemployment is the constant retrenchment by businesses of workers. Even profitable companies engage in periodic frenzies of retrenchment and `downsizing'. To us, retrenchment is often a real indictment of management, and a barometer of its incompetence.

    We call for a general accord with organised labour on the restructuring process in the public sector, which seeks to address the overall interests of society.

    1.10 Redistribute land to the poor

    A major programme of land reform, combined with the promotion of small-scale farming among black people, can promote economic activity and employment very substantially.

    We propose that active redistribution of land policies be followed, and the government immediately identifies land for redistribution.

    1.11 Stimulate economic activity

    We call for a review of monetary and interest rate policies. Other, less destructive means of addressing inflation should be pursued through Nedlac, and at sectoral level.

2. The second pillar is redistributive fiscal policies

We propose two measures to ensure a more equitable fiscal policy.

  • redirect spending towards social services for the poor.
  • increase the redistribution features of tax policy.

Proposals include:

  • Finance housing and health care for all
  • Increase corporate taxation
  • Reduce consumer tax on basic requirements
  • Introduce a tax category for the super rich
  • Introduce a capital gains tax
  • Introduce a luxury goods tax
  • Encourage savings through provident funds

3. The third pillar is breaking the stranglehold of big business in the economy

The high levels of economic concentration in South Africa have major negative consequences on social equity, concentrating power and economic decision-making in the hands of a few and limiting economic performance.

We propose that a new anti-trust policy be negotiated to address these problems. Current efforts by conglomerates to `unbundle' are no more than corporate camouflage, which retains power and control in the small group of shareholders and their directors.

Organised labour will set up an Anti-Trust Commission.

4. The fourth pillar is through improving worker rights

We propose four broad measures to improve the incomes and quality of life for workers:

  • strengthen worker rights through labour market measures, including the development of centralised bargaining;
  • invest in training and human resource development;
  • use public procurement policies to advance worker rights;
  • reduce wage differentials between managerial and `blue collar' workers.

5. The fifth pillar is greater industrial democracy

We propose four broad measures to ensure this:

  • use workplace forums to strengthen shop steward structures
  • reduce managerial prerogative through legislation
  • grant workers 50% of the seats on company boards
  • address representation on mutual insurance companies immediately

6. The sixth pillar is championing economic development and worker rights internationally

We propose six broad measures to achieve this.

  • help the development of the Southern African region through technical and other
  • assistance and aid to neighbouring countries;
  • assist the growth of trade unionism as an important instrument of social development in all Southern African countries;
  • campaign for a social clause to be part of all multilateral and bilateral trade agreements;
  • pursue the proposal that the WTO become a tripartite body, with representation by government, labour and business;
  • campaign for special market access to developed country markets for those developing countries with specified labour rights;
  • champion the call of Third World countries for a debt write off by international creditors.

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