Allister Sparks

Time for business, labour to talk as economic crisis looms

2015-08-05 09:03

Allister Sparks

A series of events last week sent a chilling message that we are heading swiftly towards an economic crisis point.

One was from Finance Minister Nhlanhla Nene warning that our economy is slowing down more than he expected and is now far below the average in a slow-growth world. Having come in at a pathetic 1% for the first quarter of this year, he now fears it won't reach his expected 3% by 2017.

Another was from Anglo American CEO Mike Cutifani noting that Anglo is looking to cut a third of its work force to 98 000 through the sale of 15 assets and retrenchments in the next two years. Lonmin will shut five platinum mines at a cost of 6 000 jobs, while other mining companies in gold, coal, platinum and iron are also shutting mines and shedding jobs because of rising costs and falling commodity prices.

Third was the Chamber of Mines tabling a final take-it-or-leave-it offer to five unions with whom it has been negotiating for five weeks. The chamber says the mining companies won't go beyond their present offers, which fall well short of the unions' initial demands of between 100% and 80% deals. The unions are calling the ultimatum "intimidation," so we could be in for another round of strikes in the already damaged mining industry,

Public sector workers have already been granted  increased benefit packages of 11.5% over the next three years, costing the state another R66bn. This while 90% of state-owned enterprises are already running at a loss.

Now Economic Affairs Minister Ebrahim Patel has announced that  government is launching a massive jobs drive to take on extra workers in all state departments for maintenance, not infrastructure,  jobs - presumably at the newly increased wage packages. He didn't say by how much that would deepen public sector losses.

Put all this together and you get a picture of where we are heading.

We have known for a long time that we need a 5% growth rate for five to seven years to prevent our already horrendous unemployment rate from getting worse at a rate of about a million a year: right now nearly half our people under age 35 are not working. That 5% is what the National Development Plan was designed to achieve.

The NDP was formally adopted by the ANC at its Mangaung conference and became President Zuma's banner issue in 2014 election campaign. But  it doesn't seem to be going anywhere, and its godfather, former Finance Minister Trevor Manuel, has left the government in frustration.

The brutal fact is that we have been nowhere near 5% growth ever since Zuma came to power.

What does this mean in practical terms?

Three years ago Nene's predecessor at the Treasury, Pravin Gordhan, warned that government revenues (through low growth) were shrinking, while over-expenditures were soaring (through corruption, wastefulness and inefficiencies), to the point where the government might soon be unable to meet both its welfare payments and its infrastructural development commitments.

Now it seems that critical moment is at hand. Nene said last week that money intended for capital expenditure will have to be diverted to pay for the increased state-sector salaries.

So we are into a vicious cycle. While unemployment balloons we are having to cut infrastructure developments to pay higher salaries, which means cutting growth, which means more unemployment.

The ultimate paradox being that we are actually paying higher salaries to increase unemployment. Which, of course, is nothing new in the voodoo economics of the Zuma administration.

But there is a tiny glimmer of light in the gloom. In his speech about Anglo's impending staff cuts, Cutifani made a conciliatory overture to the unions and government to see if they could negotiate a more flexible labour structure. He said he didn't want to ask people to work more hours, but rather to reassess the entire labour scene, including migrant labour and other social issues.

This is a vital issue that I have been advocating for years, and it should not be confined to the mining industry or just those unions with which Cutifani is engaged.

It is particularly  important that the nine private sector unions expelled from Cosatu, led by the National Union of SA Metalworkers (Numsa), be included. This group, with Irvin Jim and former Cosatu secretary-general Zwelinzima Vavi among them, are forming a United Front and considering establishing a Labour or Socialist Workers Party, which could conceivably become a  partner in a coalition government at some point.

If that happens, its labour policy will have a significant influence on the country's future.

At the moment the Numsa group is being labelled leftist. That may be true, but I have known Vavi for a long time as an eminently sensible man. He is the son of an Eastern Cape farm labourer with a visceral understanding of poverty and unemployment. I believe he has a strong realistic streak in him.

What I feel business and the unions need to reflect on is that both are still too influenced by the adversarial mindsets inherited from the apartheid era. But that era is fading into the past now and its legacies must be overcome. A new labour relationship is required.

From the Numsa group's perspective, it must surely recognise that the more the economy grows the more its own membership will grow and the more competitive influence it will have. The converse applies equally: a shrinking economy means fewer jobs, fewer members and weaker unions.

Sure there will be times when aggressive confrontation is needed. The watchword is flexibility. Changing circumstances require changing strategies, and right now a new and much more flexible negotiating framework is needed.

In his address at the Gordon Institute of Business Science last week, Cutifani spoke of a "trust deficit"  between the public and private sectors that had developed over the years, and urged that business and labour get together to overcome it.

"If we are to create a more competitive South Africa, business and labour must work together," he said. "Our current deep suspicion of each other is simply not sustainable and is evidence to the world that the Rainbow Nation is floundering, as it cannot get past self-interest and outdated ideological mantras."

Exactly. So let key figures in business and labour start coming together to see if they can find ways of working more effectively for the benefit of both, which is to raise the growth rate and create more  jobs. It is probably not something that can be done collectively in some grand forum, which would be too prone to grandstanding. But it is a process that can be started at ground level, with discussion groups leading to greater mutual understanding and the incremental building of a new labour relations framework.

But it requires more than one man to be the ball-carrier in this game. South Africa's business leaders have been too reticent for too long, complaining in private about the constraints they feel but doing little about it. Mark Cutifani has begun a new process of open-hearted communication. It is time for others to follow.

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