Barking up the wrong tree

ECONOMIC Development Minister Ebrahim Patel has ensured that the year closes on a controversial note with his growth plan, in which he proposes capping wage increases.

During December and January the subject will be energetically discussed – particularly in the social gatherings where most South Africans spend this time of the year, and not in council chambers and boardrooms where Patel would wish the discussions to take place.

Had his proposals been enthusiastically received, those in the highest council chambers would not have minded postponing their holiday plans for a week or two to set the implementation of the proposals in motion.

This would probably have included negotiations, but even more likely the allocation of responsibilities, setting up of new institutions, and the like.

These types of meetings had initially been set down - meetings between the top representatives of the three union federations in Nedlac, business leaders and cabinet members in the economic sphere – and would have continued this week and at least to the end of next week, the writer heard on good authority.

But the growth plan's content is of such a nature that no one could see any reason for getting together now, at this inconvenient time of the year.

Patel's plan is the latest in a long list of growth plans and strategies presented to South Africans since the advent of democracy, and from which precious little has unfortunately emerged.
Just cast your mind back for a moment: the reconstruction and development plan (RDP) in 1993; the labour market commission report in June 1996; two weeks later the hated growth, employment and redistribution (Gear) plan which Trevor Manuel announced in parliament without any prior negotiation; the jobs summit declaration in 1998; and former president Thabo Mbeki's growth and development summit in 2003.

Much ado about nothing - again and again
In 2005 Mbeki followed up with Asgisa, an accelerated growth plan involving the unsnarling of infrastructure bottlenecks, and Jipsa, a plan to resolve the shortage of scarce skills.

Almost all the big projects, other than Gear, were accompanied by laborious agonising over what was possible and what wasn't, who should sacrifice what and what was non-negotiable.

Each of these, other than Gear, was preceded by weeks and months of negotiations behind closed doors between the social partners - government, labour, business and the community.

The negotiations followed the usual process: first the identification of what everyone agreed on and points on which they differed. Next, formal agreements were concluded regarding the items on which everyone agreed.

Then followed the difficult job of getting the parties to move away from the points on which they differed. This was not always possible, because the different parties often flatly refused to budge.

This stage of the process often devolved to sector organisations such as the Chamber of Mines, agricultural unions and employer organisations, with the unions in the corresponding seats across the table.

All of this consumed a tremendous amount of time and energy, and precious few of the grand plans hammered out led to anything tangible.

Other than Gear - the plan about which no negotiations were held, but which was mercilessly forced on the country. When Manuel presented Gear in parliament, government had spent more than 50c of every rand of its revenue on servicing - not discharging - debt.

And when Gear's time ran out in 2000, government budgeted for a surplus.

Yes, sacrifices were required, and it was workers in the main who bore the pain at the bottom of the food chain. But the results formed the base of the growth we experienced in subsequent years.

At most of the negotiations Patel headed trade federation Cosatu's negotiation team. He probably knows better than anyone how difficult it can be to get agreement on anything like wage moderation – and how downright little the previous processes produced.

Public sector pay out of control

Wages in the private sector are moreover not really exorbitant, excepting perhaps one or two areas like the clothing industry. In most other industries - like mining and manufacturing - wages are not the growth-inhibiting culprit.

Wage costs in the public sector, particularly in the public service, are a different kettle of fish.

Since the 2007 public servants' strike wage increases have spiralled out of control, so that a worker in the public service currently earns 28% more than someone doing the equivalent job in the private sector. This has been demonstrated in research by the development policy unit at Patel's alma mater, the University of Cape Town.

Statistics on the situation at state-controlled corporations are more difficult to come by, but there is reason to believe that things there are even worse.

In the last protracted economic upturn it was not so much private consumer expenditure that fuelled inflation. It was "administered" prices – children's school fees, municipal accounts and electricity costs.

Wages in the private sector are not the problem – it's those in the public sector. The balance of power between employer and employees in the public sector has clearly been upset.

The strikes in 2007 and 2010 are clear evidence of this. Government will not rectify the situation before it does away with the central bargaining council for the public service and introduces new, better balanced negotiating arrangements for its workers.

If this was what Patel had in mind when he spoke of a ceiling for wage increases, he is sure to receive thunderous applause.

 - Fin24

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