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South Africa: Labor Statement (Excerpts,2)
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South Africa: Labor Statement (Excerpts,2)
Date Distributed (ymd): 960507
(continued from part 1)
We now propose six pillars to promote social equity, based on
South African realities. These are: a programme of job
creation, a redistributive fiscal policy, proposals to break
up economic concentration, measures to promote worker rights,
a plan to build industrial democracy, steps to promote equity
and economic development globally. ...
1. The first pillar is job creation. We propose eleven
measures to create jobs in South Africa.
1.1 Start public works and mass housing programmes
The Reconstruction and Development Programme which the ANC put
to the electorate before the 1994 elections, calls for a
co-ordinated public works programme in order to create jobs.
Sections of the business community opposed this. The
electorate backed the programme. Since the election, we have
seen little evidence of a substantial public works programme
on the scale we envisaged. The old bureaucracy which we
inherited, comfortable with their job guarantees, have not
been prepared, with energy and professionalism, to tackle the
job at hand.
The attempt to involve the private sector in the provision of
housing has not been successful. Indeed, only 34,000 units
have been built by the private sector over the last 18 months,
while the housing shortage is more than 2 million units.
(Source: Business Day, 25.03.96).
Other societies devastated by war, or economic depression,
have used public works and related programmes as a short term
measure to bring the unemployed into employment. This has been
done in the United States, Europe and Japan, with great
We propose that at least 300,000 such housing units be built
every year over the next three years. ... In short, 350,000 to
550,000 jobs can be created over a three year period through
implementing such a policy. The cost of such a programme would
be about R30 billion over a three year period, at current
prices. It can yield a continuous stream of income from
occupants to help pay for the cost of construction. ...
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.
Programmes to provide roads and major dam and canal works, and
to address telecommunication inadequacies, should be put into
We propose the public works programme be financed from
government, business and labour, in the following manner:
first, through a major contribution from the fiscus (the
government sector), second, a three year levy of 5% on the
pre-tax profit of businesses (the business sector), and third,
the introduction of a prescribed investment requirement on
pension and provident funds, the life assurance industry and
the assets of the Public Investment Commissioners, to invest
5% of funds in special government bonds to finance RDP
projects (workers and policy-holders). ...
1.2 Modernise our industrial base
A major means to foster job creation is through the
modernisation of our industrial base. ... We propose the
retention and expansion of fiscal measures to encourage
reinvestment of corporate profits, instead of the paying out
of dividends. ...
1.4 Don't export our jobs
We are opposed to trade related policies which destroy local
jobs. The trade union movement accepts the need to open our
economy, but we require a process that is carefully managed
and sequenced in order to avoid job losses.
First, we need a series of active industrial policy measures
to improve efficiencies and the performance of companies.
Then, we need a pragmatic programme which lowers tariffs
carefully, and not faster than required under the terms of the
General Agreement on Tariffs and Trade. Simultaneously - not
afterwards - we need to put into place a set of social
adjustment programmes which will absorb, retrain and then
place into new jobs, those workers who are displaced by
It is instructive that the east Asian economies, often cited
in support of a range of economic policy proposals in South
Africa, were not big bang trade liberalisers. The World Bank
study into the eight high-performing east Asian economies,
confirms this reading. ...
We propose a reorientation of export incentives away from the
current cash subsidy system under the Generalised Export
Incentive Scheme (Geis). Instead, it should be replaced by the
tripartite National Restructuring Fund, which assists
companies to address the fundamental problems of
uncompetitiveness in areas of education, technology upgrades
and work organisation.
1.5 Expand domestic demand and promote local purchasing
... The domestic market must remain an important focus for the
output of our goods - it constitutes a major market, where
local producers have closeness to location and all the
advantages of quick delivery. ... The domestic market is also
a major platform from which to launch a successful export
We propose policies which will expand the income of workers,
hence stimulating domestic demand. The way to avoid such
policies leading only to inflationary pressures, is to
substantially increase efficiency of production. This should
be done through decreasing the layers of managers in
companies, decreasing the income of top management and
introducing other productivity enhancing measures. ...
1.6 Train and develop the workforce
International experience shows unambiguously the importance of
a well-trained workforce to high growth economies. The
development of a country's human resource is a sustainable
advantage in the search for new markets. It offers real equity
benefits to workers, through increased pay for increased
skills. It leads to increased productivity. ...
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. This levy should be
introduced initially for all firms with a turnover of at least
half a million rands a year. ...
1.7 Increase productivity
Over the last ten years, labour productivity in South Africa
has risen by more than 15%. ... Notwithstanding this
performance, however, it is vital that levels of productivity
in the South African economy are improved. This will allow for
some of the policies advanced elsewhere in this document, to
be managed in a non-inflationary manner. ...
In our view, the combination of poor training of blue collar
workers, with the effects of the recession on capacity
utilisation, the lack of world class technology and work
planning systems and an incompetent managerial layer grown fat
in the apartheid years, are all important contributors to the
productivity problem. ...
We propose a national productivity and equity framework
agreement to be negotiated through Nedlac, to cover all
industries, which should be put into place before October
1996. ... The agreement should cover the goals of improving
managerial, labour, capital and raw material usage
productivity levels. It should cover equity issues such as the
distribution of productivity benefits, and the reorganisation
of relations on the shop floor. It should deal with job
creation and job security. This framework agreement could then
be used as a basis, in industry-level negotiations, to address
concrete targets of productivity improvement. ...
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 Industrial Development Corporation (IDC) should be
required to shift from its fixation with capital-intensive
mega-projects, and use its resources to invest in labour
intensive processes in industry. Job creation should be the
primary mandate of the IDC over the next 36 months. Other
goals, such as earning foreign exchange, should be carried out
through promoting investment in labour absorbing activities
with real export potential. ...
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'. This is
not only jobless growth, it is "jobloss growth". This has
occurred because it costs very little to retrench, and
retrenchment avoids the real challenge of entrepreneurship:
that is, growing a company out of economic problems rather
than shrinking it down to the most profitable sections of the
The public sector too has contributed substantially to the
crisis of unemployment. Staff reductions and natural
attrition/early retirement programmes have cut the size of the
public sector and parastatals dramatically. ... Restructuring
of the public sector should be driven by, among others, the
* those responsible for line function delivery (eg health
care, teaching and social welfare) should be productively
deployed, not retrenched; ...
* the beneficiaries of preferential employment by the old
government, particularly its bureaucracy, should have their
positions and protections reviewed;
* no retrenchments should be effected in areas of high
unemployment, and major backlogs in public services; ...
1.10 Redistribute land to the poor
There are real opportunities in South Africa for a major
programme of land reform, combined with the promotion of small
scale farming among black people, which can promote economic
activity and employment very substantially. ... In fact the
World Bank has calculated that 2 million full time jobs would
be created in agriculture and related activities, through a
programme of land reform in South Africa. (Source: Reducing
Poverty in South Africa, 1994). ...
1.11 Stimulate economic activity
... The current very restrictive monetary policies followed by
the Reserve Bank need to be moderated, in order to stimulate
economic activity. With real interest rates at 12%, the cost
of borrowing for investment for many businesses is
2. The second pillar is redistributive fiscal policies
We propose two measures to ensure a more equitable fiscal
* first, redirect spending towards social services for the
* second, increase the redistribution features of tax policy.
In the 1995/6 fiscal year, it was reported in the Budget that
almost R7 billion of RDP related monies were lying unused in
government bank accounts. The Department of State Expenditure
has subsequently said that the true figure is closer to R10
billion. These monies, allocated previously for services and
infrastructure for the poor, were not utilised because of
problems in the delivery mechanisms in the private and public
In the private sector, the much vaunted 'partnership' with the
state on provision of housing, has been a failure. The private
sector should not be allowed to escape its commitments to
redirect investment towards the poor. ...
In the public sector, sections of the old bureaucracy have not
used the reconciliatory policies to energise itself, and use
the instrument of the state to deliver to our people. Instead,
its tardiness has contributed to a snail's pace of delivery.
This must change ...
Wealthy South Africans are using the policies of
nation-building and reconciliation to clamour for their
privileges to be left untouched. They fail to see that the
stability of the new democracy cannot be built on squeezing
There is one important source of income to assist in creating
greater equity in society, and that is to tax the wealthy.
Indeed, modern fiscal policy has developed precisely to
achieve this aim.
Taxation is one of the many areas where hypocrisy is rife -
special pleading by the wealthy are dressed up as arguments to
attract foreign investment, decrease the 'undue tax burden',
widen the tax base, simplify the administration of tax
collection or encourage savings and discourage consumption.
2.1 Finance housing and health care for all ...
2.2 Increase corporate taxation
The last few years has seen a shift away from corporate taxes.
... Company taxes yielded half of total government tax income
in 1970. Twenty years later, it had been reduced to a quarter
of revenues. By 1995, the corporate sector was contributing
only 14% of tax revenue. ...
2.3 Reduce consumer tax on basic requirements
VAT is a regressive tax. Unemployed people and the very poor
pay it. Workers spend a large portion of their income on items
subject to this tax. ...
Labour proposes that no VAT be payable on all basic foods,
medicines, water, domestic electricity and education. Both
these measures will offer effective, easily-administered
relief to the unemployed and to low and middle-income earners.
2.4 Introduce a tax category for the super rich
Currently, the top marginal tax rate, at 45%, is introduced on
earnings above R100,000. This penalises the middle-income
earners, and treats the truly wealthy very leniently. ... We
now propose the introduction of a 55% tax rate on annual
incomes from R200,000. ...
2.8 The debt, the deficit and equity
... South Africa's debt to GDP ratio is 55.6%. The average for
the key OECD countries, that is societies not undergoing a
Reconstruction and Development Programme, is 72%. [e.g. U.S.
63%, Canada 97%, Netherlands 78%] ...
Yet, South African business has been repeating with regularity
the need for cutting the public debt and for reducing the
deficit sharply, irrespective of its impact on overall
economic performance. Reducing the deficit too quickly would
cause deflationary pressure on the economy, and would slow
down economic growth and job creation. Low economic growth in
turn would discourage investment. Therefore, the deficit
reduction process needs to be carefully managed, and be
situated within the context of a range of other economic tools
and objectives of government. ...
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. The big
conglomerates own banking, mining, industrial and retail
businesses. The concentration of power in a few hands limits
the prospect of inclusive economic decision-making. ...
In addition, there is a wealth of international experience to
the effect that the existence of such large and powerful
conglomerates limits economic performance.
We propose that a new anti-trust policy be negotiated, which
will 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. ...
4. The fourth pillar is through improving worker rights
We propose four broad measures to improve the incomes and
quality of life for workers:
* first, strengthen worker rights through labour market
measures, including the development of centralised bargaining;
* second, invest in training and human resource development;
* third, use public procurement policies to advance worker
* fourth, reduce wage differentials between managerial and
'blue collar' workers. ...
4.7 End the apartheid wage gap
A major source of inequity in the society is the huge
differentials in earnings between workers and management.
These differentials are based on the apartheid wage gap which
existed between white and black. The gap remains one based
largely on colour.
The high wages at the top consume the resources of companies
and hence increase the cost of production. They feed
industrial tension and conflict on the shop floor. They reduce
the prospects of a shared commitment to improving company
performance. They divide the workforce into two totally
different worlds, based on income. They are substantially out
of line with equitable international practice. ...
We propose that the top 58 companies publicly agree to release
information on the pay of their individual executive
directors, particularly their CEO's. ... We propose further
that the top 58 companies commit themselves to reducing the
wage gap (including all fringe benefits and options) in the
companies to no more than 1:8. This means that the earnings of
the highest paid person should not be more than eight times
that of the lowest paid person. ...
5. The fifth pillar is greater industrial democracy
We propose four broad measures to ensure this:
* first, use workplace forums to strengthen shop steward
* second, reduce managerial prerogative through legislation
* third, grant workers 50% of the seats on company boards
* fourth, address representation on mutual insurance companies
6. The sixth pillar is championing economic development and
worker rights internationally
We propose six broad measures to achieve this.
* first, help the development of the Southern African region
through technical and other assistance and aid to neighbouring
* second, assist the growth of trade unionism as an important
instrument of social development in all Southern African
* third, campaign for a social clause to be part of all
multilateral and bilateral trade agreements;
* fourth, pursue the proposal that the WTO become a tripartite
body, with representation by government, labour and business;
* fifth, campaign for special market access to developed
country markets for those developing countries with specified
* sixth, champion the call of Third World countries for a debt
write off by international creditors. ...
6.1 Grow Southern Africa
The Southern African region must be developed, through
technical and financial assistance to neighbouring countries.
We should find ways, while mindful of the employment
imperatives in South Africa, to help grow the Southern African
economy, to build its industry and expand its standards of
living. A regional reconstruction and development plan for
Southern Africa should be developed as a priority. We should
now set up a regional summit, of governments and trade unions
to consider how to give effect to this plan.
6.2 Support the regional unions
... "One element of regional policy, defended particularly in
the call for a Southern African Social Charter by trade
unions, is that minimum standards with regard to rights of
workers to organise be established across the region as a
whole. This will allow a process of greater integration to
become one of levelling up rights and conditions of workers,
rather than of levelling them down to the lowest prevailing
standards". (RDP Base document, paragraph 4.9.6)
This policy requires a strong, well-resourced labour movement
in the region. We propose a regional trade union solidarity
fund, with R20 million a year made available by government for
programmes by the labour movement in the region.
We propose further that the South African government initiates
a process to negotiate a set of minimum standards to be
established across the region as a whole. ...
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