Loane Sharp on ‘single biggest prospect’ for job creation in SA in 20 years
SACTWU has halted the Free Market Foundation's labour relations case which is essentially seeking to change one word in the Labour Relations Act. Despite the amendment's small size, the impact will be far-reaching, and although the action to suspend the FMF's case will frustrate the process, it will not impede it, says Loane Sharp of the FMF. In this CNBC Africa interview with Alec Hogg, Loane unpacks the detail of the questions and the case surrounding Section 32 of the Labour Relations Act – highlighting another law in South Africa that impedes economic growth rather bolstering it. – LF
ALEC HOGG: Welcome back to Power Lunch, well here's the story we promised you. The Free Market Foundation is questioning the constitutionality of Section 32 of the Labour Relations Act and it looked like it was going to Court but then we had a last minute intervention, by the Southern African Clothing and Textile Workers' Union, which is likely to delay the process a little further. Loane Sharp is with the Free Market Foundation, Loane, nice to have you here, ex Ad-Corp, now FMF.
LOANE SHARP: That's right, yes, and I'm very excited about the move. Ad-Corp continues to support the FMF but what it means for me, basically, is that I will be able to extend my activities across a broader range of issues. Labour Market liberalisation remains a key issue for me but also privatisation of State owned enterprises, I'm looking forward to banging on that bin. Also, relaxation of Exchange Controls, corporate South Africa has over half-a-trillion Rand, sitting on its balance sheets, idle because there are not domestics' opportunities for that money, and they really need to be, allowed to invest abroad.
ALEC HOGG: If they did then the country would earn taxes on it, etcetera.
LOANE SHARP: That's right.
ALEC HOGG: But the story here and we have been following this Section 32 of the Act, with Herman Mashaba, who I think is still funding the whole process.
LOANE SHARP: Yes.
ALEC HOGG: Leon Louw has been in the studio, and now you're the new man who is banging this drum. Not everybody has been following the story. How did it start?
LOANE SHARP: Well, we knew that we wanted to tackle the issue of restrictive labour laws and regulations but it was difficult to know where to take a bite of this enormous elephant. We didn't want to tackle Trade Unions directly because we felt that, due to the political alliance there would be no appetite for that, so we've chosen our issues very carefully. We've chosen Section 32, of the LRA, primarily because it is something we believe we can win decisively and SADTU's late joining of the action is really, because the Unions are running scared, around this issue.
ALEC HOGG: So they've finally woken up to the fact that if you win this court case it can make a big difference but what are you fighting here? What is the, when you now refine it all down to exactly what the area is that you are going to ask the Courts to change?
LOANE SHARP: At the moment, if a Bargaining Council has only four-percent representation of the total industry. That Bargaining Council's regulations can be, extended to the other 96-percent of the industry that didn't participate in the negotiations. We want to make the argument that four, five, ten, or 15 percent is not sufficiently representative of the industry's employees to extend those Bargaining Councils regulations to the entire industry. We've got a very, strong chance because the Labour Relations Act is supposed to follow democratic procedures, and really, we've hit the Department of Labour and its associated Trade Unions in the gut, with this. I think it is a tremendous action. It is something that all businesses in South Africa should support because what it will basically do is dismantle the system of minimum wages, as determined by Bargaining Councils. It is probably the single, biggest prospect for creating jobs, in South Africa in 20 years.
ALEC HOGG: But what happens if you win? Can the partners of the Trade Unions, the political partners, who do have control in Parliament, not just pass another law?
LOANE SHARP: Well COSATU has much diminished in power in Parliament. In 2009, it was true that most of the Members of Parliament, sitting on the Portfolio Committee on Labour, were ex COSATU and COSATU functionaries. Today it's completely different because of the collapse of COSATU, the disintegration between NUM and NUMSA and others; COSATU is not well represented in Parliament at all.
ALEC HOGG: So it isn't a guarantee that if you win this that the Government is suddenly going to jump to the defence of the Trade Unions. SADTU though, came to the party late. What do you make of that?
LOANE SHARP: Yes, well the Unions are trying to eliminate the challenge from the Free Market Foundation, so SADTU knew well about the High Court action that we've instituted and in fact, they've produced a Discussion Document as early as two months after our challenge was, announced.
ALEC HOGG: And that was 17 months ago.
LOANE SHARP: That's right, so they really are playing for time and the reason for that, I mean they were, invited today to have a debate around the issue and they've disappeared.
ALEC HOGG: We did invite them to come onto this program as well and they decided to decline our invitation. If you were sitting in SADTU's shoes though, why come to the party so late?
LOANE SHARP: Well, really to subvert the Free Market Foundations actions, and…
ALEC HOGG: So it might postpone the action.
LOANE SHARP: It will postpone it but…
ALEC HOGG: It can't subvert it or it can't kill it.
LOANE SHARP: No, our funders have deep pockets. We've allocated our resources at the Foundation in a very concerted way, to tackle this issue, so we've got very long legs. Our view is not for the next 12, 18, or 24 months. Our view is for the next 20 years, so we've got a huge amount of support from business and non-governmental organisations. People have been incredibly supportive of us, in this action, and we're not going to step back.
ALEC HOGG: So what's going to happen now? How long will it take for the legal process or the wheels of justice to grind, so that you do get your day in Court?
LOANE SHARP: Well, we could oppose these late joining. The Department of Labour took an inordinate amount of time to publish its response, and oppose the action. They can draw it out but they cannot avoid it. There will be a legal confrontation in time.
ALEC HOGG: How long is that going to take, best-case scenario?
LOANE SHARP: Best-case scenario, it could take another six months. Worst-case scenario, it could take another two years but it will end up in Court and we are very confident of a win and that is why the subversive tactics are being used, not only by Unions but also the Department of Labour, which has been captured by Trade Unions. We are going to end up in Court and I look forward to that day because it is a really, exciting development in the labour market.
ALEC HOGG: If you win, in the way that you are expressing confidence, so in two-years down the line, what is the immediate impact of that going to be?
LOANE SHARP: Well, basically immediately the Minister will not be forced to extend Bargaining Council Agreements to non-parties. The Minister will have to provide a rationale on why the Bargaining Council Agreement was extended and that means that that rationale must be subject to constitutional tests, reasonableness, fairness etcetera. So you can get to the Minister of Labour's thinking, in extending these Agreements, and then, of course, it is open to attack. As soon as the Department of Labour publishes its reasoning on extending these minimum wages and other things, we'll be able to tackle the Minister in Court, on an industry-by-industry basis. The immediate effect will be the dismantling of our extremely complex and the poor job consequences of these laws, and the impact over a two to five year period will be lots of additional employment in agriculture. Trade Unions have tried to push entry-level workers out.
ALEC HOGG: Loane Sharp, who is the Chief Economist at the Free Market Foundation – I like this. I like this a lot. In a Constitutional Democracy, that is what South Africa is. We might be young but that is what we are, only two bulwarks are between those who can abuse power and the rest of the society, and one of those is the Court of Public Opinion, and you are watching it right now. The other one is the Court of Law, and it is heartening to see business finally going to the Court of Law to overturn some of the very strange legislation that was promulgated in the early years of this democracy. It will be interesting to see how this all pans out. That's all from us here in South Africa. After the break, our Southern African viewers will cross to international programming. The rest of Sub-Saharan Africa can catch Power Lunch, West Africa. Cheerio.