Taking Government to Constitutional Court – FMF’s first step in attacking SA’s crazy Labour Laws
Talking to Leon Louw today and then reading the transcript of today's interview reminded me of a novice discovering he's painted himself into a corner. For the ANC, the Tripartite Alliance seemed like a great idea in 1994. But two decades on, as the consequences of outdated ideologies of its unelected partners causes increasing economic pain, the unintended consequences are really hurting. Showing it was actually a terrible decision. Tired of being stonewalled, Louw's Free Market Foundation has decided to fight the Labour Law insanity in the Constitutional Court. This free-wheeling interview examines why, looks at the chances are of the FMF winning, and should that happen, what would come next. – AH
ALEC HOGG: Taste Holdings: I'm just having a look at their performance over the last three years. In 2011, they were sitting at round about 40c a share, so it's virtually a ten-bagger at R3.79. Today the company is worth R750M. It owns – as you would have picked up from that interview – Scooters Pizza, which Carlo and his father, Luigi, started in the year 2000. I think that would be a story that would hearten a man like Leon Louw from the Free Market Foundation, to see entrepreneurship translating from a Scooters Pizza shop that they started and today a company worth R750m.
LEON LOUW: It's splendid stuff, and what few people realise, is many of the big conglomerates in the world – like Walmart or Sears & Roebuck – started as people who were street vendors or mechanics or whatever. So yes, this rise from rags to riches is a splendid phenomenon and it's something that every economy should allow for.
ALEC HOGG: It should be celebrated and entrepreneurs given the opportunity.
LEON LOUW: Of course, and before I came on, you were lamenting CEO's salaries. We should celebrate the fact that people can rise to those levels and can justify those levels by the value to the companies who employ them. The best people to decide what to pay are the people who do the paying, not the critics who stand on the side and shout about it.
ALEC HOGG: Well we have some interesting opinions on that. Brian Joffe: no one would ever dispute that he deserves every cent that he earns because he's built that company, but as a professional manager……
LEON LOUW: My gardener is willing to do the job for R10 000 per month, so why don't they employ my gardener? The answer is they don't think he'll produce the value.
ALEC HOGG: Perhaps not. You, however, are doing what is possible at the Free Market Foundation to give more people like Luigi and Carlo Gonzaga a start. SA's Labour Relations Act is very tough when you're in a small business. Opinions that have been thrown around for years don't seem to have changed much. But you're trying to do something concrete now.
LEON LOUW: Yes, we've instituted a constitutional challenge to not just one section, but just one word of the Labour Relations Act, which says that the Minister must extend Industrial Law Bargaining Council agreements to non-parties. Bargaining Councils are places where workers and employers collude. If it were under Competition Law, it would be called 'collusion'. There is a special exemption, so Labour and Business collusion is allowed in the law. That, itself, is interesting. But the really interesting bit is that having colluded, the collusive deal is then imposed on non-colluders and the Minister is obliged to do that. The Minister has no choice. The Minister has to effectively make law at the behest of private contractors. This is a very strange state of affairs. It's like Pick & Pay and Woolworths entering into a deal, which is imposed on Walmart, every corner café, every supermarket, and every street vendor: everyone else in retailing subjected to a collusive deal struck by the elites.
ALEC HOGG: Why would that have been promulgated?
LEON LOUW: Oh, the theory is to try to get everyone into the Bargaining Council. In other words, if you're an independent employer, an unemployed worker or independent union like AMCU or FEDUSA, or in COSATU, or you're one of the big industrial associations, you want to force all the competitors in Business and Labour into your deal. The way you do that is, you subject them to the deal and then they say to themselves 'we'd better be at the table when it's negotiated', so they all join. This is really a way of bullying people into sitting at the table.
ALEC HOGG: Is there no other way for you, besides going to the Constitutional Court?
LEON LOUW: We have tried to get South Africans to realise the extraordinary state of affairs we're in. According to some economists, the longest sustained level of high employment of any country in the world – highest unemployment for longer than anywhere else. This is a national crisis. This is a state of emergency where well over half of young people have never had a job. Most children live in homes where they've never seen a parent go to work. This is a national crisis on a monumental scale and South Africans don't seem to be alert to this. We then said if the government would not change the law, if COSATU won't agree to change the law – and they should, because if 7m unemployed people get a job they will have more members, they'll be a better and stronger union – then the only thing that we're left with, is taking it to the Constitutional Court. We cannot imagine the Constitutional Court condoning a law that says, "Collusion must be imposed by the Minister on non-colluders". This is a very strange state of affairs.
ALEC HOGG: Once you get that done – let us say that the Constitutional Court does agree with you. How then do you roll back other Labour laws?
LEON LOUW: This is a start. It's what we call Case One. This will immediately allow for unemployed workers and independent unions, independent employers, employers who want to be independent who bargain separately with workers or unions, and we suspect will bring about a significant improvement in employment opportunities and business opportunities – especially for small business. We then have to move on to other aspects. Anything that raises the cost of something. Economics 101 teaches you that it reduces demand for it. If things cost more, people buy less and the same is true of Labour. What you have to do is say, "until we have people employed, we should stop raising the cost of employing" because all that means is less people will be employed and we will perpetuate this incredible tsunami that's hitting South Africa of – nobody knows exactly what – but seven million destitute, job-seeking South Africans. That is something that no decent person should sit around and accept.
ALEC HOGG: You mentioned "decent". I'm sure there's some guy watching his television screen that he's about to break because he says, "what about decent jobs?"
LEON LOUW: I'm sorry – it's a stupid thing to say. Every human being, even non-decent ones want people to have high living standards. So to say you want high living standards or decent jobs is not saying anything meaningful. It's actually a silly thing to say. It's rather obvious. It is like saying, "I want the sun to rise". What you have to say is, "how can we get people to be employed, and once employed, how can we get them to have higher living standards?" Higher living standards means more wealth and the only way to have more wealth is to have high growth, so you have to have a high, rapidly growing economy in which living standards and wages will rise. The phrase 'decent wages' is, I'm sorry to say, and I'd like to be more charitable – but it's actually a stupid statement.
ALEC HOGG: Probably politics, and that's really the issue that many of us have to grapple with on a daily basis. From your perspective, you have engaged with the ruling political party in South Africa. Frequently. What is it that's blocking this ability to appreciate that we do have a problem?
LEON LOUW: Well, I think one of the issues is the Tripartite Alliance. About a third of all people in government have never been voted for/never run for an election, which actually raises the question of "how democratic are we really?" The question is, "if the ANC were the government and COSATU were just part of civil society – organised Labour and organised Business being governed by the government (which would be the ANC) and the SACP were just simply another political party like the Freedom Fighters or the DA, then we would not have this problem". The trouble now is that the government is schizophrenic. On one hand, it's trying to be the government. On the other hand, the Labour Union movement is the government.
ALEC HOGG: Will only a split fix it?
LEON LOUW: I should imagine so. I should imagine if you are in an alliance with people you ought to be governing, it actually makes it impossible to govern them. I don't see a split coming. So we are sitting with a strange state of affairs. A very good authority tells us that many people in government want us to win (the court case). They have to put up a token fight because we are challenging a law they've made. The government is by far the worst victim of the Labour Law. If anyone wants the law changed, it's the government. It has by far the most strike time, the most down time, the most labour unrest. It's the government we will be helping (if we win). But they have shackled themselves through the alliance.
ALEC HOGG: Leon Louw is the Chairman and Founder of the Free Market Foundation.