One changed word in labour legislation can alter SA’s economic destiny
This week's Rational Alternative column for the Financial Mail focused on a story that seems to have evaded the radar of the popular Press. Yet it has the potential to transform the country's sickeningly high unemployment. Since the article was written, the Free Market Foundation, which is the plaintiff, issued an update on its challenge to the country's labour legislation. It been added below the column. – AH
By Alec Hogg*
Official statistics are good indicators of where we are in an economic cycle. Even better are the CVs of newly appointed chief executives.
During upswings, pretty much background will do. Boards seek a touch of creativity, even tolerating eccentricity to get their business ahead of the pack.
In tough times, though, directors opt for conservatism. The numbers guys, especially chartered accountants, get the private bathrooms. Often brought in from completely different industries.
So we shouldn't be surprised to see a spate of accountants appointed to run anything from gold mines to media companies.
Conditions have been tough in SA for some time. In a recent interview, the Free Market Foundation's Leon Louw said so long, in fact, the country has set a record for the longest sustained period of high unemployment anywhere, anytime.
I've no way of being able to double check that, but presume the educated Louw wouldn't be flippant about something so damning. Intuitively, though, it sounds right. Even during the Great Depression of the 1930s, US unemployment only briefly rose above 20%. South Africa's official rate has been well above that level for a couple decades already. Sobering.
Louw calls our high unemployment a national crisis. Any rational person must agree. But how did we get here?
He puts the cause squarely on the Labour Relations Act of 1995 (LRA). That awful piece of labour legislation which an idealistic but immature ANC Government imposed a year after taking power.
Those making the laws were influenced by emotion. Those who knew better and should have spoken up, did not. So soon after Apartheid, no sane business leader wanted to risk becoming become a target.
The result has been labour legislation that keeps pushing the cost of employment ever higher. That pay no heed to productivity. That make it extremely costly to dismiss anyone brought into the business.
And a succession of Labour Ministers blindly defending the indefensible, because they don't know what they don't know.
Of course, there have been protests. Many from external, sane quarters. The IMF's analysts never lose an opportunity to raise the issue. The World Economic Forum's Global Competitiveness Report annually ranks the country last of 146 nations in labour flexibility. SARB Governor Gill Marcus keeps banging the same drum.
But talk is cheap. Money buys the whisky. And in this case, that cash is from the pockets of Louw and FMF chairman Herman Mashaba.
On March 5, the FMF launched a legal challenge in the Pretoria High Court. Brilliantly, they are not attempting to overturn the entire LRA. Or even the collusive Section 32. Instead, they're attacking a single word of just four letters.
Section 32 relates to Bargaining Councils, the place where big business and big labour meet to set pay scales. Elsewhere we refer to such practices as collusion between monopolists. But that doesn't apply here. Bargain Councils have specific exemption from competition law.
The way the Act reads, whatever Bargaining Councils decide, must be extended to the rest of the sector by the Minister of Labour. It's "must" which Mashaba and Louw want changed. To "may".
That, they say, would open the floodgates. Once extending the agreement is discretionary, across the board imposition makes the Minister of Labour vulnerable to legal challenges.
The FMF's challenge is the best chance we have of opening Government's eyes to an uncomfortable reality. Of helping it understand why the unemployment crisis exists. And encourage it to change this country's destiny.
* Alec Hogg is a writer and broadcaster who founded Moneyweb. He now runs biznewz.com. This article appeared first in the Financial Mail.
Update from the Free Market Foundation:
We, the Free Market Foundation (FMF), have committed to keeping the media and public fully informed about the progress of our legal challenge to section 32 of the Labour Relations Act 1995 (LRA) which governs relations between the government, employers and bargaining councils. Launched in the Pretoria High Court on 05 March 2013, the Ministers of Labour and Justice and Constitutional Development were cited as respondents one and two with the third being 47 bargaining councils (BC).
The FMF is dismayed and concerned by the series of interlocutory proceedings by respondents and supporters which can only be designed to delay and disrupt the lawful progress of the case and to wear down our resolve. The FMF will not allow these divertionary tactics to throw us off course to bring about a necessary change in the law.
We have been extremely patient and accommodating and granted extra time where it has been requested. Also we have allowed Cosatu to make an application to the court to intervene despite there being no legals grounds. Enough is enough and the FMF will apply for a date to have the case heard.
By September 30, the expiry of the third extension generously granted by the FMF to allow respondents extra time, not a single one of the 49 respondents cited had filed answering affidavits despite being granted three extensions over a period of six months.
After the expiry date, on 14 October 2013, the Metal and Engineering Industries Bargaining Council (MEIBC) filed an answering affidavit to oppose the challenge
A few days later, on 18 October 2013, an answering affidavit was jointly filed on behalf of 17 respondents also opposing the challenge.
Of interest, despite both of the above answering affidavits being filed out of time, no applications for condonation have been submitted. This means no one has asked the court to allow their affidavits to be heard although they have missed the deadline. Technically the Court should be asked to condone (allow) their late submissions.
Also after the deadline, on 4 October 2013, the National Union of Metal Workers South Africa, filed an application to intervene as a respondent. NUMSA was not cited as a respondent by the FMF and the FMF is opposing NUMSA's application to intervene.
This follows the example of the Congress of South African Trade Unions (Cosatu) application on 31 July to intervene as a respondent although again, they were not cited as a respondent by the FMF. Nevertheless, to ensure transparency, fairness and to allow all points of view to be properly aired, the FMF did not oppose Cosatu's application at that time.
However, to date Cosatu has not filed an answering affidavit neither has the Minister of Labour.
The FMF will be filing an answering affidavit to that filed on behalf of Numsa at the end of this week. We will be filing replying affidavits to those of the MEIBC and the 17 bargaining councils shortly.
FMF Chairman Herman Mashaba said, "Our case is based on a very simple request but one which will change the lives of thousands of unemployed South Africans. We are asking the court to change just one word in S32 from "must" to "may" which will allow the Minister to exercise her judgement when considering whether or not to extend bargaining council agreements to employers who were not at the negotiating table.
At the moment, she has no discretion, she must extend. This means mainly SME employers are faced with wage agreements that they simply cannot afford and either retrench workers or do not hire as many as they would like. One simple word change will allow her to consider the wider economic implications of the wage agreement on the rest of the sector. And it is this fundamental point to which the unions object as it will remove some of their power. Meanwhile the long term unemployed and their families languish in poverty and no hope. We cannot as a society sit back and do nothing."