Turning of the labour law tide: More business leaders, SARB Governor, join FMF call for change
Over the past few weeks we've been watched with interest how the Free Market Foundation has been stepping in where others have feared to tread. First we had a passionate chairman Herman Mashaba explaining why SA's inflexible labour legislation is having the unintended consequence of boosting unemployment. Then came CEO Leon Louw explaining why the Foundation has taken the matter to the Constitutional Court, claiming many in Government actually want to lose and are only putting up token resistance. If you missed those interviews, click on the links above for transcripts and videos. Today the FMF issued a statement pointing to growing support for its cause. It makes fascinating reading. – AH
There has been a mounting groundswell of opinion in private and increasingly so in public calling on the government to relax the rigid labour laws, which are causing so much harm to the South African economy.
The Free Market Foundation launched a constitutional challenge to section 32 of the Labour Relations Act 1995 (LRA) in the Pretoria High Court on 05 March 2013. S32 governs relations between bargaining councils (BCs), the Minister and employers and compels the Minister to extend agreements struck by those at the bargaining table to those not present and not party to the negotiations.
Quoted in Business Day this week, (Oct 21,2013, "Small businesses, under pressure from rising costs"), Rob Wilkie, the chief financial officer at Sage, a business management services supplier, is quoted as saying "Small businesses are under pressure from rising costs and should be exempt from paying wages agreed to at bargaining councils between unions and big business".
Gerhard Papenfus CEO National Employers Association of South Africa is also quoted as saying, "It was "unfair" to expect a small business employing fewer than 10 people to adhere to the same wages as a company employing 250 people, with triple the output."
Both men voice the mounting concern and chorus of calls from business leaders, economists, commentators and editorials for the government to relax the damaging rigid labour laws.
Mr. Wilkie's comments were made after the release last Friday of Sage's annual business index which showed that, among other things, local SMEs are concerned about the cost implications of wages determined at bargaining councils. "They are getting tied into bargaining council agreements that are being negotiated with unions and big business which apply industry-wide and suddenly they are told they have to give a 9% or 10% increase (in) wages and they just cannot afford it," said Mr. Wilkie and continued "Thousands of small businesses that had no opportunity to make an input into collective bargaining agreements were subjected to conditions of service favourable to big business".
This activity is similar in substance to that of a cartel, illegal in other sectors and the subject of wide spread condemnation from government and the media.
Other recent calls include:
- Last week, John Kane-Berman CE of the South African Institute of Race Relations, writing in Business Day (Oct 14, 2013 "Bargaining councils violate both democracy and basic rights") said, "… our centralised collective bargaining system, set out in the Labour Relations Act of 1995 (LRA), is one of the causes of our very high unemployment". Berman called the centralised bargaining system undemocratic and cruel because "it lifts he bottom rung of the wage ladder too high for unskilled people to be able to step on to it.
- Reserve Bank Governor Gill Marcus said in July: "Collective bargaining favours big firms at the expense of smaller ones".
- A Reserve Bank paper published in July stated: "Where large firms and unions agree to high standards, legal extension reduces competition and inhibits creation of new firms and their survival."
- Recently the IMF said, "It is important to stop extending negotiated wages to other firms that were not part of the bargaining process."
- Nedbank , in its October monthly report, flagged labour issues as a constraint on South Africa's investment, production and export capacity.
FMF chairman Herman Mashaba said, "The FMF welcomes all direct and indirect support from the many diverse quarters. Some of this support comes from individual voices but elsewhere business leaders are calling on the government to relax laws, which protect those in work but penalise the unemployed especially the young 'lost generation'. Surely government and Cosatu cannot ignore the growing level of appeals for much longer? We are asking them to listen to these respected local and international voices of reason and act accordingly before it is too late for the 7 million unemployed South Africa citizens".