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Shamima Gaibie, 13 March 2013

Essential Services

The legislative provisions

  • In South Africa the right to strike is guaranteed by section 23(2)(c) of the Constitution.
  • As with all rights, this right may be limited by national legislation.
  • One limitation on the right to strike is contained in section 65(1)(d)(i) – employees who render “essential services” cannot strike.
  • Such employees must refer all disputes, including “interest” disputes for conciliation, and if necessary, arbitration – section 74(3) and (4).
  • Section 213 defines an essential service as a –
    “service the interruption of which endangers the life, personal safety or health of the whole or any part of the population.”
  • The parliamentary service and the police services are the only services that are deemed to be essential services in terms of section 71(10).
  • For the rest it leaves the task of determining and designating essential services to the Essential Services Committee (“ESC”) – section 71
  • There is one exception to the prohibition on strikes in essential services – where an employer and a recognised trade union conclude a “minimum services agreement” (“MSA”) which is ratified, all employees in that service excluding those who will render the minimum service are entitled to strike.
  • What is the purpose of a MSA?
    • To enable essential services employees to embark on strike action, while their colleagues keep working so that the essential service can continue operating.
  • What if the trade union seeks to negotiate a MSA and the employer refuses to do so? Or what if the parties commence discussions on such an agreement but are unable to reach agreement?
    • Can the trade union refer the dispute to arbitration? Or does the LRA provide a mechanism for the resolving disputes related to minimum services? Not explicitly.
  • How are disputes – in essential services – relating to “rights” and “interests” dealt with in terms of the LRA?
    • The dispute must be referred to compulsory arbitration. The outcome of the arbitration process, in the form of an award, is imposed on the parties by an arbitrator, without either party being able to resort to industrial action.
  • Should this dispute resolution process – applicable to rights and interest disputes – apply to disputes in relation to minimum service agreements?

The Eskom matter

  • This was the question that was before the LC, the LAC and most recently the SCA in Eskom Holdings Ltd v National Union of Mineworkers & Others (2012) 3 BLLR 254 (SCA).
  • In 2007, NUM and NUMSA, after trying in vain for some years to conclude a MSA with Eskom, referred the dispute to the CCMA.
    • o Eskom, as a whole, was declared an essential service by the ESC in 1997.
    • o In discussions about a MSA the parties were far apart in relation to the number of employees that were necessary to maintain a minimum service.
      • § Eskom was of the view that almost its entire workforce was required for that purpose and the unions were of the view that only 10% of the workforce was required.
    • o Eskom argued that the LRA did not provide any mechanism for the resolution of such disputes and that the unions should approach the ESC to narrow the existing designation.
    • o The CCMA disagreed and held that it had jurisdiction to determine the dispute, and to impose a MSA on the parties via an arbitration award.
    • o The SCA agreed with the ESC’s contention that it had the right to determine such disputes in terms of section 73, that section provides that:

    (1) any party to a dispute about either of the following issues may refer the dispute in writing to the essential services committee –

    a. whether or not a service is an essential service; or
    b. whether or not an employee or employer is engaged in a service designated as an essential service.

    • o Having regard to the obligation to interpret statutes in light of: 1) the Bill of Rights; and 2) to read legislation “in ways which give effect to its fundamental values”; and 3) of the injunction to interpret the LRA in such a way that preserves, rather than excludes or limits the right to strike – the SCA held that any disputes relating to a MSA must be referred to the ESC in terms of this section.
  • · Is the SCA correct?
    • o The SCA had to stretch the language of section 73 to give effect to the right to strike.
    • o Section 73 deals with disputes about –
      • § Whether or not a service is an essential service; or
      • § Whether or not an employee or employer is engaged in an essential service.
    • o It does not explicitly include disputes concerning the conclusion of a MSA.
  • · How will the ESC determine what is a minimum service?
    • o None of the courts involved in this matter considered this issue.
    • o However, the SCA suggested, without determining the principle, that Eskom employees such as those working in the company’s gardens might not be rendering an essential service.

The POPCRU matter

  • · This issue received consideration in the Constitutional Court’s judgment in SAPS v POPCRU 2011 (9) BCLR 992 (CC).
  • · About a week after the commencement of the general public service strike in 2007, POPCRU called on its members employed in the SAPS to join the strike. The SAPS launched an urgent application and sought orders declaring that all its employees were engaged in an essential service.
  • · The Labour Court granted the orders in relation to POPCRU members who were employed under the SAPS Act, and not in respect of its members who were employed in terms of the Public Service Act (“PSA”). The Constitutional Court upheld the decision of the Labour Court.

What are the nature of the functions performed by SAPS

  • · The functions of the SAPS are set out in the Constitution in the following terms:

“ …… to prevent, combat and investigate crime, to maintain public order, to protect and secure the inhabitants of the Republic and their property and to uphold and enforce the law.” (‘the policing functions’)

Who performs these functions?

  • · The Constitution read with the SAPS Act indicate that it is the ‘members’ who are appointed in terms of the SAPS Act who are authorised to exercise or perform such functions.
  • · Based on the legislative distinction between those who perform the ‘policing functions’ and those who don’t, the Constitutional Court held that it is those members who are appointed in terms of the SAPS Act, rather than those who are appointed in terms of the PSA, that perform the policing function.

What functions are performed by the employees appointed in terms of the PSA?

  • · The Constitutional Court judgment records that they perform general duties such as procurement, secretarial work, general administration and cleaning, operating emergency call centres and crime information systems, capturing data in crime intelligence administration, and other tasks normally associated with policing.
  • · There was however no investigation as to whether these functions are integral to the policing function or whether they are supportive or ancillary thereto.
  • · The Court was however happy to make the assumption that there existed a legislative distinction between the two types of employees and based on that distinction concluded that those appointed in terms of the PSA performed supportive functions.

Other pertinent issues raised by the Eskom and POPCRU judgments

  • · In essential services, it is often the case that some or most of the employees are employed in rendering the essential service, and others are not.
  • · In the statutory dispute resolution scheme, this must mean that essential service employees must resolve their dispute via compulsory arbitration, and non-essential employees may resolve their interest disputes by strike action.
  • · It is possible therefore, in one establishment, for some employees to refer the same interest dispute to arbitration and for others to embark on strike action.
  • · In City of Cape Town v SALGBC and Others [2011] 5 BLLR 504 (LC), the Union called its “non-essential service” members out on strike and simultaneously referred a dispute for arbitration in terms of section 74 of the LRA in respect of its members who were engaged in the essential service.
  • · The arbitrating Commissioner, on the basis of an limine point raised by the City, ruled that the Council had jurisdiction to entertain the claim.
  • · On review the Labour Court:

    o Held that where a dispute has been referred for conciliation under section 64 of the LRA, the Union did not have to refer a separate dispute for conciliation on behalf of essential services employees before referring a dispute on their behalf for arbitration;

    o Accepted that when Union members comprised both essential and non-essential employees, the Union does not have to elect whether to engage in strike action or arbitration;

    o Found that there was nothing in the LRA to suggest that essential service employees lose their right to refer an interest dispute for arbitration simply because their non-essential colleagues embarked on strike action;

    o Also held that non-essential service employees retained their right to strike even though a dispute has been referred for arbitration by the essential service colleagues;

  • · The above issues raised further questions such as:
    • o Does any agreement concluded in relation to essential services apply to non-essential service employees?
    • o Will such an agreement in relation to essential service employees trump an arbitration award achieved by the non-essential employees?
    • o If the arbitration award is issued while the strike is still in progress, would the non-essential employees be entitled to rely on the award to enforce their demands?

The Labour Relations Amendment Bill

  • · The following proposed amendments are aimed at dealing with some of the issues that have arisen in light of the Eskom judgment:
    • o Section 70 will be deleted and will be substituted by a new section 70A-F;
    • o The new sections provide that the ESC will be differently constituted, and may be headed by a senior CCMA Commissioner with designated support staff;
    • o The powers of the ESC are more defined and more extensive;
    • o The ESC may ratify maintenance and minimum services agreements, it may conduct investigations and determine whether the whole or part of the service is essential and “the minimum services required to be maintained in the service that is designated as an essential service”;
    • o Provision is made for a panel which may mediate the parties efforts to establish minimum services, particularly in the public sector, and if that attempt fails, to determine the minimum services required;
    • o The panel may also vary or cancel the designation of the whole or a part of the services in the public sector as essential;
    • o The panel may direct parties to negotiate minimum services agreements within a specified period or, failing that, determine the minimum services required.
  • · The amended section 73 will include two new issues which may be referred to the ESC:
    • o First, whether an essential service employer and a registered union should conclude maintenance or minimum services agreements;
    • o Second, the terms of such agreement.
  • · These amendments at least take care of some of the gaps in the law. It falls short however of dealing with the issues raised in the City of Cape Town matter.

Pickets

  • · There have been relatively few decisions on picketing and there is only one case which was decided in 2006 that raises significant issues for the trade union movement.

Legislative provisions

  • · Pickets that comply with section 69 of the Act have been protected and enjoy the same protections as strikes that conform to the Act.
  • · A picket can occur in any place near the employer’s premises to which the public has access but can only be staged on or within the employer’s premises if the employer agrees to this.
  • · The Act does not regulate in any detail how a picket must be conducted and it is in the main left to the parties to fashion rules to cater for such an eventuality.
  • · Generally speaking such an agreement should set out when the picket will take place, where it will place, how many persons will participate in it and all ancillary matters.

Where to picket

  • · The place of the picket remains a difficult and contentious issues.
  • · For picketers, the main consideration is to make the greatest possible impact in communicating its demands and persuading other employees to join the strike.
  • · For the employer the primary concern is to ensure that the picket is conducted peacefully, that it does not obstruct entrances, or hamper deliveries or turn away customers.
  • · It is in the end about achieving a balance between the two competing interests.
  • · In Shoprite Checkers (Pty) Limited v CCMA and Others (2006) 27 (ILJ) 2781 (LC), the court dealt with the circumstances in which a commissioner may make rules in relation to in-store picketing.
  • · In that case the provisions of section 69 were relevant. This provision provides as follows:

    “(2) Despite any law regulating the right of assembly, a picket authorised in terms of sub-section (1), may be held-

    (a) in any place to which the public has access but outside the premises of an employer; or

    (b) with the permission of the employer, inside the employer’s premises.

    (3) The permission referred to in sub-section 2(b) may not be unreasonably withheld.

    (4) If requested to do so by the registered trade union or the employer, the Commissioner must attempt to secure an agreement between the parties to the dispute on rules that should apply to any picket in relation to that strike or lockout.

    (5) It there is no agreement, the Commission must establish picketing rules, and in doing so must take account of-

    (a) the particular circumstances of the workplace or other premises where it is intended that the right to picket is to be exercised;

    (b) any relevant code of good practice;

    (6) The rules established by the Commission may provide for picketing by employees on the employer’s premises if the Commission is satisfied that the employer’s permission has been unreasonably withheld.”

  • · The issue in this case was the Union’s demand that it be permitted in-store picketing. The Union wanted 20 such pickets. The employer refused to agree to this. This dispute had to be considered by the CCMA in terms of section 69, and the Commissioner decided to permit a maximum of 6 in-store picketers. The employer took this decision on review to the Labour Court.
  • · The Labour Court held that:

    (1) The section 69 procedure commences with a consensus seeking exercise.

    (2) Rules can be made only if this process fails, and any such rules entail a rational decision made by a CCMA Commissioner which must be based on relevant and reliant information placed before the Commissioner.

    (3) The rule making process flows from the consensus seeking process and the deliberations during the first process are not automatically confidential or without prejudice.

    (4) Parties should know that the information disclosed during the first stage of the process may be taken into account to reach a decision in the rule making stage.

    (5) The decision of the CCMA Commissioner cannot be taken from thin air and the submissions of the parties must be weighed and evaluated.

    (6) In respect of where the picket should be held, the Court agreed that the union bore the onus of proving that the employer’s refusal to grant in-store picketing by 20 workers was unreasonable.

    (7) Before a Commissioner makes a decision permitting picketers on the employer’s premises, the Commissioner must undertake an enquiry into the reasonableness (and the finding of unreasonableness) of the employer’s refusal to permit picketing on its premises.

    (8) In this case the Court held that the Commissioner’s failure to determine the reasonableness of the employer’s refusal to permit picketing in-store was held to be fatal to the Commissioner’s decision: In the other words, the Commissioner could only exercise its discretion to allow picketing on Shoprite Checkers premises only if it was found that the employer’s refusal was unreasonable.

Issues raised by this case

  • · The decision is indicative of the fact that trade unions who attempt to obtain picketing rights on the employer’s premises bear an onerous job to demonstrate that the employer’s refusal is unreasonable.
  • · It is important in light of this decision and the proposed amendments to the Labour Relations Act that trade unions attempt to negotiate and conclude agreements on picketing well in advance of any proposed strike.

Proposed amendments to the LRA

Section 69(1)

  • · This provision currently provides that a registered trade union may authorise a picket by its members and supporters for the purposes of peacefully demonstrating in support of a protected strike.
  • · This provision will be amended so that pickets will include members of trade unions only and not supporters.
  • · This proposed amendment is extremely restrictive given that the Constitutional Court decision in the SATAWU and Equity Aviation matter indicated that a strike notice by a trade union covers all members and non-members at a particular workplace. This provision, unlike the effect of the Constitutional Court judgment, restricts picketing to trade union members and does not include any non-members or employees employed by the same employer.

Section 69(2)(b) and section 69(6)

  • · The LRA allows for picketing rules established by the Commission to provide for employees picketing at the premises of an employer who unreasonably withholds permission.
  • · This provision remains unchanged but has been amended to allow for picketing to take place on property controlled by a third party if that party had the opportunity to make representations to the Commission before the rules were made. This amendment therefore allows for picketing to be held on the premises of the employer’s landlord.
  • · It is unclear from this proposed amendment whether any agreement reached in advance between the employer and the trade union for picketing to take place on the landlord’s property is permissible.

Section 69(8)

  • · The LRA currently allows parties to the dispute to refer matters listed in section 69(8) to the Commission. The proposed amendment now extends that right of referral to the third party on whose premises the picket will taking place.

Various forms of interim relief

  • · The proposed amendments allow for access to the Labour Court as well as interim relief for disgruntled parties. The amendment will extend parties’ access to the Labour Court in respect of disputes over compliance with picketing agreement rules. The proposed amendments set out various forms of interim relief including a suspension of the picket or the strike.

Damages Claims

  • · In light of the recent events it is apparent that employers are beginning to think about novel ways of holding Trade Unions liable for losses sustained by them. We look at the basis upon which such claims can be lodged.
  • · Sections 67 and 68 of the LRA envisage that if employees embark on unprotected strike action, they or the Union can be held liable for losses suffered as a result of the strike.
  • · This claim can be lodged in the form of a common law delictual claim for damages or a statutory claim for compensation in terms of section 68 of the LRA.
  • · The losses that are suffered by the employers can arise either from the strike itself, or the acts or omissions of members of the Unions during the course of the strike.
  • · In most cases it would be the employer who would seek to recover the loss suffered.
  • · The question is whether the LRA or any other law envisages the possibility that other parties, besides the employer, could also recover losses suffered by them as a result of such action?
  • · In a straight forward action for damages either based on the common law or on section 67 and 68 of the LRA, the employer or the claimants have the very difficult hurdle of establishing that the Union should be held liable for the acts of its members especially in situations where Union officials did not authorise the strike or the acts that led to such losses.
  • · In light of the recent spate of unprotected strikes in the mining industry Unions must anticipate claims for damages or compensation either in terms of the common law or the LRA.

The Regulation of Gatherings Act

  • · The extent of Union liability in relation to losses suffered as a result of a gathering was recently dealt with by the Constitutional Court in SATAWU and COSATU v Garvas & Others2.
  • · This case dealt with the liability of organisers and convenors of marches and demonstrations for any damage that emanates from such events.
  • · This matter was fought by SATAWU on the basis that section 11(2) provided an illusory and non-existent defence to any claim for damages lodged against the Trade Union.
  • · Section 11(1) provides that:

“If any riot damage occurs as a result of-

(a) a gathering, every organisation on behalf of or under the auspices of which that gathering was held, or, if not so held, the convenor;
(b) a demonstration, every person participated in such demonstration, shall…be jointly and severally liable for riot damage…;

  • · In terms of section 11(1), the liability of the organiser of a march is a strict one which requires a plaintiff simply to prove that “riot damage” emanated from a march.
  • · The organiser can only avoid such liability if it proves one of the defences set out in section 11(2).
  • · Section 11(2) reads as follows:

“It shall be a defence to a claim against a person or organisation contemplated in sub-section 1 if such a person or organisation proves –

(a) that he or it did not permit or connive the act or omission which caused the damage in question;
(b) that the act or omission in question did not fall within the scope of the objectives of the gathering or demonstration in question and was not reasonably foreseeable; and
(c) that he or it took all reasonable steps within his or its power to prevent the act or omission in question…”

  • · COSATU and SATAWU argued that section 11(1) places strict liability on the organisers of a march or demonstration, and that section 11(2) is internally contradictory and irrational.
  • · For instance, if an organiser of a gathering takes reasonable steps to guard against the act or omission occurring he would never be able to prove that these acts were not reasonably foreseeable.
  • · The Court rejected this argument. In short, the Constitutional Court did not see any problem with the way in which this section was drafted. It held that if the steps taken by the organiser are reasonable to prevent what was foreseeable, the taking of those steps would render the act or omission that subsequently caused the riot damage reasonably unforeseeable.
  • · According to the Constitutional Court the legislature had made a policy choice and the Court articulated that policy choice as follows:

“The approach adopted by Parliament appears to be that, except in the limited circumstances defined, organisations must live with the consequences of their actions, with the result that harm triggered by their decision to organise a gathering would be placed at their doorsteps”.

  • · But the problem with the Act is not limited to the provisions of section 11(2).
  • · The Act places liability for any riot damage that arises from the march on the organiser.
  • · Secondly, riot damage is extensively defined in the Act as:

“Any loss suffered as a result of any injury to or the death of any person, or any damage to or destruction of any property, caused directly or indirectly by, and immediately before, during, or after, the holding of a gathering”.

  • · The repetitive use of the word “any”, which ordinarily would include each and every type of loss or damage, is indicative of the breadth of liability that is intended to be imposed on organisers. Such loss may include not only patrimonial loss but also non-patrimonial loss, such as general damages for injury and any consequential damages.
  • · The use of the expression “directly or indirectly”, indicates that the causal chains of cause and effect need not be proved, as long as one can establish that the damage emanated from the march irrespective of how it was caused.
  • · For example, assume that a delivery van delivering fresh food or produce to restaurants is stopped, damaged or burnt. Given that the damage occurred or emanated from the march, one must ask in light of the definition of riot damage indicated above whether, this section permits a claim for the cost of replacing the food and repairing the damage to the delivery van, or does it extend to a loss of profits by the restaurants who were affected by the non-delivery of such products.
  • · Given the manner in which section 11(1) is drafted, it appears that as long as the damage emanated from a march, the organisers will be held liable for such damages.
  • · The definition also indicates that if the damage was caused before, during or after the gathering, the organiser will be held responsible for such damages. So for example, any damage caused while workers are in the process of assembling for the march or indeed during the period when they are dispersing from the march is, in terms of this section, a recoverable loss.
  • · For example, if a single worker on his way to the march assaults a DA supporter on the train, is that damage or injury caused before the march, or an injury that occurred as a result of it?
  • · Would it make a difference if the assault occurred or was perpetrated by a group of workers on their way home from a march?
  • · These examples indicate that the language of this section is intended to capture all of the damages associated with the march whether it occurred before or after the event.
  • · What action or steps must a trade union take in order to alleviate or avoid any foreseeable damage? That question was not answered by the Constitutional Court in definitive terms. However it is necessary to look at the Act and the mechanisms that are put in place in terms of the Act to enable organisations to hold marches.
  • · The Act provides for the right and not the privilege to organise a march.
  • · It provides for “notification” of a march to the relevant municipal authority and does not indicate the need to apply for permission.
  • · Upon receipt of notification, the municipality is required to assess the situation and to call a meeting between itself and the organisers and the South African Police. If necessary it may impose wide ranging conditions and together the parties determine the steps that need to be taken to secure the safety and security of those who will participate.
  • · In that context, the SAPS are given wide ranging powers including the right to stop the march and to take any other action necessary to enable individuals to exercise their right to march.
  • · In reality, it is inconceivable what other additional steps an organiser can take once the parties have agreed on the reasonable measures that must be taken prior to the march.
  • · It is against that background, that most international jurisdictions do not place liability on the doorsteps of the organisers of marches. It is our view that the legislation must be brought in line with international jurisdictions and that the trade union movement should consider the lobbying for an amendment to section 11 and other offensive provisions of the Act.

Strike Violence & Dismissal

  • · Recent strikes have involved excessive acts of violence and intimidation.
  • · Apart from urgent interdictory relief, and a possible claim for damages, the employer is also entitled to take disciplinary action against employees who have committed gross acts of misconduct.
  • · In order to secure a dismissal against such employees, the employer will be required to present credible evidence of the misconduct, the details and identities of the employees who were involved in such conduct supported by evidence given by witnesses and by-standers.
  • · Employers have always found it difficult to find sufficient evidence in such circumstances to sustain a finding of guilt against such employees let alone establish the basis for the dismissal.
  • · Can an employer in the circumstances dismiss employees not on the basis of misconduct, but on the ground of operational requirements?
  • · In FAWU obo Kapisi & Others v Premier Foods Limited t/a Nlue Ribbon Salt River (CA7/2010, 16 March 2012), the Labour Appeal Court, found the dismissal of 31 employees substantively and procedurally unfair and ordered the employer to pay them compensation. The Labour Court however indicated that an employer may in certain circumstances dismiss employees on the basis of operational requirements if disciplinary charges cannot be proven. The list of violent incidents in this matter was extensive and included the following:
    • o a neighbour of one of the victims who was in a position to identify those responsible for violence, was shot and killed near his home;
    • o homes were destroyed and other houses were petrol bombed;
    • o senior managers received death threats;
    • o some employees and senior management were provided with security guards;
    • o entrances and exits to the company’s premises were blocked and some employees were robbed of their personal possession;
    • o the employer’s key witness, disappeared five years later and on the date of the Labour Appeal Court hearing he had still not reappeared;
    • o there was a general unwillingness of the witnesses to speak out against those responsible for the violence.
  • · The planned disciplinary proceedings could not be pursued and was abandoned. Thereafter, the employer dismissed the employees not on the basis of misconduct, but on the ground of operational requirements (that the employees were linked to the violence and intimidation during the course of the strike).

The LAC’s findings

  • · The Labour Appeal Court assumed that the employer in this case was unable to hold the disciplinary enquiries; that the dismissals were based on the employer’s operational requirements and that operational requirements dismissals do not require the employer to prove that the dominant purpose of the retrenchment was to secure the economic viability of the business.
  • · The entire decision of the Labour Appeal Court turned on whether the employer had applied the selection criteria fairly: That the employees who were identified for retrenchment were linked to the violence and intimidation during the course of the strike.
  • · The LAC had to determine whether the employer had acted fairly in selecting employees for retrenchment on the basis of untested allegations of misconduct. For that the employer had relied on affidavits and the fact that the employees had refused to undergo polygraph tests.
  • · The LAC found that the employer had not acted fairly in selecting the employees for retrenchment as there had not been sufficient proof of their involvement in specific acts of misconduct.
  • · It is apparent from this judgment that there is some scope for an employer to dismiss employees on the basis of operational requirements instead of dismissing them for misconduct.

REPLACEMENT LABOUR DURING STRIKE ACTION

  • · This issue is governed by section 76 of the LRA. In terms of this provision an employer may hire replacement labour during strike action. There are only two limitations on this right. The employer may not do so-

    (a) ………..during a protected strike if ….. the employer’s service has been designated a maintenance service;
    (b) for the purposes of performing the work of an employee who is locked out, unless the lockout is in response to a strike.

  • · There are numerous international jurisdictions where replacement labour is prohibited during a protected strike.
  • · Examples of such clauses are attached at the end of this presentation
  • · The latest Digest of Decisions by the ILO Committee on Freedom of Association is also attached.
  • · In many European countries there are no such provisions because there is a very strong tradition of not crossing the picket line. The lesson from these countries is that trade unions don’t need such laws if there is no mass unemployment and a tradition of solidarity.

NATIONAL KEY POINTS ACT 102 OF 1980 (“the Act”)

Introduction

  • · The Act is thin on content, awards far too much discretion to the Minister and is vague in numerous respects.
  • · The purpose of the Act is to provide for “National Key Points and the safeguarding thereof and for matters connected therewith”.

What is a national key point?

  • · The Minister of Defence (“the Minister”) may, in terms of section 3, declare any place or property a NKP if –
    • o he considers it necessary or expedient –
      • § for the safety of the Republic;
      • § in the public interest; or
    • o it appears to the Minister that any place or area is so important that its loss, damage, disruption or immobilization may prejudice the Republic.
  • · The Minister’s powers are written in ‘subjective mode’ and he or she is entitled to exercise it without advice and without the need to hear the owner of the property before such a declaration is made.
  • · The Minister is not required to offer any reasons for such a declaration and there is no need to gazette or record, for the benefit of the public, such declarations. The only obligation is for the Minister to notify the owner of the property in writing, of such declaration – section 2(2).
  • · This power is vast, and it is, on the face of it, unfettered.

What happens after such a declaration?

First step

  • · After receipt of such notification, the owner must after consultation with the Minister, at his own expense take steps in respect of security of the NKP to the satisfaction of the Minister – section 3(1)

Second step

  • · If the owner fails to do so, the Minister may –
    • o order him to do so, and if he refuses to comply with the order, he will be guilty of an offence and liable on conviction to a fine or imprisonment or both;
    • o implement such steps and recover the costs from the owner.
  • · The Minister may take these steps without any consideration as to whether or not such measures are feasible, reasonable or indeed affordable by the owner.

How does the Minister fund such expenses?

  • · The Act provides for the creation of a Special Account for the Safeguarding of the National Key Points, and directs that such monies are to be utilized for any loans or financial assistance to the owner of property, at the discretion and on the conditions to be determined by the Minister – section 3B.
  • · The Minister together with the Minister of Finance are entitled to designate a person in the service of the state as the accounting officer for the account – section 3B(3).

Prohibition against the publication of any information regarding NKPs

  • · Section 10 creates a criminal offence in respect of the release of “any information relating to the security measures, applicable at or in respect of any NKP or in respect of any incident that occurred there”.

Power of entry without owner’s consent

  • · The Minister, or any person authorized by him may enter any place or area to, inter alia –
    • o exercise any power granted to him in this Act;
    • o gather information, or check whether any steps have been taken in terms of this Act.

Does the exercise of the powers by the Minister in terms of the Act constitute administrative action?

  • · Administrative action means any decision of an administrative nature made under an empowering provision, ……. or exercising a public power or performing a public function in terms of any legislation …. which adversely affects the rights of any person [or has the capacity to affect such legal rights] and which has a direct, external legal effect[1].
  • · The Minister’s decision, if any, to declare a place or a property as a NKP, is made in the course of an exercise of a public power conferred by legislation, in the course of declaring private and non-private property as NKPs for the benefit of the country, and with immediate and direct legal consequences for affected property owners.
  • · Any decisions taken by the Minister in terms of this Act falls squarely within the definition of administrative action, as defined in PAJA, and confirmed in the decision on the SCA in Greys Marine Hout Bay (Pty) Ltd.
  • · Accordingly, any rights accorded to the Minister in terms of the Act must be exercised or asserted within the framework of PAJA. That means that the Minister’s actions must be lawful, reasonable and procedurally fair.

Lawful administrative action

  • · This means that the Minister’s exercise of power must be authorised by the law[2]. In making the declaration of a NKP, the Minister will be obliged to demonstrate that he has met the requirements of section 3. In other words, and by way of example, if the Minister has made the declaration ‘in the public interest’, he will be required to demonstrate precisely what constituted the ‘public interest’.
  • · If the minister is unable to do so, his decision might be attacked on the principle of legality or on the basis that it is arbitrary, capricious or mala fides[3].

Reasonable administrative action

  • · This means in essence that the Minister’s decision or declaration must be supported by the evidence and information before him, as well as the reasons given for it.
  • · O’Regan J in Bato Star v Minister of Environmental Affairs[4] indicated that what is reasonable in a particular case depends on the circumstances, and went on to list the factors relevant to determining whether a decision is reasonable:

The nature of the decision, the identity and expertise of the decision maker, the range of factors relevant to the decision, the reasons given for the decision, the nature of the competing interests involved and the impact of the decision on the lives and well-being of those affected.

Procedurally fair administrative action

  • · Section 3(2)(b) of PAJA reads as follows:

In order to give effect to the right to procedurally fair administrative action, an administrator, subject to subsection (4), must give a person referred to in subsection (1) –

(i) Adequate notice of the nature and purpose of the proposed administrative action;

(ii) A reasonable opportunity to make representations;

(iii) A clear statement of the administrative action ……

  • · These provisions will apply where the relevant legislation is silent on the subject of fair procedures[5].

Provisions relating to Replacement Labour

British Columbia, Canada

Section 68 of the Labour Relations Code

Replacement workers

68 (1) During a lockout or strike authorized by this Code an employer must not use the services of a person, whether paid or not –

(a) who is hired or engaged after the earlier of the date on which the notice to commence collective bargaining is given and the date on which bargaining begins;

(b) who ordinarily works at another of the employer`s places of operations;

(c) who is transferred to a place of operations in respect of which the strike or lockout is taking place, if he or she was transferred after the earlier of the date on which the notice to commence bargaining is given and the date on which bargaining begins; or

(d) who is employed, engaged or supplied to the employer by another person; to perform

(e) the work of an employee in the bargaining unit that is on strike or locked out; or

(f) the work ordinarily done by a person who is performing the work of an employee in the bargaining unit that is on strike or locked out;

(2) An employer must not require any person who works at a place of operations in respect of which the strike or lockout is taking place to perform any work of an employee in the bargaining unit that is on strike or is locked out without the consent of the person;

(3) An employer must not –

(a) refuse to employ or continue to employ a person;

(b) threaten to dismiss a person or otherwise threaten a person;

(c) discriminate against a person in regard to employment or a term or condition of employment; or

(d) intimidate or coerce or impose a pecuniary or other penalty on a person; because of the person`s refusal to perform any or all of the work of an employee in the bargaining unit that is on strike or locked out.

Canada (Federal)

Federal Labour Code

Section 94

Prohibition relating to replacement workers

(2.1) No employer or person acting on behalf of an employer shall use, for the demonstrated purpose of undermining a trade union’s representational capacity rather than the pursuit of legitimate bargaining objectives, the services of a person who was not an employee in the bargaining unit on the date on which notice to bargain collectively was given and was hired or assigned after that date to perform all or part of the duties of an employee in the bargaining unit on strike or locked out.

Quebec

Quebec Labour Code

Section 194

For the duration of a strike declared in accordance with this Code or a lock-out, every employer is prohibited from

(a) utilizing the services of a person to discharge the duties of an employee who is a member of the bargaining unit then on strike or locked out when such person was hired between the day the negotiation stage begins and the end of the strike or lock-out;

(b) utilizing, in the establishment where the strike or lock-out has been declared, the services of a person employed by another employer or the services of another contractor to discharge the duties of an employee who is a member of the bargaining unit on strike or locked out;

(c) utilizing, in an establishment where a strike or lock-out has been declared, the services of an employee who is a member of the bargaining unit then on strike or locked out unless

(i) an agreement has been reached for that purpose between the parties, to the extent that the agreement so provides, and, in the case of an institution contemplated in section 111.2, unless the agreement has been approved by the Commission;

(ii) in a public service, a list has been transmitted or, in the case of an institution contemplated in section 111.2, approved pursuant to Chapter V.1, to the extent that the list so provides;

(iii) in a public service, an order has been made by the Government pursuant to section 111.0.24.

(d) utilizing, in another of his establishments, the services of an employee who is a member of the bargaining unit then on strike or locked out;

(e) utilizing, in an establishment where a strike or lock-out has been declared, the services of an employee he employs in another establishment;

(f) utilizing, in an establishment where a strike or a lock-out has been declared, the services of a person other than an employee he employs in another establishment, except where the employees of the latter establishment are members of the bargaining unit on strike or locked out;

(g) utilizing, in an establishment where a strike or lock-out has been declared, the services of an employee he employs in the establishment to discharge the duties of an employee who is a member of the bargaining unit on strike or locked out.

ILO Committee on Freedom of Association

Digest of Decisions

Back-to-work orders, the hiring of workers during a strike, requisitioning orders

632. The hiring of workers to break a strike in a sector which cannot be regarded as an essential sector in the strict sense of the term, and hence one in which strikes might be forbidden, constitutes a serious violation of freedom of association.(See the 1996 Digest, para. 570; 302nd Report, Case No. 1849, para. 217; 306th Report;

Case No. 1865, para. 336; 307th Report, Case No. 1899, para. 81; 311th Report, Case No. 1954, para. 406; 327th Report, Case No. 2141, para. 322; 333rd Report, Case No. 2251, para. 998; and 335th Report, Case No. 1865, para. 826.)

633. If a strike is legal, recourse to the use of labour drawn from outside the undertaking to replace the strikers for an indeterminate period entails a risk of derogation from the right to strike, which may affect the free exercise of trade union rights.

(See the 1996 Digest, para. 571; 306th Report, Case No. 1865, para. 336; 318th Report, Case No. 2005, para. 183; and 333rd Report, Case No. 2251, para. 998.)

634. Whenever a total and prolonged strike in a vital sector of the economy might cause a situation in which the life, health or personal safety of the population might be endangered, a back-to-work order might be lawful, if applied to a specific category of staff in the event of a strike whose scope and duration could cause such a situation. However, a back-to-work requirement outside such cases is contrary to the principles of freedom of association.

(See the 1996 Digest, para. 572; 320th Report, Case No. 2044, para. 452; 329th Report, Case No. 2195, para. 737; 332nd Report, Case No. 2252, para. 883; and 333rd Report, Case No. 2281, para. 634.)

635. The use of the military and requisitioning orders to break a strike over occupational claims, unless these actions aim at maintaining essential services in circumstances of the utmost gravity, constitutes a serious violation of freedom of association.

(See the 1996 Digest, para. 573; 308th Report, Case No. 1921, para. 575; 320th Report, Case No. 2044, para. 452; and 333rd Report, Case No. 2288, para. 831.)

636. The employment of the armed forces or of another group of persons to perform duties which have been suspended as a result of a labour dispute can, if the strike is lawful, be justified only by the need to ensure the operation of services or industries whose suspension would lead to an acute crisis.

(See the 1996 Digest, paras. 528 and 574; 321st Report, Case No. 2066, para. 340; 324th Report, Case No. 2077, para. 551; and 328th Report, Case No. 2082,para. 475.)

637. Although it is recognized that a stoppage in services or undertakings such as transport companies, railways and the oil sector might disturb the normal life of the community, it can hardly be admitted that the stoppage of such service could cause a state of acute national emergency. The Committee has therefore considered that measures taken to mobilize workers at the time of disputes in services of this kind are such as to restrict the workers’ right to strike as a means of defending their occupational and economic interests.

(See the 1996 Digest, paras. 530 and 575; 317th Report, Case No. 1971, para. 56; 335th Report, Case No. 1865, para. 826; and 337th Report, Case No. 2249, para. 1478.)

638. The requisitioning of railway workers in the case of strikes, the threat of dismissal of strike pickets, the recruitment of underpaid workers and a ban on the joining of a trade union in order to break up lawful and peaceful strikes in services which are not essential in the strict sense of the term are not in accordance with freedom of association.

(See the 1996 Digest, para. 576.)

639. Where an essential public service, such as the telephone service, is interrupted by an unlawful strike, a government may have to assume the responsibility of ensuring its functioning in the interests of the community and, for this purpose, may consider it expedient to call in the armed forces or other persons to perform the duties which have been suspended and to take the necessary steps to enable such persons to be installed in the premises where such duties are performed.

——————————————————————————–

[1] Para 21 – 24 in Greys Marine Hout Bay (Pty) Ltd v Minister of Public Works – Case No:347/04 (SCA)

[2] Fedsure Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan Council 1999(1) SA 374 (CC), para 58

[3] Johannesburg Stock Exchange v Witwatersrand Nigel Ltd 1988 (3) SA 132 (A AT 152 C-D)

[4] 2004 (4) SA 490 (CC), para 45

[5] Zondi v MEC for Traditional and Local Government Affairs 2005 (3) SA 589 (CC) paras 113 – 114

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[su_spoiler title=”COSATU Policy Framework on Climate Change: Adopted by the COSATU Central Executive Committee, August 2011″ open=”yes” icon=”folder-1″]

19 November 2011

Introduction: COSATU’s positions on Climate Change so far

Climate change is part of a larger economic and ecological crisis which represents a serious challenge for the working class in general and the trade union movement in particular. It is a challenge that has a gender dimension in that working class women, as the administrators and labourers of households, are bearing the brunt of the impacts of climate change.

For some years COSATU has recognized that as more and more greenhouse gases (GHGs), especially carbon dioxide (CO2) but also other gases such as methane, are thrown up into the earth’s atmosphere, so a blanket of these gases is being formed around the earth, which in turn is heating up the temperature immediately above the surface of the earth. This is what is called “global warming” and is what is causing extreme weather events on a scale that has not been seen before. Such extreme weather events include droughts, floods, tornados, and snow storms. Global warming is also causing the rapid melting of ice in the north and south poles, which is causing sea levels to rise. Climate patterns are changing and becoming unpredictably variable, with shifts in rainfall and other seasonal patterns. All these events (which collectively we refer to as “climate change”) are having devastating impacts on the poor and the powerless throughout the world. Already there are over 150 million “climate refugees” in the world who have been displaced through drought, failed crops, floods and rising sea levels. In addition 262 million people are being affected a year by climate related disasters, with the poor worst affected.

COSATU resolved at its 2009 Congress (Annexure 1) that “climate change is one of the greatest threats to our planet and our people”. It noted that “it is the working class, the poor and developing countries that will be adversely affected by climate change.” The Congress also noted that “unless the working class and its organizations take up the issue of climate change seriously, all the talk about ‘green jobs’ will amount to nothing except being another site of accumulation for capitalists”. The 2009 Congress resolution also committed COSATU to increase its research capacity on climate change.

The labour/civil society conference convened by COSATU in October 2010 included over 300 civil society organisations and resulted in a declaration (Annexure 2) which included recognition of the ecological crisis. The declaration states “We need to move towards sustainable energy, to migrate the economy from one based on a coal to a low carbon or possibly carbon free economy. The renewable energy sector will grow, needing different skills and different locations. We have to make sure that we are in charge of this process and do not become the objects of it.” There are also references in the Declaration to eco-agriculture, zero-waste, green jobs, and a rejection of nuclear power.

A resolution on campaigns adopted at COSATU’s Central Committee in June 2011 (Annexure 3) the central committee of COSATU endorsed the Million Climate Jobs campaign and resolved “to mobilise our members for the Global Day of Action on climate change on the 3rd December 2011 in Durban.

COSATU’s “Growth Path towards Full Employment” published by the federation in 2010 presents a strong argument for a growth path that promotes redistribution and which creates decent work. The document puts forward six policy pillars for the achievement of redistribution and decent jobs. One of these pillars is environmental sustainability, which is fleshed out in chapter 17 of the document under the heading “Green Jobs and the Environment”. The chapter does not however directly address climate change and the challenge of carbon emissions. The other five pillars are fiscal policy, monetary policy, industrial development, collective and public forms of ownership, and the development of the southern African region.

The above resolutions, declarations and growth path framework, while important milestones for COSATU, do not constitute fully-fledged policy on climate change. This document provides a framework for such a policy. The framework prioritizes the interests of the working class in the changes involved in reducing carbon emissions. These changes will involve a transition from our total dependence on fossil fuels like coal, oil and gas to a mix of energy sources which includes the so-called renewable of solar, wind, hydro and waste. The framework supports a ‘just transition’ to a low carbon economy. A ‘just transition’ means changes that do not disadvantage the working class worldwide, that do not disadvantage developing countries, and where the industrialized countries pay for the damage their development has done to the earth’s atmosphere. A just transition provides the opportunity for deeper transformation that includes the redistribution of power and resources towards a more just and equitable social order.

Further education and research work will be required across the federation to ensure implementation of the policy

COSATU principles in the Climate Change Policy Framework

  • Capitalist accumulation has been the underlying cause of excessive greenhouse gas emissions, and therefore global warming and climate change.
  • A new low carbon development path is needed which addresses the need for decent jobs and the elimination of unemployment
  • Food insecurity must be urgently addressed
  • All South Africans have the right to clean, safe and affordable energy
  • All South Africans have the right to clean water
  • We need a massive ramping up of public transport in South Africa
  • The impacts of climate change on health must be understood and dealt with in the context of the demand for universal access to health
  • A just transition to a low-carbon and climate resilient economy is required
  • We need a carbon budget for South Africa
  • African solidarity is imperative
  • An ambitious legally binding international agreement designed to limit temperature increases to a maximum of 1.5 degrees is essential as an outcome of the UNFCCC process
  • We reject market mechanisms to reduce carbon emissions
  • Developed countries must pay for their climate debt and the Green Climate Fund must be accountable
  • We need investment in technology, and technology transfers to developing countries must not be fettered by intellectual property rights
  • The South African government’s position in the UNFCCC processes must properly represent the interests of the people

Principle One: Capitalist Accumulation is the underlying cause of excessive greenhouse gas emissions

COSATU recognizes that the fundamental cause of the climate crisis is the expansionist logic of the capitalist system.

Capitalism is a system that constantly seeks to expand production by the cheapest means possible. This means that it depends on the exploitation of workers around the world as well as the depletion of the natural resource base of the planet. What is produced is very often not really needed by people, but becomes desirable through advertising and marketing. It is also a system that creates massive waste – either in the form of production that exceeds demand, or in the form of goods that are bought but thrown away. This includes food. In the highly industrialized countries it is estimated that at least 40% of all food produced is thrown away. Continuous expansion of production means massive use of electricity, which historically has been mostly produced by burning coal. The burning of coal and other so-called fossil fuels such as oil produces huge volumes of greenhouse gases (especially carbon dioxide CO2). The excessive waste created by capitalism is either burned or dumped – either way it also produces huge volumes of GHGs. Capitalism also ravages the natural production of oxygen and absorption of carbon dioxide by destroying forests and marine life.

Of course even under socialism and communism greenhouse gases are produced and oxygen replenishment is undermined. However the scale of this process can be limited and controlled, because production is geared to meeting real needs of people, not for the sake of creating profits for the bourgeoisie regardless of the cost to humanity as a whole.

The argument that capitalism is at the root of the current climate crisis has already been reflected in Joint Labour’s (COSATU, NACTU and FEDUSA) submission earlier this year in response to the Green Paper on Climate Change. The submission states that “we are convinced that any efforts to address the problems of Climate Change that does not fundamentally challenge the system of global capitalism is bound not only to fail, but to generate new, larger and more dangerous threats to human beings and our planet. Climate Change …. is caused by the global private profit system of capitalism. Tackling greenhouse gas emissions is not just a technical or technological problem. It requires a fundamental economic and social transformation to substantially change current patterns of production and consumption”.

Of course we cannot however wait for the socialist revolution to resolve the immediate threat of climate change. We have very little time left to slow down and reverse the world-wide production of greenhouse gases which is threatening the future of humanity at large, but the future of the working class in particular. So while we are working towards our goal of socialism, we have to build in strategies and demands that immediately address the crisis.

This takes us to our second principle.

Principle Two: A new Low Carbon Development Path is needed which addresses the need for decent jobs and the elimination of unemployment

As indicated in the introduction, COSATU’s 2010 “Growth Path towards Full Employment” already provides a framework for redistribution and the creation of decent work. At the same time, the various resolutions referred to in the introduction have committed COSATU to a future of much reduced carbon emissions i.e. “a low carbon future”. It is now time to put the two arguments together.

This means that every time we think of economic expansion and the creation of jobs – whether it be in manufacturing, agriculture, services, construction, transport, or mining – we must think about how the activity can either contribute to reducing carbon emissions, or can contribute to managing the consequences of climate change. The first response (reduced emissions) is known as mitigation, and the second response (dealing with the consequences) is known as adaptation.

We also need to start thinking even more seriously about focusing production and consumption on meeting basic needs. This implies starting to think about growth in a different way. We need to start thinking of measuring growth not in money terms (“gross domestic product”) but in terms of targets for housing, health, education, access to services, and even in terms of leisure, happiness and wellbeing.

Support for this notion of a new low-carbon development path is increasing globally. A resolution adopted at ITUC’s second congress in 2010 stated that “The global crises show clearly that coherent and ambitious initiatives are needed to address the challenges of today and tomorrow. It demands a transformational change in global production and consumption systems to make our societies and workplaces sustainable and to safeguard and promote decent work for all”.

At a gathering of trade union and global movement leaders in April 2011 known as the “Madrid Dialogue” a new low carbon development paradigm was discussed. Ambet Yuson, the General Secretary of Building and Woodworkers International (BWI) argued that “a green economy based on rights, sustainability principles and decent work can meet the challenge of our societies.” The Social Democratic Spanish Minister of the Environment stressed that “the social and environmental agenda should be indissolubly joined in order for a just transition to be produced towards a new model of growth”. At the same meeting, the General Secretary of COSATU, Zwelinzima Vavi cautioned that the path to a low carbon economy must be based on new relations of production: – “We will not support any form of capital accumulation that breeds inequalities – even if those forms of capital accumulation are green”.

The International Transport Workers Federation (ITF) in a 2010 Congress discussion document “Transport Workers and Climate Change: Towards sustainable, low carbon mobility”, spelt the argument out further. “This new economy will still see growth – but the emphasis should be on “social growth” whereby the number of good jobs increase; the incomes of the poor are raised; the deployment of climate-friendly and other green technologies are advanced; the availability of health care becomes more widespread; and security against the risks of job displacement, old age, and disability are enhanced. Policies are needed that temper traditional economic growth while improving social and environmental wellbeing – policies establishing, for instance, increased “time wealth” by reducing the number of hours at work and lengthening vacations. For the global South, top priority must be given to providing space for countries to develop their productive forces in an environmentally sustainable way. Many countries still lack adequate water and sanitation systems. They also need to expand electricity generation based on renewable sources, build safe and affordable public transport systems, and introduce road safety systems in order to protect both drivers and pedestrians. This kind of social growth will only happen if economic life is made much more democratic and more responsive to social and environmental needs.”

Clearly workers and their trade unions are an indispensable force in the transition to a low carbon economy. COSATU has a responsibility to lead in this regard. We have to acknowledge that some employment will be shifted, and some jobs may even eventually disappear. Some workers will need training in new skills to accommodate the changes in their trade e.g. plumbers and electricians. But above all, we need to seize the opportunity to demand a massive expansion of jobs in order to meet the need for new kinds of energy production (such as solar, wind and water power), more public transport, more recycling, renovating and insulating already existing buildings (including homes) with energy saving and carbon reducing devices etc. This is why COSATU has already adopted the campaign for a Million Climate Jobs at the June 2011 Central Committee.

Climate jobs are decent jobs that reduce the emissions of greenhouses gases and/or that strengthen the resilience of communities to deal with the impact of climate change. These jobs are in almost every case more labour-intensive. First prize would be for these jobs to be created directly by the state – via existing or new parastatal, and via all levels of government. We need these jobs, and we need them now! We have a lot more research and campaigning work to do to make these jobs a reality.

There are a number of progressive campaigns for climate jobs and/or retraining around the world that we can learn from.

Principle Three: Food insecurity must be urgently addressed

Climate change will increase the food insecurity already affecting 40% of all South Africans. As part of our new low-carbon development path we need to change the present unsustainable system of industrialized agriculture. This will help us both adapt to the climate reality that is already with us, and to reduce carbon emissions from the sector.

Future food production will lack cheap energy, abundant water or a stable climate. The increase in droughts and floods which are part of climate change will cut food production in parts of the world by 50% in the next 12 years. This will put pressure on food prices, including on basic foods such as bread. South Africa will not be exempt from this. In fact the bread price in South Africa has already risen by 66% in the last three years.

The way food is produced under the current corporate food regime also contributes directly to climate change. Long supply chains mean wasteful ‘food miles’. Fertilizer and pesticides are made from petroleum and natural gas. Both are used in planting, harvesting and transport. Cultivating right up to edge of water sources, including rivers, destroys those water sources and leaves no natural habitat in which plants and animals can adapt to new climatic conditions. Ploughing also releases lots of carbon.

For reasons of adapting to climate change as well as for reasons of reducing the agricultural sector’s direct contribution to climate change, we therefore have to start changing the way we produce food. We need to be promoting and supporting local small scale agriculture for local consumption – a form of food production that creates more jobs and requires less chemical and transport inputs. Such a shift must include support for urban small scale production. Such shifts are what we mean by moving to a state of food sovereignty. This shift implies a substantial ramping up of food production to eliminate food insecurity.

Principle Four: All South Africans have the right to energy

Presently 17.4% of all South African households are not connected to the electricity grid. We would have to add to this the number of people who are connected to the grid, but who cannot afford to pay for electricity to get a true figure for household access. It has to be acknowledged that a life without electricity in the 21st century is one of great disadvantage, and has a multiplier effect on inequality. Therefore in developing a strategy that reduces our dependence on fossil-fuel produced electricity we have to at the same time rapidly expand our household electricity connections.

We reject nuclear energy as too expensive and dangerous. There are no known safe ways of disposing of nuclear waste. The commitment of our government to nuclear energy contributes to policy incoherence as it is proven that this industry is not labour intensive, and therefore cannot contribute in any real way to job creation. Nuclear plants cost billions to build and take a long time to get up and running. This is money and time that the country could better spend on real renewable energy solutions, and other developmental imperatives. We therefore need to continue to oppose government’s current commitment to expansion of nuclear energy generation. It can be shown that we can meet South Africa’s electricity demand using renewable energy technologies and have no need of nuclear for “base load” as is often promoted.

New and renewable power generation from sources such as wind, solar, hydro and waste needs to be cheap. In order to keep it cheap it must be generated and distributed by entities owned and controlled by government.

While access to cheap electricity needs to be ramped up, levels of household consumption can be limited through the construction and retro-fitting of energy efficient homes. This includes the fitting of solar water heaters, installation of decent ceiling insulation, and the design of houses to best take advantage of natural light and warmth from the sun.

The expansion of access to electricity, the growth in renewable energy production, and the initiatives to reduce electricity consumption, will be part of a strategy to create tens of thousands of new jobs.

Principle Five: All South Africans have the right to clean water

South Africa is already a country of water scarcity. Climate change is putting further pressure on this. As with agriculture, we have to adapt how we deal with water distribution and consumption.

Access to clean water remains a dream for millions in South Africa. In adapting to increasing water stress, we have to ensure that at the same time those who currently have no access are given access. State support for rain collection (or “rain harvesting” as it is referred to) through the mass distribution of rain water tanks should be considered.

Addressing water wastage is also critical. Leaking municipal and domestic pipes account for massive daily wastage.

As water stressed country we need to value and safeguard the natural sources of water – our aquifers, groundwater, water catchment areas, rivers and wetlands. These are part of the natural cycle which cleans and provides water to life on the planet. In our quest for new energy sources we must ensure that we do not compromise this scarce resource.

Strategies to address preventing water wastage and the protection of our water sources will be part of a campaign to produce tens of thousands of new jobs.

Principle Six: We need a massive ramping up of public transport in South Africa

We note that transport in South Africa is a significant emitter (around 12% of all GHGs).

The most obvious intervention to reduce transport emissions is to ramp up the provision of public transport. 32% of commuters travel to work daily in private cars – the majority being one person one car. Attracting even a portion of these private car users to public transport could assist in cutting emissions. But in order to attract private car users to public transport, services need to be safer, more frequent, more comfortable, and more affordable. Massive public investment is required to make this possible, but the spinoffs would be significant not only in respect of reduced carbon emissions, but also in respect of job creation.

To meet the need for massive expansion in public transport, the local manufacture of public transport vehicles that use cleaner fuels must be supported as a job creating initiative. And the infrastructure for transport of fuels must be invested in to make it suitable for movement of cleaner fuels.

COSATU will lead a national campaign for the rapid expansion of public transport.

Principle Seven: The impacts of climate change on health must be understood and dealt with in the context of the demand for universal access to health

There is already a body of international evidence on the health impacts of climate change. This includes predicted increases in incidents of malaria (due to warmer and wetter conditions), water-borne diseases, heat-stroke etc. Drought and other extreme weather related events will also impoverish the already marginalized, making them further vulnerable to ill-health and disease.

These health impacts are however little understood by the health sector in South Africa. Urgent attention needs to be paid to developing an understanding and a response in the health sector.

Principle Eight: A Just Transition to a low-carbon and climate resilient economy is required

A just transition addresses both the unemployment crisis and the ecological crisis.

The evidence suggests that the transition to a low-carbon economy will potentially create more jobs than it will lose. But we have to campaign for protection and support for workers whose jobs or livelihoods might be threatened by the transition. If we do not do that, then these workers will resist the transition. We also have to ensure that the development of new green industries does not become an excuse for lowering wages and social benefits. New environmentally-friendly jobs provide an opportunity to redress many of the gender imbalances in employment and skills. The combination of these interventions is what we mean by a just transition.

The just transition is a concept that COSATU has supported in the global engagements on climate change that have been lead by ITUC. The basic demands of a just transition are:-

  • Investment in environmentally friendly activities that create decent jobs that are paid at living wages, that meet standards of health and safety, that promote gender equity, and that are secure
  • The putting in place of comprehensive social protections (pensions, unemployment insurance etc) in order to protect the most vulnerable
  • The conducting of research into the impacts of climate change on employment and livelihoods in order to better inform social policies
  • Skills development and retraining of workers to ensure that they can be part of the new low-carbon development model

It is noted that ITUC’s lobbying, which COSATU is a part of, succeeded in 2010 in getting governments to agree internationally at the UNFCCC on a commitment to the concept of a just transition.

We also need to ensure that the concept of a just transition is built into the final text of the international legally binding agreement that we are pushing for as international labour.

Internationally we support the ITUC position that the ILO should be given the mandate to set recommendations to the UNFCCC on operationalising the just transition agenda. The ILO should also be given the mandate to monitor and report on progress in achieving a just transition.

As COSATU we need to ensure that the concept of a just transition is developed further to fully incorporate our commitment to a fundamentally transformed society. We need to embed it in all our local campaigning and negotiating on climate change. We need to urgently educate our members on the shop floor so that they can identify issues for negotiation and items for intervention. We also need to find ways of extending the discussions and mobilization into communities.

Principle Nine: We need a carbon budget for South Africa

The process of measuring current emissions and making targets for the future is what is known as having a “carbon budget”. Our government has already developed a system of calculating emissions per sector, and of reporting these to the UNFCCC. The only target for emissions reduction that we have however is a contested overall national target. This has not yet been broken down per sector.

South Africa urgently needs a carbon budget, so that all sectors can work to targets and be held accountable. As COSATU we need to have input into the development of such a carbon budget. Our proposals for such a budget must be based on the other principles of our approach to climate change.

Principle Ten: African solidarity is imperative

In developing our policy response to Climate Change, we have to ensure that we are taking into account the wider interests of Africa as a continent, and the interests of the SADC region in particular this is for two reasons. We are already the worst carbon emitters in Africa, and Africa (including South Africa) is likely to be worse affected than most other regions of the world. This is because Africa has a very large land mass which means that whatever average temperature rise is experienced world-wide, Africa will experience a rise of 1 and a half times that average. So, for example, a two degree global rise in temperature will mean a three degree average rise for Africa.

A rise of a single degree in Africa will cause a loss of 65% of the continent’s present maize growing capacity. Food production overall could fall by as much as 20%.

The latest Intergovernmental Panel on Climate Change predicts that wheat production will disappear from Africa and there will be a marked decrease in the amount of maize under cultivation across the continent. An OXFAM report estimates that the price of wheat will increase by 120% in the next few years which will put bread out of the reach of many.

A single degree rise in temperature will result in a 10% decline in rainfall by 2050, creating water stress for 480 million people. Africa also has large coastal areas at sea level or marginally above sea level. A warming of two degrees will produce a significant rise in sea levels, which will flood many coastal communities and destroy much of Africa’s coastal infrastructure. It should be noted that our government has not to date supported the position of the majority of other African countries that measures must be taken to restrict temperature increases to a maximum world average of below 1.5 degrees. South Africa is sticking with 2 degrees.

Africa is also more vulnerable because it has fewer resources to deal with the results of climate change. As a continent we lag behind in technology, skills and financial resources. This is why the argument for technology transfer without the constraints of intellectual property rights, and the argument for a transfer of grant funds from the developed nations are so important. Grant funds for climate change must be in addition to other “overseas development assistance”.

We also need continental solidarity to resist a new neo-colonial land grab that is taking place in Africa. Biofuels are liquid fuels made from plants such as maize, sugar, and other crops. These crops need large amounts of land on which to be cultivated. Ironically, laws introduced in Britain and the European Union that demand the blending of rising amounts of biofuels into petrol and diesel, have resulted in British and European companies buying up large tracts of land in Mozambique, Senegal, Mali, Guinea and at least 16 other African countries. There are no central records of land acquisitions in Africa, but research by the Guardian newspaper has revealed the scale of the biofuels rush in sub-Saharan Africa – 100 projects and 50 companies in more than 20 countries. A commission set up by an institution called the Nuffield Council on Bioethics found that in the UK only 31% of biofuels used meet voluntary environmental standards intended to protect water supplies, soil quality and carbon stocks in the source country. This is over and above the fact that the land and resources used to produce biofuels competes with land and resources required for food production – creating a link between biofuels and record food prices and rising hunger. A study by Greenpeace on the acquisition of African land has also shown that in the wake of the growth of the biofuels industry, European companies are buying up even more land as hedge funds and stocks. So while biofuels in themselves produce less carbon emissions, this does not make them necessarily desirable from a development point of view.

It is imperative that as COSATU we work with our sister federations throughout Africa to develop a continent-wide labour perspective on Climate Change. It is also imperative that we push our own government towards policy positions that go beyond the self-interests of South Africa. We need to be part of developing a comprehensive African trade union response by engaging in the debates to be held at the ITUC-Africa Regional Congress to be held in October this year.

Principle Eleven: A legally binding international agreement designed to limit temperature increases to 1.5 degrees is essential as part of the UNFCCC process

United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992 and entered into force 1994. Under this agreement, all governments commit to reduce their emissions, under the principle of common but differentiated responsibilities and respective capacities. However seventeen years and millions of tons of carbon emissions later, there is still no effective agreement to ensure emissions cuts at the scale needed to avoid catastrophic climate change. The next annual meeting of the UNFCCC process will be in late November/early December in Durban. This meeting is known as COP17 (17th Conference of the Parties to the UNFCCC).

In line with the position of ITUC, as COSATU we demand an international agreement that is: –

  • Fair i.e. which respects the different responsibilities of developed and developing countries, and ensures also a just transition for workers and their families around the world
  • Ambitious i.e. whereby developed countries take the lead and make binding commitments for emission reductions of up to 40% of 1990 levels by 2020, and whereby allowance is made for an average increase in temperatures of no more than 1.5 degrees
  • Legally binding with sanctions against those that break the agreement

As part of a parallel UNFCCC process of working towards an international binding agreement, an agreement was reached by a limited number of countries (37 in all) in 1997 and entered into force in 2005. This is the Kyoto Protocol, which sets rather inadequate emission reduction targets for the signatory countries and introduced carbon trading and other market mechanisms for reducing emissions. The USA as the worst emitter, has never signed up to the Kyoto Protocol. The first round commitments of the Kyoto Protocol are about to come to an end in 2012. In the absence of a new global and binding agreement under the UNFCCC process, we believe the signatories must agree on deeper commitments for a period beyond 2012. However, many of the signatories to the Protocol, including Japan, Russia, Canada and Australia, are resisting adopting a second commitment period. The future of the Kyoto Protocol is likely to be the main issue of contention at COP 17

Those who are resisting a second commitment period under the Kyoto Protocol have joined the US in proposing that emission cuts, whether under Kyoto or under a new global agreement, should be ‘pledges’ rather than targets. This ‘pledge and review system’, coupled with the market mechanisms that the same countries are happy to retain, represents the DEREGULATION of the international climate regime, with no consequences for those that break their pledges. This will continue to drive us towards climate catastrophe. We therefore reject the system of voluntary “pledge and review”.

Principle Twelve: We reject market mechanisms to reduce carbon emissions

There are a number of market mechanisms that have been developed by governments in an attempt to reduce carbon emissions. The problem is that these mechanisms are all about making the atmosphere into a commodity for sale in the same way that other natural resources have already become commodities used to generate profit. Using market mechanisms also means that the rich and powerful dictate the terms on which the last “free space” (the atmosphere) is carved up an allocated unfairly. Worst of all, the market mechanisms don’t necessarily even reduce emissions!

The market mechanisms that have been developed are:-

  • the Clean Development Mechanism (CDM )
  • Carbon trading, including government regulated “cap and trade” systems

The Clean Development Mechanism (CDM) is part of the Kyoto Protocol. It allows the 37 countries with reduction targets to “offset” their own carbon emissions by investing in emissions reducing projects in other countries. Carbon offsets work by investing in a carbon-reducing project in a developing country, and then receiving “carbon credits” for these investments. In this way they can continue to pollute in the mother country. It has been compared to paying someone else to diet and lose weight for you!

There are about 200 projects in South Africa which have applied for CDM status, of which 20 have so far been formally registered as carbon offset projects. One of these projects is Sasol’s nitrous oxide plan. Sasol’s registration as a CDM project means that as world’s worst single carbon dioxide emitter, it is receiving CDM funds which are then being used to further invest in carbon intensive coal-to-liquid plans across the globe! So in practice, CDM is enabling further destruction of the planet.

Carbon trading is another manifestation of ‘green capitalism’ which is aimed at making profits from climate change, not solving it.

A specific form of carbon trading exists where governments have set national emissions reduction targets (or caps). These governments can give out ‘pollution permits’ to major emitters or sell them at auction. The permits can also be bought and sold by emitters who need them. This is called ‘cap and trade’. So, both the level of the target (the cap) and the remaining permits to pollute place a price on emitting carbon. Emitters are supposed to have an incentive to cut their emissions because they will have to buy fewer permits and may be able to sell any spare. This is the principle behind Europe’s internal carbon emissions trading system and the ones being set up in Australia and under discussion in the USA and Mexico. In Europe however, it has already been found that the system can easily be manipulated by a government over-allocating carbon permits. In addition, the most recent recession has resulted in a drop in production in many polluting industries, which in turn has meant that these industries have accumulated massive carbon credits. Arcelor Mittal alone has credits in Europe worth 1.7 billion Euros.

We reject these market mechanisms. We need international regulation, coupled with sanctions against those who bust the regulations.

Principle Thirteen: Developed countries must pay for their climate debt and the Green Climate Fund must be accountable

While we accept that developing countries, including South Africa, have to play their part in reducing emissions, developed countries must carry a larger part of the burden.

Developed countries have less than 20% of the world’s population but they have emitted almost three quarters of all historic GHG emissions – and they have grown wealthy through this. On a per person basis developed countries are responsible for more than 10 times the historical emissions of developing countries.

There are two forms of climate debt that the developed countries now owe: – an emissions debt and an adaptation debt. This means developed countries need to make deeper emissions cuts than developing countries, and indeed many developing nations need to be allowed to grow their emissions (off a very low current base) before peaking and then also reducing. It also means that developed countries need to provide direct funding for assisting developing countries to adapt to the damage that has already been and will be caused by climate change.

In regard to the management of these debts, the UNFCCC process has agreed on the establishment of a global Green Climate Fund. This Fund is in its infant stages, with the sources or mechanisms for funding not yet agreed. The only steps that have so far been taken are the appointment of a Panel which has been given the task of designing the Fund. Seven African countries have seats on this Panel, with Trevor Manuel being one of the appointees and the co-chair.

The pledge made by developed countries at COP15 in Copenhagen in 2009 of US$100 billion by 2020 is hopelessly inadequate to meet the debts. Modest estimates argue that at least US$200 billion of public finance per year will be needed to meet adaptation and mitigation requirements. Some estimates of requirement are as high as US$600 billion per year.

We need to campaign to ensure that the Green Climate Fund is innovative in sourcing funds and that it considers options such as a Financial Transaction Tax. A tax on stocks, derivatives, currency and other financial instruments (i.e. excluding simple money transfers including remittances of migrant workers to developing countries) of between 0.2% and 0.5% could generate up to USD$650 billion a year globally. This figure could be achieved without applying the tax in developing countries. Such a tax would have the co-benefit of curbing dangerous financial speculation.

We must also ensure that the Fund provides finance through direct grants, not loans. The Fund must not become another mechanism for creating debt and impoverishment of developing countries. The governance of the Fund must be democratic and fair, and trade unions and civil society must be guaranteed participation. Gender equality must be a guiding principle in the governance and operationalisation of the Fund. Any project funded by the Fund must respect ILO core Labour Standards and environmental requirements, and must not be speculative.

And the Fund should not be administered or dominated in any way by the World Bank, as has already been mooted. The World Bank has historically been part of the problem of Climate Change, not part of the solution. It continues to fund massive fossil fuel projects in at least seven different countries (including the 2010 granting of a loan to build a new coal fired power station in South Africa).

Principle Fourteen: We need technology development, and technology transfers must not be fettered by intellectual property rights

We recognize that one of the constraints that South Africa and other developing countries has is a deficit of technology and skills to both reduce emissions and to adapt to a new climate changed reality.

We note that in the UNFCCC processes, technology transfer and financing has been on the table since 1992. The Green Climate Fund is not yet up and running to fund technology transfers. The COP16 in Cancun also set up a technology mechanism, but this is still without content.

We must make sure that technology and skills transfers are effected without being fettered by the obligation to pay for intellectual property rights.

Locally, government must support research and development of technologies which assist in reducing (mitigating) and adapting to climate change. In this regard, priority should be given to collaborating internationally on the possibilities of carbon capture as an interim measure i.e. the process of “capturing” and storing or converting carbon released by the manufacturing and coal-powered electricity sectors. This should not however be assumed to be an option until it has been proven to be effective and safe.

Principle Fifteen: The South African government’s position in the UNFCCC processes must fully reflect the interests of the people

The Bolivian ambassador to the UN talks, Ambassador Solon has argued that governments needed to reflect on whether they are informing the population in an understandable way of what is going on in the negotiations and what are the options for climate change, and whether there is a real process of consultation within the population in the country? He has also expressed concern at the over-representation of private and business interests and the neglect of grassroots movements.

We have to ensure through our campaigns, protests, lobbying, and negotiation processes, that the position of the South African government truly reflects the interests of the people of South Africa, and the interests of the working class in particular. We cannot allow the position of our government to be dictated by capital.

In developing our position, we must build alliances with all other progressive forces in the country. We need:-

  • A common set of demands and principles
  • A joint mobilizing strategy

We also need to put pressure on our government to commit itself to an African position, including committing to the position supported by a majority of African countries on 1.5 degrees and no recognition of intellectual property rights in the transfer of technology.

The campaign resolution adopted by the 2011 COSATU Central Committee resolved that “going forward, we should strengthen our participation and be more effective in the National Committee on Climate Change in order to influence government’s negotiating position in COP 17; that as COSATU we should continue to participate in the Civil Society (C17) which is responsible for co-coordinating civil society work around COP 17 and mobilize our members for the Global Day of Action on Saturday 3 December.”

Strategies for COSATU affiliates

The above framework requires fleshing out in practice. To this end:-

  • COSATU affiliates should begin to develop their policies on climate change that will inform their sectoral engagements on climate change.
  • COSATU affiliates should build their research and education capacity on climate change.
  • COSATU affiliates should initiate education programmes for all their leaders and members on climate change.
  • COSATU affiliates must begin sectoral engagements on climate change, aimed at specific and targeted strategies for emissions reductions AND job creation in each sector
  • COSATU affiliates must investigate ways and means by which they can begin a consistent and informed response to climate change as trade unions.
  • COSATU must develop internal capacity to support affiliates in all of the above.
  • COSATU must continue to engage our government on climate change in Nedlac and other appropriate forums

Patrick Craven (National Spokesperson)
Congress of South African Trade Unions
1-5 Leyds Cnr Biccard Streets
Braamfontein
2017

P.O.Box 1019
Johannesburg
South Africa

Tel: +27 11 339-4911/24
Fax: +27 11 339-5080 / 6940
Mobile: +27 82 821 7456
E-Mail: patrick@cosatu.org.za

[/su_spoiler]

[su_spoiler title=”Position paper on Political Strategy & Organisational Issues” open=”yes” icon=”folder-1″]

1 July 2005

1. Overview

Political strategy questions are contained in the document that set guidelines for discussing strategy and tactics. As the paper poses questions rather than offer proposal on whether to update the strategy and tactics document, it is not important at this stage to comment in detail on the issues raised. Moreover, the NGC will consider inputs from branches and on that basis map the way forward regarding the question of strategy and tactic.

Organisational issues on the other hand are contained in three documents namely strategy and tactics, unity of the movement and organisational redesign. The strategy and tactics poses a general question about the implications for the ANC arising from the n ew terrain of struggle but offers no proposals on how to address them. The unity of the movement paper traces the history of managing unity within the ANC and its alliances.

Building on the political questions posed in the S&T paper, the paper maps the challenges of maintaining unity within the ANC and with its allies (both strategic and tactical) in the current period. However, it does not set out strategies on how the moveme nt should maintain unity in the current period except to underscore the challenges of maintaining a mass based movement and problems of factionalism, careerism and discipline.

The organisational design paper (released Friday 24 June) is the one that provide some recommendations on organisational change. For this reason, it is worth some time to analyse the recommendations contained in the paper. This paper deals with two inter-r elated issues:

  1. How does the ANC as a movement assert its authority over governance?
  2. The role of ANC structures in mass mobilisation and how this link with state power?

The problem that the paper seeks to address is “the changes at the ANC head office, which resulted in the shrinking of previous capacities and their unintended relocation in government, the establishment of caucuses at various levels, and the creation of g overnance committees in all out legislatures” para 5. COSATU has consistently raised these issues and it is a welcome development that the ANC is also recognising these challenges. Later on in para 22 the paper argues that “the most critical weakness of ou r party constituent structures at all level is that they do not address the optimal mobilisation of the motive forces for change. Secondly our structures do not speak to the centres of power of our transformation. These two factors constitute the ANC’s sof t-under-belly today”.

To this issues should be added the question of internal democracy and mass mobilisation as this require better articulation in the current period. The paper set out many proposals regarding ANC structures. Key among them is:

  • ANC executive at all level must be structure in accordance with their responsibility to intervene and provide leadership to all centre of power, i.e. the state, civil society, the economy, the battle of ideas and the continental and global arena. As such all levels should have the following departments legislature and governance, economy, mobilisation/organising, media and communication, international affairs, political education and ideological work.
  • Organising/mobilisation should be broken down into targeted sections dealing with different sectors and segments of our motive forces.
  • New branches aimed at substantial population groups and communities which from an organisational point of view can be defined as naturally belonging together on grounds of a variety of factors including among others to common interests such as universiti es, big workplaces and interests groups such as cultural workers and issue based organisations.
  • Zones will be eradicated and will be replaced by sub regions.
  • Resources and power will be devolved to the regions.
  • Provinces must mirror restructuring at head office in terms of functions and operations.
  • Proposal for head office include better management and coordination of work that has linkages such as political education and communication. Two departments dealing with state the economy may be created.
  • ANC Parliamentary caucuses: the paper suggests two options one of establishing a fully-fledged parliamentary wing which can deal with selection of leaders in parliament and option 2 is establishing a department at head to service legislature.
  • The NEC sub-committee must develop further proposal on policy formulation
  • Establishment of a permanent Electoral Commission which will take charge of the elections process in the run-up and including at the next conference. The Commission will deal with selection of comrades to party positions while the current system of selec ting public representatives will be maintained. This includes intervention by the leadership to ensure proper representation of women and other groups consistent with national policy

2. COSATU’s approach to the ANC Organisational Issues

Due to the fact that this paper has recently been released the analysis is not exhaustive nor aims to answer all the questions. The paper itself suggests that the NGC should be a launch pad for more consultations that will culminate in more detail proposal s being developed. As such, the paper itself is a framework or scaffolding upon which more proposals on organisational reform will be developed. Therefore, this position paper will pose questions for reflections by COSATU itself.

For purpose of discussion it is proposed that we distinguish COSATU’s views from individual ANC activists/members views. That is, what type of ANC does COSATU seek to have a relationship with? Of course this may coincide with comrades’ views of what the AN C should look like.

The ANC is now attempting to consciously manage the transition from a liberation movement to a political party. Political parties can creatively merge state power and their mass character to further pursue change even in the context where it is in power. A lternatively the political party machinery can be useful solely to garner votes. The latter is what has led to disenchantment with political parties in other countries.

In this regard, the question is how should the ANC retain is mass and multi-class character and what should be the purpose of mass mobilisation beyond elections? A related question is how should it harness its social power and state power to advance the so cial transformation? It must be borne in mind that the ANC’s social power is not exclusively in its internal structures but also in its relations with the mass democratic movement.

If this social power is to be kept alive how then do we manage two contradictory tendencies? First tendency is the danger to bureaucratically manage this diverse movement by subordinating it to the government plans. The second danger is for the ANC to be d ivorced from its mass constituency because it has been collapsed into the state. A question without obvious answers is what is the purpose and programme of mass mobilisation for the ANC both in its own name as well as a party in government?

The condition under which the ANC operates has vastly changed from when it was a movement seeking power to one that is now in power. Perhaps the essence of the debate is what can be retained and what may not be relevant. Having said, COSATU want an ANC wit h the following characteristics:

  • Philosophical and programmatic bias to the working class and the poor. While it will retain its multi-class character the ANC should overwhelmingly be driven by the aspirations of the working class for a better life. To that end, it must retain its capac ity to maintain multi-class solidarity as a means to marshal society’s efforts to transformation.
  • An ANC with a strong internal democracy both in formulation of policy and selecting cadres for deployment. This means that all ANC structures should have a voice in determining the policies of the movement and selection/election of cadres for positions w ithin the movement and the state. In this regard it must involve the alliance and the mass democratic movement in the formulation and monitoring of policy on number of issues.
  • ANC must have internal capacity to formulate policy for the state as well as hold the comrades in government accountable. In the last ten years, ANC tailed policy set by the state rather than the other way round partly because it collapsed its internal c apacity into the state machinery.
  • The ANC should retain its anti-colonial and anti-imperialist stance and invest resources to the mobilisation of democratic forces against the agenda of imperialism. At a local level, this also means a critical approach to capitalism especially the ideolo gy of market fundamentalism.

Though the ANC is not socialist, neither does it have an uncritical approach to capitalism hence it seeks to transform property relations developed under apartheid capitalism.

3. Proposals on new Branches

As stated above the paper proposes that new branches be established to compliment territorial/residential branches. On the face of it the proposal can ensure better reach of ANC structures to cover different layers of the South African population including at the workplace. Though the reasons advanced to justify this move are legitimate it is important that this matter be given extra thought. It is not very long that the ANC shifted to ward-based branches and part of the debate on these new braches we ought to assess the experience with ward-based branches.

There are three potential pitfalls with this proposal.

  1. First, what will be the programme of these branches in relations to sectoral organisations? For instance what should a workplace based ANC branch do that is different from what shop stewards are supposed to do?
  2. Second, by creating this community of interest branches this may undermine cross-class and solidarity and interaction which is the strengths of the current branches. One of the unintended consequence it the creation of working class and middle class branches with minimum cross class interaction except at a higher levels.
  3. Third, proliferation of branches in this form does resolve the concern of disgruntled elements using alliance structures to settles scores. In this regard there is a high danger of comrades who are not satisfied with outcomes of democratic decisions and move out of sectoral organisations into ANC branches and vice versa. This creates rather than limit instability within the movement and the alliance.

Perhaps we should propose rather professional ANC associations, which would let ANC members discuss sectoral issues, rather than giving them the political powers vested in branches. In this regard we should assess the experience with SACP industrial units, which are based in industrial areas rather than at a factory.

4. ANC Policy formulation capacity

Clearly, a major weakness in the ANC has been the lack of capacity for policy development. This contrasts with the situation before 1994. Interestingly, although the discussion document identifies this problem, it fails to propose any solutions. Debates on policy formulation in the ANC centres on the following:

  • Ensuring democratic participation of the membership and the alliance in policy formulation processes. This means establishing mechanism for consistent policy debate and input by members and alliance partners between major gatherings such as Congress and the General Council.
  • Translating ANC policy positions into government policy to avoid a disjuncture between ANC policies and what government does on a daily basis. Experience in the last ten years is mixed on this front between government policies that are consistent with AN C policies and some that are not in tune with existing policies of the movement.
  • The ANC’s technical capacity for research and policy formulation has to be strengthened. The policy institute can go a long way in building the ANC’s technical capacity for research and policy development. The role of allied and progress research institu tes should also be clearly define.
  • Define mechanisms for alliance input in policy formulation to ensure that the ANC as a whole defines policy for the state and take collective responsibility for governance and transformation.

5. Process for Selecting/Deploying Cadres

According to the paper the current practice of selecting and electing leaders is “not always informed and in line with the values and traditions of the organisation…are contributing to the poor levels of cohesion within the ranks and factional agenda, as t he current practice does not necessarily promote the values of the ANC, such as putting the collective first and of assigning individuals responsibilities objectively in accordance with their abilities. The role financial resources play in the selection pr ocess is critical and must be expanded upon.”

On this basis the paper contains two set of proposals one dealing with selection/election into ANC structures and another part dealing with deployment/selection for public office. In the former case, the paper proposes the establishment of a permanent Elec toral Commission. The role of the commission is still very vague particularly how it will help eliminate factionalism, careerism and other problematic political practices. Be that as it may, it is important to emphasise the Commission should not displace t he role of branches and members in electing leaders at all levels of the organisation.

With regard to the list process the paper suggests that the current practice be retained. That is branches will continue to play a role in the submission of names for public representatives and the higher structures will intervene to correct deviation from national policy, including ensuring fairer representation of women. It is also important to reopen certain issues for debate:

  • The centralisation of power in the President to appoint mayors, premiers and cabinet members. A proper balance should be found between the President’s Executive powers and the role of structures of the movement. In the long run, a democratic process for selecting and appointing leaders will go a long way to defeat cronyism, politics of patronage and careerism. The current practice sits uncomfortable with internal democratic process and may unintentionally stifle debate within the movement due to reluctanc e to tamper with career prospects by being too vocal. The COSATU Congress Resolutions calls for alliance and ANC members involvement in this process.
  • The second issue requiring debate is the introduction of a constituency element in the national and provincial elections. Constituency representation will broaden the democratic space and ensure direct accountability which is currently lacking in the PR system.

[/su_spoiler]

[su_spoiler title=”COSATU position paper on Privatization” open=”yes” icon=”folder-1″]

This paper both answers the governments response to our Section 77 Notice, and presents our basic arguments on privatisation.

The paper first explains the definition of privatisation used by COSATU in its Section 77 notice of dispute. It then reviews some government policies on privatisation, demonstrating the commitment to this inappropriate policy.

The third section of this paper provides a general analysis of why privatisation is not appropriate in the South African context. The central problem is that it is inherently difficult, if not impossible, to compel private interests to serve the poor or intervene strategically to restructure the economy.

The final part of the paper gives examples of the damage already caused or likely to occur from current practices and proposals associated with privatisation.

  • Defining privatisation

COSATU’s Section 77 Notice defines privatisation in terms of the extension of the control and wealth of the private sector at the cost of the state. In effect, it refers to the process that the DTI, in its recent discussion document on industrial strategy (DTI 2001), calls the extension of the market.

This definition of privatisation covers, not only the open sale of state assets, but also other processes that turn state functions over to the private sector and the market. These processes include:

  1. The sale or partial sale of state-owned assets or enterprises.
  2. The introduction of private competitors in sectors historically controlled by the state. Effectively, this approach privatises part of an industry or sector, even if the state does not itself sell any assets. It effectively subjects state interests to pressure to compete on the market, ultimately reducing their capacity to meet social needs.
  3. Relinquishing the management of state functions to private interests. This can take the form of outsourcing services from the public service. It also takes the form of contracting management of municipal services to private companies. In these cases, the state does not necessarily sell assets, but they nonetheless fall under private control.
  4. The requirement that state functions operate on a commercial basis, in some cases registered under the Companies Act. Commercialisation both often forms a first step toward privatisation and subjects state activities to the logic of the market. As with the privatisation of historically state-run industries, it makes state interests pursue commercial imperatives rather than broader social needs.

Given this definition, it is clear that COSATU demands, not just an end to the sale of state assets, but re-examination of whether it is desirable for market forces to govern the delivery of basic services. It is also clear that:

  1. COSATU’s definition of privatisation is not covered by the NFA for State-Owned Enterprises, and therefore cannot be dealt with in that forum, and
  2. COSATU is not objecting to a lack of consultation about privatisation, but rather to privatisation itself.

  • Government policy on privatisation

In public, government generally voices some cautions on privatisation, arguing that it will not privatise on a wholesale basis or without regulations. Virtually without exception, government documents avoid the term privatisation, preferring euphemisms such as “restructuring” or “public-private partnerships.”

Yet examination of key policy documents points to an overwhelming belief in the efficacy of markets and private managers. They also support privatisation as a way to compensate for budget cuts in recent years, to attract foreign investors, and generally to satisfy foreign interests. At the same time, they fail entirely to propose consistent, strong regulatory structures or to analyse systematically the costs and benefits of proposals for privatisation.

We here first examine some important government policies related to privatisation – the Budget Review 2001, the Department of Public Enterprise (DPE) policy framework, the Department of Trade and Industry (DTI) discussion document on industrial policy, and the 2000 Municipal Systems Act. We then look at ANC positions, starting with the Freedom Charter.

  • Budget Review 2001

The National Treasury has adopted a particularly uncritical approach to privatisation. In the Budget Review 2001, it argues that what it calls “restructuring [of] state-owned assets” can “broaden economic participation, recapitalise public enterprises and reduce state debt…” (page 91)

The National Treasury makes no bones about its main motive for pushing privatisation: to raise funds so that it can stick to the GEAR targets. In effect, these targets set limits on taxation – which mostly affects the well off – and on government borrowing. Thus, the Treasury expects privatisation of the major parastatals alone to raise R18 billion for the fiscus in 2001/2. This sum is equal to 7,4 per cent of the budget in that year. Only these proceeds permit the budget to grow faster than inflation in 2001/2.

The National Treasury has also played a leading role in demanding that government agencies bring in private investors in infrastructure. It justifies this push in large part by contending that the private sector is inherently more skilled and competent that the public sector.

While public-private partnerships will not necessarily lead to additional capital expenditure, they should lead to greater efficiency as private sector expertise is utilised in the planning process and in the operation and maintenance of buildings and equipment. In addition, a key objective of such partnerships is to shift some of the risks to the private sector… (National Treasury 2001, page 137)

The National Treasury has established a special unit to encourage local governments to enter into arrangements that increase private participation in service delivery. It has made some funding for local government contingent on acceptance of this type of arrangement.

  • The DPE’s Policy Framework

In August 2000, the DPE published a policy framework on restructuring state-owned enterprises (SOEs) – An Accelerated Agenda Towards the Restructuring of State Owned Enterprises: Policy FrameworkThe framework effectively commits government to bringing in private interests wherever possible – again, using the euphemism of “partnerships.” Thus, it suggests that options to “enhance productivity, profitability, investment and innovation… will often entail equity sales (full or partial privatisation) in order to access additional funding, technology or markets. Where this is not required, other approaches such as corporatisation, joint ventures, employee participation schemes and community partnerships may be more beneficial”. (DPE 2000, page 153)

In general, the framework favours the sale of assets, arguing that, “While many forms of restructuring can improve the efficiency with which SOEs use resources, a process that involves a transfer of ownership can have important additional macroeconomic benefits.” (DPE 2000, page 34) It lists the potential benefits as reduced government debt, improved credit rating, and increased foreign direct investment.

While the DPE acknowledges that it cannot privatise all SOEs immediately, it strongly voices the belief that as a rule, competition will improve services for all.

The promotion of competition and competitive markets should be an integral element of any restructuring strategy to ensure that the benefits of restructuring (such as efficiency gains) translate into lower prices, higher quality goods and services, and wider coverage. (DPE 2000, pp. 153-4)

This approach has led the DPE to push for the privatisation of parts of industries that were historically controlled by SOEs – notably electricity, rail and telecommunications. The DPE generally acknowledges that competitive markets may require some forms of regulation or subsidy. Yet it never explores the implications of South Africa’s unusually large inequalities in incomes.

Although the DPE provides some broader ideological reasons for privatisation, it is clear that, as with the Treasury, a major aim is to raise money. The policy framework implies that private capital will, somehow, be provided at no cost to either government or consumers.

Unfortunately, the state lacks the immediate resources to address these investment and infrastructure backlogs. There is thus an inescapable demand for new financing through different forms of domestic and foreign partnerships to promote the infusion of new equity capital and technology… [T]he South African context of infrastructure backlogs and limited government resources indicates that, in many cases, there will be some level of equity sales to provide capital, technology and/or access to markets for infrastructure expansion. Given the limited fiscal resources, further infrastructure investment can only be achieved through an accelerated programme of the restructuring the SOEs and more extensive use of public-private partnerships. (DPE 2000, p. 36)

The policy framework admits the need for careful analysis of the impact of “restructuring” on society. It contends that “Such an analysis should address the costs and benefits to society, both direct (e.g. immediate impact on pricing or employment) and indirect (e.g., social costs from non-delivery of certain essential services or the impact of unemployment on specific communities).” (DPE 2000,l page 47) Yet the DPE has never published such an analysis of its own proposals for the biggest parastatals.

The DPE contends that an important part of privatisation is to make it harder for companies to provide internal cross subsidies.

An important lesson from the international experience, however, is [to account for social impact] .. in a more transparent manner. This would mean that Government’s intention of making SOEs more responsive to market incentives (i.e. promoting microeconomic efficiency and effectiveness) should not be undermined by other social or political obligations to preserve employment and/or deliver services uneconomically. (DPE 2000, p. 44)

By “transparent,” the DPE means that subsidies must be made part of the annual budget allocation. It ignores the fact that, as discussed below, on-budget subsidies are more subject to short-term fluctuations and political lobbying.

The DPE argues that it can control negative effects of privatisation through shareholder compacts and regulation, particularly in terms of competition policy. Yet it never explores the capacity required to achieve these aims. Moreover, it does not seem prepared to publish existing shareholder compacts, for instance with Telkom.

In sum, the DPE argues that privatisation is the best way to achieve efficiency, and that government regulation, shareholder compacts or subsidies will ensure adequate services for the poor. As with the National Treasury, it is clear – despite these commitments – that raising money off budget remains the main reason for pushing privatisation.

  • The DTI’s Driving Competitiveness: An Integrated Industrial Strategy

The DTI recently published a discussion document, Driving Competitiveness: An Integrated Industrial Strategy For Sustainable Employment And Growth (May 2001). This document adopts the DPE’s assumption that competition will almost inevitably ensure more efficient and effective service delivery.

The principle insight underlying our industrial strategy is one that acknowledges the power of market forces – that the market is a force for low prices and extended choice, for innovation and for new entry into the economic arena. (DTI 2001, page 8)

[E]nsuring the introduction of feasible levels of competition into [historically state-controlled] sectors is also vital. Transport, energy and telecommunications facilities will not be extended at affordable prices or at the required levels of competence if the providers are not subject to powerful disciplines and it is clear that market forces, or competition, is one such source of discipline. (DTI 2001, page 14)

Like the DPE, the DTI calls for regulation, without specifying its content or assessing whether the state has the capacity to implement it.

[O]ur industrial strategy also recognises that, like all-powerful [sic] forces, the market needs to operate under a clear set of rules. In the absence of clear and enforceable rules it runs the risk, indeed, the certainty, of capture by the most powerful participants and the undoing of all the positive outcomes associated with an effectively functioning market. (DTI 2001, page 8)

The DTI appears to see state ownership as justified only in the case of natural monopolies – that is, in industries where the unit cost is lowest only when one enterprise produces enough to meet the entire market demand. Natural monopolies often exist where large investments in basic networks are necessary, for instance electricity and local telephony. But the DTI agues that technological advances mean that natural monopolies no longer exist in these sectors. By extension, they should be privatised and regulated, rather than remaining in state hands. (DTI 2001, page 14)

  • The Municipal Systems Act 2000

The Municipal Systems Act is the only legislation on restructuring the state. It applies only to local government. The Act does set limits on privatisation – limitations very similar to those demanded by COSATU in its Section 77 notice. Unfortunately, faced with the national government’s broader pressure to privatise, municipalities have largely disregarded the Act’s prescripts.

In Section 78, the Act requires that local governments assess options for service delivery in terms of sustainability, the ability to provide the service through its own capacity, the impact on employment and development, and the views of local government. Moreover, if the local government contemplates introducing a private service provider, it must first notify the community. It must also conduct a social cost-benefit analysis, assess the sustainability of the delivery system, and consult with the affected communities and with labour.

Section 81 requires that even if the local government uses a private service provider, it must set the tariffs, ensure adequate services for the poor, and generally ensure that services align with its overall integrated development plan.

It appears that local governments, under pressure to hand service delivery over to private managers and investors, have rarely undertaken the analytical work and consultation required by the Act. They argue that it is too onerous and time consuming to conduct a proper investigation of delivery options and to consult stakeholders. It is not surprising, then, that – as detailed below – many instances of privatisation at local government level have turned out badly.

  • Summary

Government views on privatisation are contradictory. They praise market forces, yet at the same time call, without detail, for regulation. Ultimately, they endorse wholesale privatisation, driven by three key assumptions:

      1. Competition will lead to lower costs and better quality services for all consumers.
      2. The private sector generally is more competent than the public sector.
      3. Privatisation will bring in additional resources for government services at no cost to the state or consumers.

The rest of this document discusses the flaws in these assumptions. The next section points to some theoretical problems, and the final part looks at actual experiences with privatisation.

  • Shortcomings of privatisation

The main arguments for privatisation are that it will enhance efficiency in addressing social needs and leverage private investment to that end.

The first argument assumes that South Africa has relatively efficient markets from a social standpoint – an assumption that holds neither in theory nor in practice. Above all, because of very unequal incomes, private providers have little incentive to serve the poor and cannot easily capture the benefits of broad-based development. The result is that they simply cannot take on the developmental role of the state. They also undermine cross-subsidisation, increasing the pressure to raise tariffs for the poor.

In these circumstances, government lacks the capacity to compel private providers to met national targets. Moreover, the attempt to restructure on a broad front, combined with excessive faith in private expertise, has led to management mistakes.

Given these realities, the argument that privatisation will bring in funds really only means that it will increase the off-budget resources available for infrastructure. The cost may be high – to the state, in terms of subsidies or lost assets, and to poor consumers in the form of rising tariffs and limited access.

  • When are markets efficient from a social standpoint?

Much of economic theory analyses the question of when markets will prove efficient from the standpoint of society. In essence, the challenge is to define when private interests, intent on making a profit, will also meet social needs. If those conditions are not met, the market outcome may be inefficient from a social standpoint.

Conventionally (1), economic theory has defined specific conditions for socially efficient markets. In essence, they are:

      1. Incomes are sufficiently equal that market demand essentially expresses social needs (2),
      2. The price of a product reflects its full costs and benefits to society – to use the economics jargon, there are no externalities,
      3. Market actors have sufficient information,
      4. Resources move easily between activities, and
      5. A high degree of competition exists.

In South Africa, especially in industries that meet basic needs, most of these conditions are noticeably absent. Yet where these requirements do not exist, the market will not compel private interests to meet social needs.

We here review the three main market imperfections that mean privatisation will not meet social needs: mass poverty aggravated by massive job losses since 1990; the fact that producers cannot capture the long-term gains associated with improvements in basic services, and therefore cannot carry out for the developmental role of the state; and factor immobilities – that is, the difficulty of moving resources between sectors – associated with high unemployment.

  • Privatisation cannot meet the needs of the poor

South Africa has inherited a particularly unequal distribution of income. Estimates suggest that in this regard, we rank third worst in the world, following Brazil and Uruguay. The richest 10 per cent of South Africans get around 45 per cent of the national income, compared to between 30 and 40 per cent for almost all other middle-income developing countries, and 24 per cent in South Korea. (UNDP 2001)

In part, inequality is rooted in the injustices of apartheid, which denied the majority of our people formal qualifications and access to basic infrastructure. It has been aggravated by the massive loss of formal jobs in the past decade, fuelled in part by downsizing in the public sector. As a result, despite improvements in government services to the poor, income distribution has not improved.

The particular impact of unequal access to basic infrastructure emerges in the Human Development Index (HDI), which combines GDP per capita, life expectancy and educational achievements. South Africa ranks 94th in the world in terms of the HDI, but 46th in terms of GDP per capita, taking purchasing power into account. (UNDP 2001)

The distribution of income ineluctably shapes the outcome of the market. After all, the market is only designed to reach those who can pay, not to raise living standards for the poor. Consider the housing market: effective demand has been met, every single participant may be acting efficiently in their own terms – and yet millions go homeless.

The DPE’s policy framework argues at length that as consumers exercise their market choices, the market will bring about efficiency.

Price-sensitive consumers may be prepared to accept a lower quality of service in exchange for a reduced price. Other consumers may be prepared to pay a premium for a high level of service. (DPE 2000, page 41)

One wonders where the authors live. Few South African households have the luxury of deciding between quality and price. After all, most earn well under R1000 a month. They have no choice but to rely on the state to provide a minimum of basic services at an affordable price.

In the industrialised countries, which have relatively equal incomes, the market will compel private service providers to meet the needs of the majority. In contrast, South Africa’s mass poverty makes a mockery of the belief that the market will secure efficient services for the masses.

  • Markets and the role of the state

The market will not meet the social and economic requirements of development, since private companies cannot capture the long-term benefits of developmental measures. To understand the implications, we here explore the functions of the developmental state, and analyse why the private sector cannot carry them out.

 

  • Social protection

 

The state must enhance social protection – that is, the basic services provided to ensure no South African lives in extreme poverty. This is critical both to raise productivity, for instance by improving skills, health and security, and to expand the domestic market. In addition, improvements in household infrastructure such as water and electricity should lay the basis for home-based employment.

In effect, poverty in itself creates poverty, by lowering productivity and employment. The market cannot break this vicious cycle, since in the short run, the poor majority cannot afford to pay the full cost of basic services. This problem is particularly acute in the rural areas, where provision of services generally costs more. Yet failure to provide services in the countryside fuels rural-urban drift and the associated social and economic costs.

It follows that the poor, especially in rural areas, cannot rely on the private sector to provide basic services. Only the state can do that, breaking the vicious cycle of poverty and initiating broad-based, rapid economic and social development.

In the language of economics, given widespread poverty, the market price of basic services does not reflect the long-term economic and social benefits. As a result, left to itself, the market will under-provide basic services. If it privatises these services, the state will have to compel private agents to undertake a role that fundamentally contradicts market signals.

 

  • Industrial strategy

 

The developmental state must support a strong industrial policy to restructure the economy toward growth. To that end, it needs to direct the development of economic infrastructure to support employment-generating activities. Indeed, the allocation of infrastructure is one of the main ways the government can support desirable economic activities. By privatising the main infrastructure sectors, the state undermines its own capacity to intervene strategically in the economy. It reduces its own control over key national assets.

Privatisation is especially hostile to the growth of home-based micro enterprise, particularly in rural areas. Privatised industries will generally seek to serve large, formal enterprise, which can buy in bulk and often afford relatively high tariffs. In contrast, the arduous and expensive task of extending infrastructure to households is less profitable. Moreover, as discussed in section 3.3, private infrastructure companies do not want to cross-subsidise poor households. As a result, micro enterprises may not be able to afford such critical infrastructure as telephones and electricity.

Industrial strategy also may run counter to the focus on competition as an aim in itself. Often, restructuring the economy and competing internationally requires large-scale enterprises compared to the economy as a whole. In these circumstances, breaking up state enterprises or requiring the introduction of private competitors may undermine the efficiency of the economy as a whole.

Again, we can explain this issue as one of externalities. Private companies cannot capture the long-term benefits of strategic investments to restructure the economy. The situation also reflects the market’s inability to anticipate the need for major investments – an information problem.

 

  • Increasing the asset base of the poor

 

Both social protection and economic strategies must increase the asset base of the poor by improving housing, land reform, support for SMMEs and skills development. More equitable distribution of assets enhances the stability of the economy, supports employment creation, and leads to greater overall equality. Again, as privatised industries will not serve the poor, they will not carry out this function.

 

  • Strengthening democracy

 

Finally, the developmental state must strengthen democracy in both political terms and in the economy. Otherwise, the rich and powerful can always hold it hostage.

How does privatisation affect democracy? In the short run, it increases the voice of capital in social and economic policy. It takes assets out of the control of the democratic government and turns them over to private interests. It reduces the capacity of the state to ensure support for micro enterprise.

The government has stressed that privatisation should enrich black capital, in the name of black economic empowerment (BEE). This approach makes a mockery of the aims of BEE as articulated, amongst others, by the BEE Commission, which defines BEE as:

.. an integrated and coherent socio-economic process.. located in the context of the country’s national transformation programme, the RDP.

It is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa’s financial and economic resources to the majority of its citizens.

It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity.

In a democratic South Africa, state ownership is critical for black people to participate in the economy. On the one hand, in itself it represents a critical way for the majority to take part in and benefit from economic decisions. On the other, only the state can extend basic services and assets to poor black communities.

 

  • Summary

 

Privatisation undermines the ability of the developmental state to fulfil its core functions in terms of social protection, industrial strategy, increasing assets for the poor, and enhancing democracy.

In this context, any assessment of costs and benefits must take the impact on broader national policy aims into account. Privatisation, with a short-sighted target of maximising profits, may well end up imposing large costs on the government and on society.

  • Resource mobility

Markets will not ensure efficiency if resources cannot move rapidly and without cost to new uses. In this situation, a resource – including labour – may become unnecessary in one sector, but not find employment in another. The result may be substantial costs to society.

Privatisation (including commercialisation) often leads to substantial job losses. Private management quickly closes down less profitable operations, typically those that serve the poor. They do not take political or social responsibility for the survival of the workers who lose their jobs. Furthermore, where companies plan to list shares, they often want to look lean and cash rich – and subcontracting or downsizing help in achieving that aim, although sometimes at substantial long-term cost to the company and the country.

The DPE’s policy framework simply assumes that factors are mobile, and therefore the costs of retrenchment will be limited.

[S]ome declining sectors will experience an irrevocable loss of jobs. However, where restructuring brings about significant efficiency improvements and new technology, the result is often the development of new niche industries able to absorb retrenchments in other areas. (DPE 2000, pp 39-40)

This naïve belief that restructuring will create new jobs is borne out neither by experience nor by theory. Unemployment is now officially over 20 per cent, and the formal sector continues to lose thousands of jobs every year. In these circumstances, workers who lose jobs as a result of privatisation cannot count on easily finding new employment. This is especially true because the majority of those affected are in the lower skill levels, and many live in rural areas where unemployment is highest. Very substantial costs to society and the economy have resulted.

  • Summary

The argument that markets and private investment are inherently more efficient than public-sector delivery does not reflect South African realities. In the event, markets are inefficient because of massive income inequalities, the failure of market returns to reflect the full benefits from development, and factor immobilities in a period of very high unemployment. In these circumstances, state control is necessary to ensure adequate, quality provision of services to the poor, and to initiate strategic investments to restructure the economy.

  • Why regulation won’t work

Because the developmental inefficiency of South African markets is undeniable, virtually all government policies on privatisation admit the need for regulation. But closer examination of this commitment demonstrates a lack of seriousness.

Effective regulation – whether through regulations or contracts – requires appropriate targets, monitoring and feedback mechanisms, and capacity to enforce regulations. South Africa has inadequate capacity in all these areas.

      1. Most policies on privatisation are not linked to targets for service delivery, and often the targets are inadequate and poorly publicised or even secret. For instance, the targets for Telkom are badly defined. They require a specific number of new connections every year, without any standards for affordability or sustainability. As a result, although Telkom has met the targets for new connections, a large number are terminated every year, and as discussed below, basic telephony has become increasingly unaffordable. It appears that the new strategy on telecommunications sets even weaker targets for new actors in the market.
      2. Given vague and inappropriate targets, monitoring and feedback mechanisms cannot function well. In any case, the new regulatory agencies at national and local level do not have capacity to monitor privatised agencies consistently. That would require a profound and independent understanding of the finances of the private sector interests as well as developmental needs.
      3. Finally, regulatory agencies generally have very little capacity to enforce regulations. Once it has turned its own capacity over to the private sector to own or manage, government is in a weak position. It cannot easily impose strong sanctions, since that could in itself disrupt service provision. This has been the experience, for instance, with the contracts for pension pay-outs, where companies have reportedly violated agreed targets. It has also happened with water-supply contracts around the world, and more recently in the Dolphin Coast and KwaZulu Natal. In these case, the company accepts high targets in order to get the contract, then demands renegotiation after a year or two. The local government no longer has the resources or systems to provide water, and must cave in to the private investor’s demands.

A fundamental problem underlies these weaknesses in the regulatory framework. The practice of arms’ length regulation of basic services emerged in industrialised countries, where income inequalities are less extreme and developmental needs less pressing. The demands of the regulators therefore do not diverge greatly from the imperatives of the market. It is relatively easy for the private provider to comply. In contrast, in South Africa, developmental targets impose a considerable cost on the private company.

Furthermore, industrialised countries have far more resources and skills to use for regulation, and have developed their systems over many decades. In South Africa, regulatory agencies have inadequate resources, and must develop new systems in the course of a few months or years. It is not surprising that most of them do not function efficiently or effectively.

As one observer notes about electricity regulation,

Even now – ten years since privatisation – Ofgem, the UK regulator – is struggling to prevent market abuses by private firms. This is in a wealthy country where the regulator has substantial resources. How much more difficult then is the job of the regulator in developing countries where organisations are staffed by poorly paid public sector workers with little exposure to international corporate activities and where the ‘opposition’ consists of highly paid internationally trained corporate executives. What is more, the regulator has little at hand in the way of sanctions, should the firm refuse to adhere to the rules of the regulator. In low-income economies, sometimes few bids are received for privatisation tenders. In such a context, the ultimate sanction of the regulator of terminating the concession and awarding it to a competitor may not be a valid option. (Bayliss 2001, p 23)In the event, we need only point to our experience with regulatory agencies so far to suggest that government is overly optimistic about its ability to control privatised services.

  • Cross subsidisation

Privatisation makes cross subsidisation to cut costs to the poor more difficult, even impossible. In the case of fully privatised companies, management will not see why it should engage in relatively high-cost, low-profit services for the poor. Where government permits competition with parastatals, private companies will pick the most profitable opportunities. The parastatal therefore loses the option of the cross subsidising less profitable customers. In any case, it must compete with the private suppliers, and cannot afford loss-making operations.

As discussed below, this situation has already emerged in the telecommunications, and has been officially proposed for electricity. In the case of electricity, the result will be declining costs for larger companies, but 20 to 50 per cent higher tariffs for households and, by extension, micro enterprise.

Some government officials argue that cross subsidisation is inherently inefficient, since it subverts market prices, and that it is not politically accountable. They say that they should therefore replace cross subsidisation with direct subsidies from the budget.

This approach is deeply flawed.

      1. It rests on the assumption that markets are inherently efficient – an argument already countered.
      2. Leaving decisions to the budget process introduces annual fluctuations, which can introduce costly instability into service delivery.
      3. Budgetary subsidies are no more accountable than cross subsidies. After all, parastatals are ultimately accountable under a law. If Parliament objects to cross subsidisation, it can change the law.
      4. Budgetary subsidies typically only show the cost, not benefits such as the long-term gains from providing basic services to the poor. As a result, they are vulnerable to political opposition, especially from the relatively rich and business, who see them as an unnecessary redistributive expenditure.

The recent experience of the corporatisation of Eskom illustrates these problems. Eskom has spent around R1 billion a year on electrification in the past few years, mostly through cross subsidisation from industry. With corporatisation, these revenues were supposed to go to taxes, and the national budget would pay for electrification. The Department of Financepromptly proposed to cut electrification funding to R600 million.

This cut in electrification funding would have longer-term consequences, since Eskom would have to reduce the capacity it has put together for electrification over many years, which it could not rebuild easily. Even if, as promised, government increases electrification funding to 2000 levels, the process demonstrates the risks of subjecting subsidies to annual decisions.

  • Mistakes and wastage

The adoption of policies that effectively require wholesale privatisation, and not the case-by-case approach adopted by the RDP, has led to a number of basic management mistakes.

Many privatisation projects, some of them of enormous significance to the country, have been based on wholly inadequate research. For instance, the proposal to commission parts of Spoornet apparently did not derive from a consistent analysis of the financial implications. In the case of Eskom, corporatisation was accompanied both by (1) a commitment to use tax revenues to pay for electrification, and (2) an agreement not to tax Eskom for the next three years.

Consultants on privatisation can expect huge fees, often for shallow advice. There appear to be no guidelines for fees to consultants on privatisation. All too often, the big consultancy firms push privatisation out of ideological grounds, without doing any serious research into alternatives.

Privatisation is also supported by merchant banks and financial institutions, which hope to make fees off the privatisation process; and by foreign and local capital, which hopes to find new markets and obtain state assets at bargain prices. In addition, of course, capital – as expressed through business commentators in the press – generally supports privatisation on ideological grounds.

Given unnecessary urgency, poor advice and research and pressure from capital, the push to privatise ends up tampering with systems that are working, rather than focusing on problematic areas. For instance, the demand that Eskom be privatised ignores the fact that it is one of the cheapest electricity producers in the world. The problem in electricity lies in distribution, not in generation. Similarly, detailed analysis finally concluded that Spoornet’s current operations, although they need to become more efficient, will not benefit from fundamental restructuring.

A problem in this connection lies in the way that privatisation reduces the capacity and power of the state. In particular, restructuring of the state-owned enterprises has been associated with fragmenting strong, integrated and flexible systems. For both Eskom and Spoornet, for instance, the push has been to fracture large and powerful entities into a host of small companies. That in itself weakens the ability to the state to bring about transformation.

Finally, the push to accelerate privatisation means that management pays inadequate attention to building consensus or minimising transition costs to workers and communities. As a result, considerable conflict results. In many cases, a deadlock emerges, and restructuring is halted altogether. For instance, the Department of Public Works in Northern Province has had plans for several years to outsource construction work, losing 10 000 jobs. This plan has been blocked by public pressure, but the department has not developed others to ensure more effective service delivery.

  • Fiscal policy and privatisation

Finally, we need to examine the presumption that privatisation will make up for under-budgeting. This belief has two legs: first, that private investment is a virtually costless supplement to the budget; and second, that government must sell its assets in order to reduce the national debt.

Far from being free, a private investor imposes a cost on the budget and/or the public. It will participate in providing infrastructure only if it will make a profit. To serve those who cannot pay, it will require a subsidy. For the rest, it must have tariffs that ensure at least a normal rate of return. In contrast, a state-owned service provider can decide on a lower mark up in order to realise broader social and economic benefits.

If private capital were inherently more efficient than the public sector, it could still cut costs to the state. But there is virtually no evidence that private managers are magically more skilled than public-service ones. Indeed, the experience with SAA and the U.S. partners in Telkom suggests the opposite. In the absence of efficient market pressures, private managers will not generate efficient outcomes.

A second fiscal motive for privatisation lies in the desire to reduce the public debt. In itself, this approach cannot justify privatisation of any single asset, as the DPE policy framework points out. Privatisation in order to free up government funds for other purposes makes sense only where there is no justification whatsoever for keeping an asset in state hands. An excessive focus on the immediate returns from privatisation will lead to short-sighted and costly sales – as seems likely already with the Telkom IPO.

The real problem lies in an excessively restrictive fiscal policy. This is expressed through the attempts to cut the Public Sector Borrowing Requirement (PSBR) and local government budgets, as well as tight targets for the national budget.

Between 1996 and 1999, the budget declined in real terms, dropping some 10 per cent per capita. Real growth in total spending in 2000/1 and 2001/2 did not bring a proportionate increase in expenditure on basic services, because of the increase in military spending. In light of the tight deficit and tax limits, the growth in spending is predicated on wholesale privatisation – which will soon undermine any improvements in services brought about by higher budgets.

Currently, too, state-owned enterprises face pressure to privatise so that they do not have to borrow to fund investment. The argument is that the state must reduce its contingent liabilities. Yet there is no systematic attempt to quantify the relative costs and benefits of raising funds through parastatal bonds and privatisation.

Overall, the fiscal arguments for privatisation really seek to use accounting conventions to reduce on-budget costs in order to meet deficit and tax targets. If the private sector provides services in return for payments by users, government can reduce its on-budget costs – but not the cost to society. Indeed, the costs to the public will be higher in the long run, even though government can fulfil its fiscal targets.

  • Conclusions

The arguments for privatisation are deeply flawed. They essentially start by assuming the efficiency of markets and private managers – an assumption that is belied by examination of South African realities. They also evince an unwarranted belief in government’s ability to regulate private interests irrespective of market imperatives.

Ultimately, it is clear that fiscal policy is a primary driver of privatisation policies. Yet if market forces are not efficient, privatisation will not reduce the costs to society – indeed, it may well increase them. It merely takes the cost off the budget.

  • Some experiences with privatisation

We here summarise some experiences with privatisation related to SOEs, the public service and local government. In light of the wholesale approach adopted in recent years, we cannot specify all of them. Moreover, where we are still dealing only with proposals, we can only point to the likely consequences of adopting these proposals.

  • SOEs
  • Spoornet

Spoornet is the freight and long-distance passenger rail operations subsidiary of Transnet. It operates as five distinct but integrated business units: Main Line Passenger Services (MLPS), now re-named Shosaloza Meyl; Coallink (the coal operation running from the coalfields to Richards Bay); Orex (the iron ore operation running from Sishen to Saldanha Bay); Luxrail (the Blue Train); and General Freight Business. There is a high degree of interdependence between the five business units. In particular Coallink, Orex and General Freight Business have high degrees of synergy. For example, for every coal carrying trainload on the Coallink line, there is a general freight train running on the same tracks.

Government’s initial intention, announced in various public forums in early 2000, was to concession all of the business units independently, with the exception of the General Freight Business. General Freight Business was to be “turned around” from unprofitability within three to five years, and thereafter to be considered as a candidate for concessioning or another form of privatisation.

After considerable interaction through a joint labour-government task team, it was agreed that this plan was not viable. Instead, agreement was reached that:

        1. The general freight business of Spoornet should be retained in state hands as a strategic transport asset, but that efficiency improvements as well as investment are urgently needed within it.
        2. The low-density lines of Spoornet should be considered for a separate decentralised management structure within Spoornet. After local avenues have been explored to improve the customer base of these lines, options for the future of each line should be considered on a line-by-line basis.
        3. Main Line Passenger Services (MLPS) should be retained in public ownership as a strategic transport asset. A merger between MLPS and Metrorail should be explored.
        4. Luxrail (the Blue Train) should be concessioned to a private operator, subject to approval by Labour’s membership.

Labour and government still do not agree on the future of Coallink and Orex, Spoornet’s profitable coal and iron ore transport operations. In effect, these lines have paid for the extension of the General Freight Business, especially rural lines that have an important developmental role but remain unprofitable in themselves.

The government argued that Spoornet need substantial investments, which it could best meet by using the revenues from concessioning these two profitable lines. In addition, the concessionaires would be required to invest in Coallink and Orex. Officials also said that separating out Coal-ling and Orex would ensure greater transparency into the cross subsidisation of the general freight business. Finally, they held that Coallink and Orex are not strategic businesses but commercial operations, which can just as well be operated by the private sector.

For its part, labour argued that Coallink and Orex should be retained in an integrated Spoornet, that should remain fully in the hands of the state. There are various reasons for this.

Coallink and Orex form the most reliable source of funds for the general freight business, and would permit Spoornet as a whole to remain financially viable. This type of cross-funding is entirely in line with international practice in rail freight, whether in the public or private sector.

Cutting off the cash-flow generated by the ore lines would render the general freight operations unsustainable on their own and would force the operations to shrink dramatically and to rely for the first time ever on government subsidies. This outcome would contradict Cabinet’s objective of increasing the use of rail for freight. Furthermore, reliance on government subsidies would make it extremely difficult for Spoornet management to plan ahead. They would depend on annual national budget decisions rather than on longer term business planning, and could be condemned to failure.

The proposed privatisation plans fall into the classic mould of selling off the most profitable activities while retaining social responsibilities – and costs – in the hands of the state. Concessioning the profitable sections of Spoornet would result in the transfer of the least risky bits of the network to the private sector, and leave government responsible for the most risky bits. Spoornet’s current ability to borrow (and pay back) for infrastructural investment would be totally undermined.

In almost every instance where railways have been concessioned in other countries, the concessionaire has not met its investment obligations and has re-negotiated the initial concession contract within the space of three to four years of the concession agreement being signed.

In light of these debates, a second labour-government task team was set up to investigate the concessioning of Coallink and Orex. For the first time, together with Spoornet management, it embarked on a detailed financial analysis of the proposals. It became clear that the economic rationale for the proposals was not sound. In particular:

        1. Spoornet’s investment requirements are not so high that they cannot be funded more cheaply through borrowing and internal returns.
        2. The costs of separating out Coallink and Orex in themselves will be quite high.
        3. To survive without Coallink and Orex, the General Freight Business would need either subsidies or drastic downsizing. The latter would entail closing all so-called unprofitable lines, stopping all services to unprofitable clients (thereby reducing the customer base from over 1000 to less than 300), and slashing the workforce to around 7,000 workers (from the current 33,000). This would obviously have developmental consequences, both undermining many rural enterprises – at least one agro-processing plant has already been closed because of the closure of rural lines – and adding to the burden of unemployment.

In light of these factors, the evidence before the task team shows that an integrated Spoornet stays cash positive for the full 20 years, taking into account all capital requirements, finance costs and severance pay. No external funding is required. Debt financing ranges from around R200 million to R800 million over the full period, depending on the size of the network and volumes carried. The company pays for all its debt. In contrast, if Coallink and Orex are taken out of Spoornet, the remaining General Freight Business loses money for most of the next twenty years.

The task team has not yet finalised its recommendations. It is, however, indicative of the shortcomings of the push for privatisation that basic economic research into the proposals were not completed until labour insisted.

  • Portnet

The DPE and the Department of Transport have been working on a ports policy for the past five months. It appears that the main thrust of this policy is to introduce concessioning of port operations that are currently carried out by Portnet.

Labour has, however, been excluded from all the deliberations to date. Letters requesting meetings to discuss the ports policy have not been replied to. Officials have informed the union verbally that labour will not be consulted until after the policy has been submitted to Cabinet for approval.

Despite this, government has already announced its intentions to concessions port operations at various local and international conferences, and in the press. We are thus likely to end up in a position similar to that with Spoornet eight months ago: that is, the policy will be announced to the world before any financial analysis has been done, and without prior consultation with labour.

  • Electricity

The current proposals for restructuring the electricity industry are idiosyncratic: they meddle with the parts of the sector that work well by international standards, while leaving fundamental problems unsolved. In consequence, they promise soaring costs to households, a slowdown in electrification, and may undermine investment in the industry.

No one denies that South African electricity is amongst the cheapest in the world, in part because massive investments in the late 1970s and ‘80s have limited the need for new investment in generation. In this context, government’s restructuring proposals apparently seek to address four key problems.

        1. The chaos in distribution, which is controlled by local municipalities and, in some townships, Eskom. Many local governments, especially in the former homeland areas, cannot afford to maintain, much less extend, electricity systems.
        2. The need to plan for new generating capacity when demand outstrips current supply around 2010.
        3. Inefficient pricing systems, which do not generate sufficient returns to maintain investment. It is not clear whether government here means investment in maintenance or in new capacity.
        4. The lack of a competitive market in electricity, which government officials apparently see as a problem in itself, without specifying the presumed ill effects.

In response to these perceived problems, government plans to set up a market in electricity. That, in turn, requires multiple sellers and buyers. This approach is apparently driven in large part by the unreflective commitment to free markets described earlier. The central proposals aim:

        1. To set up regional distributors, which would consolidate existing local-government systems into six Regional Electricity Distributors (REDs). The regional distributors would compete to buy electricity from generators.
        2. To permit private generation of up to 30 per cent of electricity.
        3. To separate Eskom into competing groups of power plants. The characteristics of this internal competition have not yet been explained in any detail.
        4. To establish transmission as a single independent service for all distributors and producers, belonging to Eskom but ring-fenced.
        5. To move toward market prices for electricity, while maintaining cross-subsidisation of poor households by rich ones.

The shortcomings of this restructuring proposal reflect the imperfections of South African markets that are summarised above.

First, in terms of distribution, the maintenance of regional distributors limits cross subsidisation between regions. That approach ignores the huge spatial inequalities left by apartheid. If REDs have to compete for skills and funding as well as wholesale electricity, there is little doubt that the poorer regions – especially around the Eastern Cape and Northern Province – will come off worst. The main profits in distribution come from supplying industry, which is heavily concentrated in the metro areas.

The government has agreed to a national holding company to support the weaker REDs for at least six years. But the regional approach remains deeply flawed, and it is not clear whether the national holding company will be able to counteract the negative effects of a regionally based competitive system.

Even within regions, if REDs have to maximise profits, only regulation can compel them to maintain services to the poor. Establishing a regulatory framework able to monitor services and set appropriate targets will certainly require a substantial increase in resources.

Second, in terms of supply, government officials have not been able to give us evidence of any kind that private generation is either necessary or likely to be cheaper than Eskom production. As far as we can tell, no serious study has been done to back up this presumption. Such a study would

        1. Analyse projections of demand and supply.
        2. Explore alternative sources of electricity, including imports and the use of renewables and other forms of off-grid electricity.
        3. Assess investment needs on the basis of this analysis.
        4. Compare the costs and benefits of private and public generation in terms of the cost to the state and consumers. These costs would take the form of the cost of capital – the profits required for the private investors as opposed to Eskom bonds – and increases in tariffs to different classes of customer.

The risk is that, in the absence of this type of detailed investigation, South Africa could licence private producers – and down the line face their pressure for soaring tariffs hikes as the price of electricity security.

Third, the proposed tariff system would end the cross subsidisation of households by industry, resulting in massive hikes in the cost of electricity to households and a small reduction industry tariffs. Specifically, it would increase the cost to households by at least 20 per cent, and possibly up to 50 per cent – the difference depends entirely on the extent of savings from the rationalisation of distribution. It would reduce the cost to industry by about 5 per cent.

This proposal, which is already being implemented under the name of the Wholesale Electricity Pricing System (WEPS), appears to be based on three flawed assumptions: that the state should reduce electricity costs to big users; that cross-subsidisation within households can protect the poor from the proposed tariff hikes; and that market prices are intrinsically superior to fixed prices.

The first assumption argues that we should cut electricity prices to industry in order to cut their costs. That ignores the relatively capital-intensive nature of electricity-intensive industries. In effect, the proposals would raise costs to home-based micro enterprise, while cutting them for large companies. It would also raise the cost of electricity to ordinary consumers, restricting domestic demand for appliances and generally reducing the standard of living. Nowhere in the documentation provided by government is there a study of the impact of the proposed changes in electricity costs on employment, regional development, living standards, investment or economic growth.

Government has also not provided any evidence to support the second assumption – that cross subsidisation between households will control tariff hikes to the poor. COSATU strongly supports cross subsidisation to reduce tariffs to the poor. If well-off households have to bear the full cost of the proposed increases, however, the system may break down due to consumer resistance. After all, South Africa’s skew income distribution means that the top 10 per cent of households get close to half the national income. It would aggravate poverty and undermine micro enterprise to raise electricity costs substantially for the remaining 90 per cent. As a minimum, the commitment to free electricity for the very poor should benefit the poorest 40 per cent, in households that earn under R1000 a month.

The third assumption – as discussed above – simply ignores the problems with South African markets and, by extension, market-based prices. In particular, it effectively ignores the external benefits of affordable electricity for households and the associated economic activities. Besides, it is internally contradictory: it praises market prices as the best guide to resource allocation in general, but accepts cross subsidisation within the household sector. Apparently market prices are only worthwhile if they benefit big business.

Finally, the proposal on market structure is driven purely by a misunderstanding of economic theory. Certainly monopolies can be inefficient – but so can competitive markets, given massive income inequalities and poor information. This argument simply functions as an ideological argument against a fully state-owned energy sector. The analysis here of the proposals for distribution and supply points to the hazards of this approach to restructuring state assets.

The very cheap cost of electricity in South Africa certainly does not suggest Eskom suffered substantial inefficiencies, despite its monopoly status. More generally, an academic study of private and public electricity utilities found that private electricity companies do not generally outperform public ones. For generation, the results provided “strong empirical support for the view that, given the technology employed, IOUs [privately-owned plants] and MUNIs [publicly-owned plants] were being operated equally efficiently.” In transmission and distribution, the conclusion again was that there was “no significant difference in technical efficiency between the two ownership types.” (Pollitt 1995, quoted in Bayliss 2001, p 15)

In this context, it is worth noting that the international experience of privatising electricity has often been disastrous. A study by the PSIRU (Bayliss 2001) gives examples from, amongst others, New Zealand, Australia, California, the U.K., Argentina, Brazil, the Dominican Republic, Moldava and Kazakhstan. To take two examples:

        1. New Zealand had two months of power cuts in 1999 because the private electricity company didn’t maintain the underground cables. It simply wasn’t cost effective for them to do this.
        2. California has also experienced protracted power cuts since the deregulation and privatisation of the electricity industry. Since this process started in 1996 prices have risen by up to 300 per cent, the system is completely fragmented, and there have been massive shortages in the generating capacity, resulting in frequent power failures. As a result, production in the state dropped by 10 per cent in 2000.

California Governor Gray Davis said in his State of the State address, “We must face reality: California’s deregulation scheme is a colossal and dangerous failure. It has not lowered consumer prices. And it has not increased supply. In fact, it has resulted in sky-rocketing prices, price-gouging and an unreliable supply of electricity. In short, an energy nightmare… We have lost control over our own power. We have surrendered the decisions about where electricity is sold – and for how much – to private companies with only one objective: maximising unheard-of-profits.” 

  • Telkom

Privatisation has affected telecommunications in two way: the sale of 30 per cent of Telkom to U.S. and Malaysian investors, with a further 20 per cent planned for an IPO; and the liberalisation of the telecommunications market, initially to cellphone operators and more recently to a fixed-line competitor and the internet. Again, these policies appear driven by a naïve belief in the efficiency of private companies and the market.

The RDP pointed to the important economic benefits of ensuring basic telephony for all South African households. The DTI’s discussion document on industrial strategy (DTI 2001) stresses the need for telecommunications in the modern economy. In this context, ensuring affordable universal service should be a priority.

In the event, the results of introducing competition have been – as in most countries that privatise telecommunications – increasing costs for poor users and lower costs for business and the rich, and relatively slow improvement in access.

According to the 1999 October Household Survey, among the African population, less than a third of urban households and less than 8 per cent of rural households have access to telephones, compared to over 85 per cent of white households in both types of region.

Overall, South Africa has lagged behind in new connections. Between 1995 and 1999, the middle-income countries as a group increased connections per 1000 inhabitants by 60 per cent, while in South Africa they rose by 30 per cent. In 1995, South Africa had about 65 per cent more than the average for middle-income countries; by 1999, it had dropped to the average. (World Bank 2001)

Poor access has been compounded by increasing costs for poor people, even as the cost for higher-end services have declined. In the past three years, the price of local calls, which the poor use, has increased in real terms by around 35 per cent. In contrast, the price of domestic long-distance calls has dropped, and international calls have become cheaper by 40 per cent, again in real terms. In addition, basic rental costs are high, at over R60 a month.

The increases in the cost of local calls and basic rentals have pushed telephones beyond the reach of most South Africans. Many connections are terminated every year, largely because users cannot pay. Thus, in the year to March 2001, Telkom provided 620 000 new connections – and 220 000 lines were terminated.

Given the impact of privatisation, the regulatory framework seems unlikely to ensure affordable universal access. It does not set any time frames, and considers households have access if they are up to half an hour away from a telephone. The latest policy directions (DoC 2001) give only the vaguest guidelines on universal and affordable access. While they require the regulatory body, ICASA, to set new targets for universal access, they do not set timeframes or give much direction. In the absence of clear targets, the Universal Service Agency has not had a significant impact.

The new policy directions also permit small-scale producers and co-ops to provide telephony in underserved areas. This seems like an attempt to remove the burden of ensuring access from the larger companies, including Telkom, as well as the state itself.

The partial privatisation of Telkom itself has appears in its commercialisation and the introduction of foreign partners. Although the foreign partners have only a minority share in the company, it has become clear that on key issues – including investment and employment – they have effective veto power.

The loss of jobs associated with privatisation is a particular concern for COSATU. In the past three years, Telkom has lost about 17 000 jobs, or around a third of its total labour force. The lay offs have impacted above all on unskilled African workers, many in rural areas where no other job opportunities exist. It seems that the downsizing is largely an attempt to slim the company down to make it more attractive for its IPO. With unemployment already at record levels by world standards, the IPO is thus being bought at a high cost.

In short, privatisation in telecommunications has followed the classic path: worse services for the poor, high job losses, and improvements only for formal business and the rich. For this reason, COSATU argued that new entrants should be allowed only at the top end of the market, where the market would function efficiently to provide better services. Access to this market should be contingent on paying a levy to help achieve universal access and cross subsidise local phone calls. The state, through Telkom, must take direct responsibility for achieving these developmental aims.

  • Public service

Privatisation in the public service has taken two forms: outsourcing of work to private companies, and the piecemeal privatisation of assets, especially in education, corrections and housing. In the absence of a clear policy, however, privatisation takes place mostly piecemeal, without adequate consultation with communities or labour. We here briefly consider only two examples: the outsourcing of welfare payments and the effective privatisation of general education.

  • Welfare payments

Welfare payments have been outsourced in many provinces. The Minister has expressed dissatisfaction with the results, saying that the companies have not met contractual requirements to provide shelter and toilets for the elderly. (SABC 2001) Again, the problem was the assumption that private business would serve very poor people because of regulation – and then the regulatory system proves unable to monitor or compel compliance.

  • Education

In education, the government decided to turn key ownership and control functions over to school governing bodies. These decisions relate to charging fees, the use of revenue, and hiring employees, including teachers.

The result of this form of privatisation of education has been continued inequalities between schools. Suburban schools in historically white areas have been able to charge high fees, and use them to improve facilities, equipment and staffing. Around one in seven teachers is now hired privately by a school in a well-off neighbourhood. In contrast, historically black schools in the former homeland regions and townships have far lower incomes.

The importance of these inequalities can be understood by considering two schools with a thousand learners each, one in an historically white suburb, the other in an informal settlement. The first school can charge fees of R500 a month, for an income of R6 million on top of its government support. The second school can raise, with great sacrifices by parents, at most a tenth as much.

The inequalities in resourcing as a result of the privatisation of schools emerge in persistent differences in results. In particular, the failure rates in historically black regions remain far higher than in white ones. This difference is reflected in provincial matric results, with consistently higher pass rates in Gauteng and the Western Cape.

  • Water

Water supply is one of the main areas facing privatisation at local-government level. Both in South Africa and abroad, the experience of water privatisation, especially in developing countries, is that it leads to higher prices and worse services. Moreover, far from leveraging private capital, the investment funds used typically end up coming from the public sector – either national parastatals or international multilateral financial institutions.

Yet South Africa faces particular challenges around water. According to the UNDP, water provision in South Africa lags behind many middle-income developing countries. About 86 per cent of South Africans have access to improved water, compared to 95 per cent or more in Uruguay, Cost Rica and Malaysia, all of which have a lower GDP per capita in terms of purchasing power parity.

We here consider the experience of two high-profile water privatisations – the Dolphin Coast and Nelspruit, and then briefly review additional local and international examples.

  • Dolphin Coast

Government policies generally say that regulations and contracts will compel private owners or managers to meet social needs. In water, contracts with private providers generally set out the basis on which tariffs will be increased, the time period over which they will be increased, and investment and service plans.

While the initial terms of the contract might seem reasonable, often the service provider renegotiates them after a year or two. In effect, they use a “bait and switch” tactic: the municipality is forced to accept higher tariffs, less investment by the concessionaire, and a watering down of clauses in the contract that gave the most protection to residents.

This is exactly what has happened in Dolphin Coast. In 1999 a contract was signed there between the KwaDukuza municipality and Siza, in which SAUR holds 58 per cent of the shares. Just one year later, the contract had to be renegotiated. Siza argued that the development of middle-income and mass housing did not meet the projections, so that demand for water is not as high as expected, cutting into its profits. Siza now faces a R12 million shortfall. Since the contract provides for renegotiations if returns are above or below the expected rate, the municipality must now accept changes.

Specifically, the renegotiations provided:

        • a 15% increase in the tariffs
        • both parties examining ways to reduce costs. One possibility is that the concession fee paid by Siza to the municipality will be reduced. The problem with this is that this fee is supposed to be used to set up and operate a contract compliance monitoring office.
        • Siza’s investment commitment will drop by more than half, to R10 million from R25 million over five years.

These are serious inroads into the aspects of the contract designed to protect residents from the profit-making priorities of the company. Clearly the company’s need to maintain a particular rate of return is the primary consideration, with issues of social equity, meeting needs and ensuring access for all have become secondary concerns.

  • Nelspruit

A 30-year contract was signed between the Nelspruit municipality and Biwater for a water concession covering the Nelspruit municipality. Since then, there has been little progress in meeting the contractual obligations. There were numerous complaints from residents:

        • they don’t have access to water
        • their water is being disconnected
        • even where people pay, water is cut-off without warning, sometimes for up to a week
        • tariffs have increased and are now too high – particularly for residents who never paid for water in the past
        • communities who never paid for water in the past are now being billed, without any attempt to explain the situation to them first
        • households get inflated bills or bills for water when they are not even connected
        • leaks are still a major problem.

Biwater did not carry out the promised developments and improvements in part because it lacked the funds to meet its investment promises. Eventually, it fell back on the public sector. On November 9, 2000, the DBSA announced it would loan R150 million to Biwater to carry out the investment programme. And has been handed a new water treatment plant as part of the contract – a plant which was funded by the government of Portugal and built by the South African government.

This accords with international experience which shows that international consortiums generally don’t use their own funding to finance investment. They rely on parastatals like the World Bank or the European Bank for Reconstruction and Development. As with Biwater, for example, in Buenos Aires Suez Lyonnaise only invested $30m of their own money. It then raised $1 billion from the IFC (a World Bank agency), the IDB and local Argentinean banks.

  • Some other experiences

Generally privatisation of water leads to higher prices, since the systems must operate according to financial criteria. In France, where some water is managed by the municipality and some by private companies it has been found that the private companies, or public-private partnerships consistently charge higher prices. In 1999 the prices of the private companies was 13 per cent higher. In Paris, auditors found that the company that took over water supply – Suez Lyonnaise, which recently obtained a management contract for Johannesburg’s water – enjoyed a profit margin 2,5 times the level it reported to government.

South Africa recently experienced particularly high price hikes with Umgeni Water in KwaZulu Natal, which increased water costs by over 20 per cent in June 2001. Management blamed the cost of connections in the rural areas. At the same time, however, it paid inflated sums – over R100 million – to outsource functions that were then poorly performed.

In Manila, water was privatised two years ago because of a World Bank/IMF imposed structural adjustment programme. Just months after the privatisation, the consortium tried to increase tariffs by a massive 196 per cent. After two years of privatisation seven million Manilans remain without a regular water supply and 60 per cent of the city’s water is lost through leaks. To get access to water people make illegal connections. An outbreak of typhoid has been traced to these illegal connections.

In some cases – for example in Johannesburg and Fort Beaufort – the private partner requires secrecy about its contract. This obviously undermines both regulation and monitoring, and democratic control of local government in general.

In Puerto Rico, the management of the water authority, PRASA, was contracted to Vivendi. In 1999 an official report was released which was highly critical of the way Vivendi was fulfilling the terms of the contract. It identified a number of the problems such as problems with maintenance, administration and operation of aqueducts and sewers; a lack of response to residents needing help; charging residents who never got water; and an increasing operational deficit – $241.1 million by 1999.

In Walkerton, Canada seven people died from the e-coli bacteria which found its way into the water system. The water was tested regularly, and the problem was picked up. But the testing of water had been privatised to a private company and the company simply didn’t inform the municipal or regional authorities in time to avert the disaster – there was no legal requirement for them to do so, and since they are therefore completely unaccountable, they simply didn’t pass on the potential danger to the right authorities. The fact that the testing of water had been privatised was as a result of municipalities being given more responsibilities (like the testing of water) but without sufficient funds to cope with the extra responsibility. The response of the municipality was to contract out water monitoring.


  • References

Bayliss, K. 2001. Privatisation of electricity distribution: some economic, social and political perspectives. PSIRU / University of Greenwich: 2001

DoC. 2001. Telecommunications Policy Directions. Pretoria. Government Gazette. March 20.

DPE. 2000. An Accelerated Agenda Towards the Restructuring of State Owned Enterprise: Policy Framework. Pretoria.

DTI. 2001. Driving Competitiveness: An Integrated Industrial Strategy For Sustainable Employment And Growth. Pretoria.

National Treasury. 2001. Budget Review 2001. Pretoria.

Pollitt, M. 1995. Ownership and Performance in Electrical Utilities. Oxford University Press

UNDP. 2001. Human Development Report.


Footnotes:

  • This approach started with Adam Smith, who includes a brief list of the factors that make markets inefficient in The Wealth of Nations.

  • This condition is usually made explicit only in development economics. It can be deduced from the conditions of perfect competition, however, since it follows necessarily from the existence of myriad buyers and sellers.

[/su_spoiler]

[su_spoiler title=”Audit of COSATU position on Social Security” open=”yes” icon=”folder-1″]

1. GENERAL SOCIAL SECURITY

1.1 Central Committee Resolution, 1998

Problem Statement

1. South Africa has inherited a fragmented social security system, which was not based on comprehensive coverage for the population as a whole, but started as a social security net for mainly whites. As a result of such discrimination, the amount of welfare going to Africans was considerably restricted. The low spending on African non-pension welfare primarily resulted from the exclusion of Africans from certain non-pension benefits, such as child maintenance grants.

2. Social insurance on the other hand is generally tied to formal sector employment. The coverage of social insurance schemes does not cover more than two thirds of the formal sector. A large sector of those in informal employment, and the unemployed are not covered. Moreover, the level of social insurance benefit is generally considered very inadequate. For example, in the case of the Unemployment Insurance Fund (UIF) an unemployed contributor can claim only 45% of his/her last wage, and then only for a maximum period of six months.

3. Due largely to the lack of adequate social assistance and compulsory social insurance protection, many basic services and benefits are increasingly being provided through private employment related systems. There is also a bias against part-time and temporary workers. With the absence of publicly provided social security and income-earning opportunities, remittances (sharing of wages) within households play a de facto social security role. In particular, remittances play a decisive role in supporting the poorest households.

Vision

1. The social wage comprises of direct income transfers (such as social security benefits, UIF, old age pensions, and retirement funds); and social subsidisation of the costs of basic needs (such as housing health, education, electricity, transport) primarily through public provision financed through the fiscus. Although, in general, the social wage needs to be publicly funded, if it is to benefit everyone, some aspects of the system are funded , at least partly, by contributions from only some members of society e.g. employer and worker contributions to retirement funds and UIF. This is known as “social insurance”. Social security benefits which are paid entirely from the fiscus (budget) e.g. old age pensions, are known as “social assistance”. Some areas of the social wage may be funded by a combination of private contributions, and the fiscus e.g. the national health system

2. COSATU’s vision on social security and social wage derives from the overall vision of the Reconstruction and Development Programme. The RDP advances the need for a comprehensive approach to the meeting of basic needs such as shelter, food, health care, work opportunities, income security and all those aspects that promote the physical, social and emotional well-being of all people in our society, with special provision made for those who have been historically disadvantaged.

3. This vision is further cemented by the new Constitution which guarantees that: “Everyone has the right to have access to social security, including if they are unable to support themselves and their dependants, appropriate social assistance.” The Constitution further extends fundamental rights to housing, education, health care, food and water.

4. The state is further obligated under the Constitution to “take reasonable legislative action and other measures, within its available resources, to achieve the progressive realisation of each of these rights.

5. To reverse the legacy of apartheid requires a comprehensive social security system in South Africa. Complimenting this should be the expansion of the provision of the range of social services such as housing, transport, water provision, health care, which improves workers’ ‘social wage’. Social wage benefits include those types of benefits that should be publicly supplied, even if they are currently privately supplied.

1.2 “Accelerating Transformation”

COSATU has proposed that engagement on the shape of a comprehensive social security system needs to happen at various levels:

  • restructuring of the retirement system in South Africa.

  • restructuring of the UIF.

  • investigating the basic income grant proposed at the job summit, and its relationship to other grants.

  • debating the correct mix between social assistance and social insurance, the former largely being direct grants coming from government (from the fiscus); while Social insurance is predominantly funded by employers and workers.

  • Scrutinising the implications of current macro economic policies on social security provision.

  • Finally, there needs to be a rigorous debate on the notion of “developmental social security”, which as advanced by certain technocrats, is interpreted to mean that communities should in the first instance ‘look after their own’, purportedly to avoid dependency. This approach arguably contributes to an abdication by the state of its social security responsibilities, and a deepening of poverty and dependency.

The COSATU Policy Conference held in May 1997 noted the following historical weaknesses in social policy and called for these issues to be addressed: The absence of social security targeted at the majority of the population; The apartheid housing legacy and reliance on the private sector to deliver on the housing programme; Current policies aimed at privatising public transport; The lack of a strategy to harness the important role of retirement funds in reconstructing our economy; The need for all levels of government to play a central role in the provision of basic infrastructure; The escalating cost of medical care, and the actions taken by the health industry to frustrate measures aimed at promoting affordable and accessible health care.

COSATU’s Policy Conference articulated a vision of the provision of a ‘social wage’ package to working people. Under this conception, recognition is given to the fact that social security and the provision of more affordable social infrastructure, such as public transport, health, housing and services, increases the effective wage of workers- both directly and indirectly, in terms of support given to their dependants. In other words, the provision of more affordable public goods complements the direct money wage paid to workers, in particular, and redistributes wealth to working class and poor communities. To increase the size of this ‘social wage’ requires that policies are put in place which aim at progressively increasing the provision of basic affordable public goods.

The September Commission outlined eight economic and social benefits of establishing a comprehensive social wage package:

  1. “Its impact as part of an active strategy to stimulate demand in the economy ;

  2. Its impact in reducing inequality ;

  3. Its impact in bringing the working poor and the unemployed more directly into the mainstream economy, through addressing conditions of extreme poverty, degradation and disease ;

  4. Reduction of direct non-wage costs to employers, by socialising the provision of elements of the social wage and by socialising provision of areas such as health care, reducing costs by taking them out of the private sector

  5. Combined with a new approach to urban planning, reduction of the hidden costs of apartheid geography (in terms of well-located housing and infrastructure, transport etc) ;

  6. Helping to lower input costs into the economy through socialising areas such as Infrastructure, health and transport

  7. Laying the basis for raising the overall productivity of the economy, through improved health conditions, reduced travelling time etc ;

  8. Improving quality of life of society as a whole, and creating conditions for addressing crime and violence in a sustainable way.”

COSATU’s submission on the Social Welfare White Paper called on government to

“deepen its commitment to improving the co-ordination of the social security system in order to provide people, those who are working as well as those who are unemployed, with the knowledge that government is committed to putting into place a system which will ensure that no South Africans should live in poverty.”

In the submission it was noted that:

“South Africa remains one of the world’s most unequal societies, with great wealth existing side by side with extreme levels of poverty. The poorest 40 percent of households earn less than 6 percent of total income, while the richest 10 percent earn more than 50 percent of total income. The poorest sections of the population also have severely limited access to housing, electricity, piped water, modern sanitation, health care and education. These inequalities are not accidental. They are the natural outcome of low wage policies, followed by the private sector, and the deliberate policies of the old government to under-spend on social services for black people. These inequalities can now only be overcome through government programmes to boost economic activity, redistribute wealth and extend social security.”

COSATU was critical of the draft White Paper, released for discussion in 1996, which failed to address the RDP’s commitment to a “national social security system… designed to meet the needs of workers in both formal and informal sectors, and of the unemployed.

As a result, it recommended that a new White Paper should be drafted, focused particularly on transforming the system of social security. COSATU argued in the Parliamentary Welfare Committee’s public hearings on the matter that instead of engaging in piece-meal tinkering with elements of the inherited, fragmented social security network, policy should seek to create a comprehensive social security system, consisting of social assistance transfers and the restructuring of the social insurance system.

ANC members of the Welfare Committee were supportive of the issues raised by COSATU and ultimately incorporated the proposal that the draft White Paper be amended to include the following commitment:

“[A] transformed social security system should be built on two pillars. Firstly, it will require comprehensive social assistance to those without other means of support, such as a general means tested social assistance scheme. Secondly, it will require the restructuring of social insurance, including the retirement industry, unemployment insurance and health insurance.”

Despite the fact that the amended White Paper supported the establishment of a comprehensive social security system, it was apparent that further engagement would be required, since this commitment was purely a statement of intent. To take the matter forward, COSATU commissioned research during 1997-98 on the gaps and weaknesses in the present social security system, which also assessed the viability of a basic income grant, as an element of a more comprehensive social security system (CSSS).

COSATU has also advocated that approaches to delivery need to be linked to other strategies which government is developing to empower people, particularly the poor and rural communities. One example is the proposal of setting up a restructured post office bank. This would enable everyone in the country to be linked into the banking system through the network of post offices. This has obvious advantages in relation to delivery of social welfare.

1.3 NEDLAC Framework Agreement

The framework agreed by the post-Job Summit task team at NEDLAC is as follows.

  1. Ensure that social assistance provides a safety net to all citizens: The social assistance system must provide all citizens, especially the poorest, with a basic safety net. Currently South Africa is recognized as having a wide-reaching Old Age Pension for the elderly poor. There are also child grants for the young. Crucially, however, there is no support for 90 percent of working age people who are unemployed. In this regard, non-work related (basic) income grants were proposed in the Job Summit, and are included as part of NEDLAC’s follow-up process.

  2. Restructure existing social insurance institutions: The objectives of this restructuring include the following:

    1. Increase coverage to all: All working people should be covered by work-related social insurance.

    2. Promoting greater equity: This objective entails a pooling of risks, and incorporating high- and low-income earners.

  3. Improve and expand public sector service delivery: This must provide essential goods and services to all, especially the poorest. The provision of better services lowers the cost of living and improves living conditions. Public services should not be seen as a cost – but rather performing a role in maintaining critical social infrastructure.

  4. Replace or rationalize privately provided employment-related benefits: Employment-related benefits such as transport, retirement, health care, and housing amount to about 30 percent of labour costs. Socialising these benefits into an overall social wage package will reduce the costs to employers. More importantly, through reducing duplication and increasing economies of scale, the publicly provided safety net will be more resourced and sustainable.

  5. Promote the redistribution of economic assets: This includes the restructuring of income-generating assets, such as land and credit. This will increase the ability of the poor to improve their conditions, will increase levels of economic activity, and promote the reduction of high levels of economic concentration. There is also a need to increase the investment in the infrastructure of disadvantaged communities. This will result in both employment opportunities coupled with the development of stable communities.


 

2. NATIONAL HEALTH INSURANCE (NHI)

2.1 Central Executive Committee Resolution

1. Current Policy Developments

  1. Although classified as a middle-income country and spending 8,5% of GDP on health care, South Africa exhibits major disparities and inadequacies. This is the result of former apartheid policies, which ensured racial, class, gender and provincial disparities.

  2. The majority of the population has inadequate access to basic services including health, clean water and basic sanitation. Up to 55 percent of the population live in poverty. All these factors combined have adverse effects on the health of our society, particularly historically marginalised communities.

  3. Severe distortions and a general collapse in service marked the public health system. One of the distortions was that is was hospital-based with an emphasis on expensive curative tertiary care. The primary health sector which focuses on preventing diseases, and community based medicine was generally undeveloped.

  4. Compounding this is the imbalance between the public and private health sectors. At present about 60 per cent of all health spending is in the private health sector, which serves only 23 percent of the population. Most health personnel except nurses work in the private sector (e.g. 60 percent of doctors and 93 percent of dentists).

2. National Health Insurance Scheme

  1. Guided by our overall vision to build the public health system, COSATU supports the introduction of the National Health Insurance Scheme. Our long-term aim is to move away from medical aid schemes towards a National Health Service, which provides comprehensive care for the whole population, employed, and unemployed, without distinction. This should be funded from general taxation, supplemented by additional contributions from workers and employers. We propose that each stakeholder – government, business and labour – contribute one percent towards the NHI.

  2. It is vital that this contribution is levied on everyone in employment, with no exemption for members of medical schemes. The money raised must be securely earmarked for health and must not be offset by a reduction in the share of general tax revenue.

  3. The percentage level of contributions should be set in negotiation in NEDLAC, with regard to potential impact on the cost of employment and level of employment. Exemptions should be considered with care, given the danger of creating an incentive for employers to lock workers into a low wage ghetto below the cut-off point for contribution. Consideration should be given to a programme of gradual increase in the level of contribution, which should still be substantially lower than those for medical schemes.

  4. Any new system should be publicly administered and not sub-contracted to medical aid administrators. Administration should be streamlined as far as possible to minimise cost.

  5. Public sector primary health care is already free at the point of service. Public sector hospital care will be free at the point of service (funded by a combination of general taxation and the NHI contributions). There will be no need for additional cover in the form of private medical schemes or private health insurance. These need not be abolished for those who choose to seek health cover in the private sector, but they should not be subsidised in the form of tax concessions, which should be phased out. Progressive union-sponsored initiatives to provide affordable primary care in jointly funded schemes should be encouraged by appropriate concessions from state health authorities (e.g. access to essential drugs at low cost or free).

  6. The special situation of the mining industry should be recognised. The industry has a substantial network of facilities, which should be retained and upgraded, to form the basis for family services in the areas around the mines. The historical debt to the rural areas, from which the mine labour force was and is drawn, should be recognised by a joint undertaking by the mining houses to assist the state in developing and supporting rural health services, which will care for the families of migrant miners and for retired and disabled miners who have returned to these areas.

3. Approach to medical aid schemes

  1. Medical schemes may not exclude an individual on the basis of health risk. Contribution rates for the full package of benefits will be set according to income and number of dependants.

  2. Medical schemes are obliged to continue providing health benefits to continuation members (i.e. pensioners, widows, widowers), and to individuals for a limited period after their becoming unemployed. In addition, the practice of transferring private patients to public hospitals once their medical aid benefits are exhausted should be discontinued.

2.2 COSATU Submission on the White Paper on the Health System, 1998

COSATU supports the principle of access to free health care at the point of delivery. The proposal to introduce the Social Health Insurance (SHI) is essentially about realizing this goal for workers and their dependants. We note that there are forces in society bent on obstructing the introduction of the SHI and the transformation of the health system in general.

The scheme will be rendered problematic if it allows medical scheme members to opt out. This will reduce the pool of contributions to the lowest paid, thereby cutting the extent of cross subsidization and redistribution. The system of contributions should be progressive and ensure that society across the board contributes to the public health system, according to their income.

An administrative model needs to be designed to contain administrative costs without undermining the credibility of the SHI. Another cost consideration to take into account flows from the notion of shared contributions between employer and employee. While COSATU accepts the need for workers and employers to contribute, this should be combined with the allocation from the fiscus. There is a need for a balance between fiscal contributions and the SHI to avoid this acting either as a disincentive to employment, or a progressive reduction in fiscal allocations.

The vision of SHI needs to be integrated with the goal of developing a comprehensive social security system. SHI should positively contribute towards the long-term goal of moving away from medical aid schemes towards a National Health Service, which provides comprehensive care for the whole population, including the employed and the unemployed. Such a national health care service should be funded by allocations from the fiscus and contribution by employers and employees. Measures need to be introduced such as a prohibition on compulsory medical aid membership as a condition of employment.

A broader concern is that SHI may be conceived as a countervailing mechanism to cuts on health as a result of fiscal austerity. This will be inappropriate and will place undue pressure on workers in particular. If the macroeconomic programme compromises government policy, then the programme should be changed, rather than transferring the burden to workers.

Having said this, COSATU supports the principle of the SHI as a way to improve the quality of the public hospital service and as an incremental strategy to move away from reliance on private provision of health care, as long as it takes the above concerns into account.

2.3 “Accelerating Transformation”

The issue of a national health system is linked to the question of regulation of private medical schemes. COSATU made the following intervention in relation to the Medical Schemes Act, linked to its vision of promoting a national health system.

COSATU supported the following key elements of the new regulatory framework:

  • The introduction of a community rating system which, by prohibiting schemes from charging different rates based on age and health status, were designed to ensure that there is an element of cross-subsidisation, preventing schemes from ‘cherry-picking’ the young and healthy at the expense of the older and ill.

  • The requirement that all medical aids adhere to a core set of services to their members by authorising the Minister to prescribe a minimum package of benefits.

  • The strengthening of consumer protection, including appeal mechanisms, requirements that schemes pay-out claims promptly, and measures designed to protect the financial stability of schemes.

Notwithstanding support for the legislation’s main proposals, COSATU raised various issues of concern at the Health Portfolio Committee’s hearings. These included a limited extension of medical aid cover for workers leaving their employment, as a result of retrenchment, and that the establishment of medical aids schemes by bargaining councils should be regulated by the Medical Schemes Act and not precluded by it.

COSATU’s proposal for an extension of medical aid benefits to workers who had recently lost their jobs until a new job with medical aid cover was found, or until a stipulated period had lapsed, has not yet been accepted. However, amendments to the LRA in 1998 address the concern raised by COSATU with regard to medical schemes established by bargaining councils.

Despite the relative improvement in the number of people covered by medical schemes, a significant proportion of workers and their families do not have medical cover. This imposes a burden on the public health system without in many cases the benefit of payment for services. To remedy this situation the White Paper proposed the introduction of a Social Health Insurance. In principle, COSATU supports a Social Health Insurance or National Health Insurance and has historically lobbied for its introduction.

COSATU’s support is premised on the view that the NHI will provide cover for workers and their families and inject much needed resources into the public health system. Ultimately, the goal should be to shift from private medical schemes to a public National Health Insurance, as part of a comprehensive social security system. Despite the White Paper’s commitment, however, national legislation to establish the NHI has not been introduced due to differences within government, mainly opposition from the Department of Finance.

While COSATU supports the principle of the NHI there are important differences with government’s approach. First, COSATU believes that the NHI must supplement rather than replace funding of public health from the fiscus. Secondly, the scope in terms of contributions must go beyond the formal sector to include sections of the ‘informal sector’ such as the taxi industry. This will contribute towards formalising the informal sector and eradicate the ‘free-riders’ from the system. Thirdly, the question whether members of medical scheme members will contribute to the NHI is unclear.

If medical schemes member were to opt out, this will render the scheme problematic as it reduces the pool of contributions to the lowest paid, thereby undermining the principle of cross subsidisation. This issue is comprehensively addressed in COSATU’s submission to the White Paper on Transforming the Health System.

2.4 Congress 2000 Resolution

Believing

    1. That comprehensive health care can be achieved only by

    • 1.1 Improving the funding and efficiency of the public health system

    • 1.2. Limiting the growth of the private health system

    • 1.3 Asserting the major role of the labour movement in advancing the free health care system

Resolves

    1. Systematically to move toward a public health care systems for all.

    2. COSATU reaffirms our fight for a National Health Insurance (NHI) programme that would

      1. cover everyone under a single public health insurance programme that takes into account the cost and affordability, timing and introduction of the programme;

      2. pay all hospitals, clinics, nursing homes an annual amount that would cover operating expenses,

      3. gradually limit the extent of the private health care and improve the services of the public health system, and

      4. go hand in hand with increases in the health budget, in order to maintain a strong public-health system.

    3. Private insurance coverage for services included under the NHI would be eliminated, leading to substantial savings for society as a whole.

    4. The NHI would permit doctors and other health professionals either to charge fees at NHI rates, or to take salaried positions in clinics or hospitals.

    5. Funds for NHI could be raised though a variety of mechanisms, including

      1. a progressive tax that raises revenues at least equal to the sum currently spent on private health care, adjusted for inflation, and

      2. a uniform employer contribution covering all employees.

    6. Together with Alliance and progressive health formations, to work for introduction of the legislation needed to implement this proposal in the 2001 Parliamentary session.

    7. To campaign for government support and funding for sectoral provision of primary health care services by the labour movement and bargaining councils.

To avoid conflicts of interest, union investment companies should avoid investment in private health care and health insurance, and should redirect existing investments of this kind


 

3. UNEMPLOYMENT INSURANCE AND MATERNITY

3.1 “Accelerating transformation”

COSATU’s primary intervention on this matter has aimed to ensure that progressive proposals made in the Ministerial Task Team’s report, such as widening the coverage of the UIF net and increasing the progressivity of benefits, are brought into effect through amendments to the UIF Act.

Throughout this process COSATU stressed the fact that the UIF, in its current form is a measure designed to deal with short-run ‘frictional’ unemployment, rather than the longer-term problems associated with the South African reality of structural unemployment. As currently constituted, the UIF benefits less that 10 % of the unemployed. COSATU called in its 1999 submission on the Task Team Report for the establishment of comprehensive social assistance based mechanisms, to compensate for the narrow scope of the UIF system.

Those who are covered by unemployment insurance (UIF) are covered on a temporary basis. They are only covered for a 6 month period and then, only if they have been in employment for a certain period of time. Those who are long term unemployed and who have never been employed are not covered at all by UIF.

COSATU supported restructuring proposals in the task team report, aimed at increasing both the fairness and financial viability of the UIF. With regard to increased fairness, the Federation argued that

“UIF benefits should be designed to ensure that low income employees are given a greater proportion of their wages as a benefit than more well paid employees, who should receive a smaller proportion of their wages. The proposals for a flat rate maximum for high income earners and a flat rate minimum for low income earners is also supported as being in line with these overall objectives. At present all beneficiaries of the UIF receive a benefit of 45% of their earning rate, with the effect that higher income earners receive greater benefits than low income earners.”

During discussions on this matter, certain arguments were put forward by, amongst others, the Department of Finance opposing such progressivity of benefits on the basis that this may lead to “inequities” for high income earners. Such arguments were rejected as they display a marked misunderstanding of the broader constitutional commitment to substantive equality (which may entail unequal treatment for people facing unequal conditions), rather than superficial notions of equality. It was also contended that such arguments display an insensitivity to the desperate position of poverty in which recently unemployed low income earners find themselves, as compared to higher income earners.

In order to bolster the financial viability of the UIF, and ensure more comprehensive coverage, COSATU supported proposals that high income earners and government employees also be included under the UIF’s ambit. Furthermore, it was stressed that government should contribute to the UIF not only as an ordinary employer, but should also underwrite or act as a guarantor to the fund. The additional income from contributions of high income earners and public servants and their employers would have a dramatic effect in improving the financial position of the fund.

A further challenge for the UIF is to find an effective way in which local government can be utilised to extend UIF access to vulnerable groups of workers. A range of workers, including contract workers, seasonal workers, and domestic workers continue to fall through the cracks. This has particularly important implications in the context of the struggle for gender equality: in terms of the Basic Conditions of Employment Act, paid maternity leave will only be available to those contributing to the UIF.

3.2 Submission on Unemployment Insurance 2000

  • 60 % should be the minimum floor, with at least 50% for those earning R2000 a month or less.

  • the Board should set the schedule after consultation with the Minister and NEDLAC.

The inclusion of high-income earners will contribute in bringing stability to the fund as employees in these categories are not as a rule affected by unemployment. In the event of being unemployed, they are able to find jobs due to their skills. The added benefit of including high-income earners is that they can cross-subside low income earners. Nevertheless we have concerns with the blanket exclusion of public servants and the manner in which the issue of domestic workers is handled in the Bill.

First we welcomed the Bill’s separation of maternity benefits from unemployment benefits. This will secure women’s unemployment benefits if they go on maternity leave. This is consistent with the Task Team’s recommendation that the administration of maternity benefits through the UIF, should in no way mean a woman’s unemployment benefits are eroded as a result of having received maternity benefits. Likewise, drawing from the unemployment benefit should not affect a woman’s maternity benefit.

Under the current dispensation a woman is entitled to six months maternity leave. To ensure that no woman is worse off due to the new Act as a general rule there should be an option of 2 months linked to service in addition to the BCEA’s four months maternity leave. The 2 months option will also accommodate collective agreements that provide for 6 months maternity leave.

However, we believe that the right to maternity benefit should be automatic and entitlement to benefits should not be linked to a period of service. The motivation for our proposal is to avoid the unintended indirect discrimination of pregnant women. To peg the benefit to maternity leave to period of employment would constitute indirect discrimination against pregnant women. The effect is that pregnant women will conceal their pregnancy status first in order to be employed. Secondly, the proportionate formula of calculating benefits would mean a woman who was pregnant at the time of employment would receive maternity benefits for a reduced period of time.

Under the BCEA [section 25(2)] maternity leave can be taken from four weeks before the expected date of birth unless a medical practitioner certified that it is necessary for the leave to be taken earlier. This provision should be referred to as the starting point for eligibility for maternity benefit under the UIF.

The Bill endorsed the principle of topping up benefits for the following benefits illness; maternity, adoption benefits and dependants benefits. This principle was welcomed and supported as it improves on the current situation where the beneficiary may only receive UIF benefits if he or she receives less than one-third of his/her earnings during for example illness.

Concern was raised about the exclusion of domestic workers from the Act. It was proposed that the Bill should include:

  • A commitment to including domestic workers no more than 12 months after it is passed; and

  • Provision for an investigation, if necessary, as well as development of the necessary systems for registration and collection of contributions before that date.

A concern was also raised about the exclusion on public servants and it was proposed that:

  • the government provide a subsidy to the UIF equal to its employer contribution (around R500 million); or alternatively, guarantee it will meet any annual deficit incurred by the UIF,

  • public servants begin to contribute to the UIF immediately, and receive benefits; and

  • the situation with the employer contribution be reviewed in two years.

The fund should be a fully-fledged agency like the South African Revenue Service (SARS). It is, after all, an insurance system, not a social welfare system, and therefore should first and foremost be responsible to contributors.

The current state of finances of the UIF can be described as a ‘crisis’ – the fund has a large deficit but has the obligation to meet large claims. The Fund is teetering on the verge of collapse if its funding is not radically changed. There are five ways to improve the financial state of the fund:

  • increase levels of contribution;

  • reduce benefits;

  • bring more contributors with relatively stable employment into the scope;

  • reducing fraud and improving efficiency;

  • increasing the government subsidy.

For this reason, we believe that the costing models should be availed to ascertain the impact of the changes on the financial position of the Fund. Until such time, it will be difficult to determine the viable route of ensuring that the fund is sustainable. As noted above, the bill should rather set a ceiling, then let the Board vary the actual amount after appropriate consultation.

Historically, government contributed substantial amounts of money which stabilised the fund. In our view, the state should underwrite the fund as part of its vision to progressively realise the right to social security. From the standpoint of the State, the UIF is one of the cheapest ways to improve social security, since the vast majority of the funds come from the beneficiaries themselves.


 

4. BASIC INCOME GRANT

4.1 Central Committee Resolutions

Given the widespread situation of poverty, and that millions of people have no Regular source of income as a result of structural long-term unemployment, urgent attention needs to be given to providing a basic income to those not covered by unemployment insurance, or other forms of social security.

According to research conducted for COSATU 13,8 million South Africans live below the poverty line without qualifying for support under the current social security system. The viability and implementation of a comprehensive income grant to those living in poverty and/or long-term unemployment insurance needs to be investigated as a matter of urgency.

4.2 Proposal in Job Summit Process

All South Africans would receive a basic Income Grant of say R100 per month. In order to ensure that the system targets the poor and unemployed, those earning over a certain amount would pay back the amount they receive, as a tax collected by the South African Revenue Service. People in high-income groups would pay back double what they receive and by doing so pay a “solidarity tax” the system would be directly redistributive. Such a universal system is simple to administer as the benefit comes as an entitlement.

Everybody receives the benefit as an entitlement. However, the money would be reclaimed from higher income earners and by doing so, only low-income groups would in fact benefit. Parts of the cost for the system is also recuperated through a “solidarity tax” from people earning above a certain amount. The advantage of this option is that there is less room for corruption, as the payment of the benefit does not depend on an official. Furthermore, it is simple to administer, cost-effective and does not require a lot of administrative capacity. An important advantage of a universal Basic Income Grant is the absence of any stigma attached to it as everybody receives it as a right of social citizenship. Most importantly, it does not create perverse incentives not to take up work.

The Basic Income Grant could be paid into people’s accounts through the banking system. A reformed and extended Post Office Bank or community banks could be used. This would help to expand much-needed financial infrastructure into rural areas. Such an electronic and automatic transfer is cost effective and requires less administration. Furthermore, recent evidence points to the positive spin-offs of bringing poor people into the formal banking system. Access to and integration into the system is seen as a huge advancement for poor people by giving them opportunities to accelerate development.

It is obvious that the introduction of a Basic Income Grant requires a decisive financial commitment by government. The final estimated costs after an introduction period amount to about 1.5-3 % of GDP depending on the level of benefit and the system selected. Further research is on its way to model the various budget estimates. While this is a significant decision, it does not blow South Africa’s social spending out of proportion. The actual amount spend on the basic Income Grant could be fixed as a rate e.g. percentage of GDP. Thereby the basic Income Grant would grow with the economy, but at the same time it would not grow faster than the economy can afford.

There are serious economic considerations which in fact necessitate a system of transfers which directly benefit South Africa’s poor. Given South Africa’s legacy of structural unemployment, economic growth on its own will take decades to alleviate poverty. Besides the moral obligation, it does not make sense economically to leave behind well over 50 % of South Africa’s people with increasing disparities. Not only does malnutrition of children and adults cause major government spending, but it also reduces the productivity of the workforce, it is the cause for social unrest and crime. A Basic Income Grant does not solve the structural unemployment over night, but it provides a net for destitute people and a basis from which self-employment can be started.

The Basic Income Grant would contribute to making people economically active through giving them access to cash resources. It would contribute to an improved health status and improve the ability of children for learning in schools. Both factors increases productivity. Further, it would stabilise consumption spending and demand- particularly increasing demand for locally produced goods which is especially important for the rural areas. Internationally experience shows that basic social security is important for promoting economic growth. In particular, it contributes to social cohesion for sustainable economic growth. In preparing the final policy proposal detailed attention needs to be given to the modeling of the economic benefit of a Basic Income Grant including the likely employment, investment and distributive impact of such a grant.

4.3 Congress 2000 Resolution

Noting

  1. The demand for a Basic Income Grant for all those who are unemployed and live in poverty forms an important unifying point for the struggle of the working class.

  2. The Basic Income Grant forms a critical element of a comprehensive social security system

  3. The Presidential Job Summit agreed that the government should consider a Basic Income Grant

  4. Workers’ wages are not sufficient to support the unemployed.

Resolves

  1. The state and business must contribute to the elimination of poverty through the establishment of a Basic Income Grant.

  2. COSATU must monitor and interact with the inter-departmental task team on comprehensive social security. There is an obligation on us to develop a framework on comprehensive social security.

  3. Legislation to establish a Basic Income Grant must be introduced in the 2001 Parliamentary session.

  4. Government departments and institutions should provide free services to the aged, the disabled and the unemployed, with the provision of free lifeline services for all households

  5. The cost of the Basic Income Grant must fall on the rich.

(need to clarify q. of funding mechanism- slight inconsistency)


 

5. CHILD MAINTENANCE

5.1 Central Committee Resolution:

  1. Over 5 million children (90% of total), mostly from poor communities, are without formal care. This strongly disadvantages these children in later schooling, and contributes to the skill disparity between races. Childcare provision is a labour intensive service (about 275 000 potential jobs) and would contribute to the economic emancipation of women. Poor quality backyard crèches which workers pay towards childcare is currently provided by the unemployed.

  2. Childcare is a family responsibility that should be recognised and be paid for by the employer, including childcare leave for workers, including the right for time-off to attend to social activities that involve their children.

  3. Unions should negotiate with employers to contribute to or build childcare facilities at workplaces (taking into account the dangers of hazardous environment), which will enable parents to be close to their children to ensure their healthy upbringing.

  4. Employers should provide resources to ensure childcare facilities are adequatelyresourced, including competent staff. These facilities shall be controlled by workers and the community which is being served by these facilities.

5.2 “Accelerating Transformation”

During Parliamentary hearings on the child maintenance grant in April 1997, COSATU raised concerns that the laudable objective of universal access to the grant was being overshadowed by fiscally-driven considerations:

“A problem with the proposed reforms is that the objective of increased equality has been overshadowed by government’s self-imposed commitment to reduce the budget deficit by cutting-back on expenditure… [A] reduction of child and family support would fly in the face of the constitution’s commitment to “the progressive realisation” of a right to social security and…the commitment in the White Paper on Social Welfare …”

Concern was also raised by a range of organisations that administrative capacity had not been developed sufficiently in historically excluded communities. This would have the effect of increasing the potentialbeneficiaries, but actually reducing the amount which government allocated for child support.

Although implementation of the reform was not suspended, as requested, there was a marginal increase in the amount of the maintenance grant from R70 to R100 per month, However, predictions concerning weaknesses in the administrative machinery of the grant were confirmed. As at the beginning of 1999, this was evidenced by a very low take-up rate of new beneficiaries onto the child maintenance grant system, effectively reducing the overall amount actually spent by government for purposes of child maintenance assistance.


 

6. RETIREMENT FUNDS

6.1 Central Committee resolution:

3. Retirement Funds

  1. The biggest institutions of social ownership are the retirement funds. Worth some R500 billion, a large part of their assets consist of worker’s deferred wages in the form of savings for retirement. Retirement funds represent 35% or more of total savings in South Africa and provide about 60% of local finance to companies. The retirement funds are the major source of investment capital in the South African economy and own a substantial stake in hundreds of companies.

5. State Old Age Pension

  1. Social assistance is a non-contributory benefit that accrues to a citizen. The most important current benefit is the government old age pension that supports the large section of the rural populace and is South Africa’s largest and most redistributive income transfer. It goes to about 1 million people and their dependants.

  2. The Federation should engage in policy discussion with the state with a view to influencing the level of pension payments to the aged, dependants and the means test which is being used.

  3. Administrative issues pertaining to method of payment, retirement age and eligibility age should form part of the engagement process with the state.

7. Industry Funds and Workers Benefits

  1. Lump-sum versus pension: The lump-sum from provident funds was achieved through the workers’ struggle and it must therefore be the right of workers to choose.

  2. No legislation should interfere with this choice.

  3. Workers must be able to transfer their savings from one fund to another if they so choose.

  4. Tax must be used to encourage industry funds to invest in the RDP.

  5. There must be a top-up system to compensate workers for the recent tax changes regarding retirement funds.

  6. We need to do research into union funds already existing to assist the implementation of the industry fund.

  7. It is important that COSATU influence the training of the worker trustees on the Boards to ensure that they take forward union issues. This needs urgent attention because private companies are already providing this training without union influence.

  8. Unions should have representation in Mutual Funds such as Old Mutual.

  9. COSATU needs to investigate the viability of moving to one national fund.

6.2 Accelerating Transformation

Retirement funds are the major source of income for working people in South Africa, who are no longer of working age. Most workers are covered by contributory funds (involving joint contributions by employers and workers) as part of the wage package, which can therefore be defined as social insurance. About 7 million people, including 70% of those holding formal sector jobs in the private sector, are estimated to be covered by these funds. About 1 million public sector workers are covered by the Government Employee Pension Fund.

The State Old Age Pension (SOAP) is funded by government from the fiscus, and is a major source of income support for low income households, with about 2 million old people currently benefiting from the grant. Although only about a third of poor households receive this pension, it is particularly important in supporting families which have no other source of income, including from contributory funds. The SOAP is the largest element of the limited social assistance provided by the state.

Although the scale of publicly and privately provided pensions in South Africa is very large, the structure, and depth of coverage of people, is fragmented, inadequate, and in need of substantial restructuring.

While retirement funds have been used as extremely lucrative tax havens by the wealthy, low income workers find that their payments, often a lump sum, are exhausted rapidly, and therefore don’t serve as a sustainable basis for income security.

The need for restructuring has been recognised, albeit from radically different perspectives, by different stakeholders, and there has been extensive debate, with numerous commissions, forums and investigations, on various options. The sheer scale of investments and the financial interests involved, the complexity of institutional and legal arrangements, has resulted both in a resistance to transformation, as well as an obscuring of the issues for ordinary people.

The policy debate has revolved around a number of issues, in particular:

  • regulations governing investment of public and private sector funds;

  • corporate governance, and democratisation of the funds;

  • the funding arrangement and structure of these funds;

  • taxation of pension funds, and the effect on low income earners;

  • demutualisation of mutuals handling insurance and retirement funds;

  • the disposal of pension ‘surpluses’;

  • the need for a compulsory national retirement fund; and

  • the level of benefits, and scale of the state pension fund.

There is the need to rationalise and consolidate the existing funds. Currently there are over 15 000 funds, which results in huge wastage, unnecessary administrative costs, and none of the benefits of economies of scale. It also creates problems of non-portability between jobs. COSATU affiliates have successfully mobilised to set up industrial funds in a number of sectors. However, excessive fragmentation still exists. This led COSATU’s Central Committee to resolve to investigate the viability of moving to one compulsory national fund. Another structural question is the issue of the preferred form of funds- defined benefit vs defined contribution funds or pension vs provident funds. COSATU has argued that these macro questions relating to the shape of the retirement industry need to be resolved in a national forum. Such a forum was set up, but failed to conclude its work. This task therefore remains.

The restructuring of the Government Employees Pension Fund (GEPF) is another highly controversial matter, in terms of the level of its funding, which was discussed extensively at the Jobs Summit, and led to the formation of a task team at NEDLAC. This issue is dealt with in more detail in the section on Fiscal Policy.

While there have been attempts in some quarters to cut back the state old age pension, it remains South Africa’s largest and most redistributive income transfer, critical to the survival of the rural poor. COSATU’ s concern has been to increase the level of payment, given that the SOAP has progressively declined in real terms over the last number of years, and to address concerns such as the method of payment, retirement age, eligibility age, and means testing. Some, particularly from business and the finance department have attempted to argue that a shift to social insurance (retirement funds), allows for the reduction or phasing out of social assistance (SOAP), given that the latter is ‘unaffordable’. This ignores the fact that only employed workers benefit from social insurance, and the continuing chronic levels of poverty in our society which require greater levels of social assistance not less.

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[su_spoiler title=”Women and the Job Summit: notes for Labour Presentation” open=”yes” icon=”folder-1″]

  • Unemployment, Poverty, Inequality and the position of Women

Around the world, women’s access to employment is constrained by various factors, including inequality in access to education and training, and productive resources, household responsibilities and gender stereotypes. Where women are employed, they face discrimination and disadvantage. They are employed in lower paid, less secure jobs and they have limited access to economic resources, including land, capital, credit and technology. Their contribution to the economy in terms of unpaid labour remains unrecognised and undervalued.

Women are the last to benefit from periods of employment growth, but they are the first to suffer when employment levels fall. The unemployment rate for women in South Africa, particularly rural women, is shockingly high.

Women are also found in jobs where standards are deteriorating. More women are being drawn into atypical work, as opposed to full-time, permanent, regular employment. This means that they face a severe problem of underemployment.

Women in South Africa, specifically black women, are worst affected by unemployment, poverty and inequality. This position is the result of a range of factors, but most serious is the legacy of decades of exploitation and oppression of black women under the apartheid system. In particular, the systematic dumping of women into remote rural areas, and urban ghettos to bear the burden of reproducing families, without support from the state, access to land or other means of livelihood; the exploitation of black women as a source of ultra-cheap labour, located in many of the worst paying, and most insecure jobs; and the perpetuation and distortion of the worst features of patriarchal structures in traditional societies, as well as society in general, to maintain women in a position of powerlessness. This is what has come to be known in South Africa as triple oppression- exploitation of women as workers, oppression as black people, and domination by a patriarchal society.

This is the legacy we have to confront today. Therefore a critical test of the proposals before the Job Summit, and ultimately agreements reached at the Summit, is the extent to which they comprehensively begin to address the plight of black women, their poverty, unemployment, and inequality in opportunity and status in society. Indeed, the Summit will only begin to address the crisis of unemployment, poverty and inequality more broadly, if the plight of women is seriously addressed. This needs to be done in a comprehensive way, which `mainstreams` the concerns of women. In other words, proposals which merely propose a few add-on projects for women, or mention women at various strategic points, but fail to comprehensively address this structural oppression of black women, will have failed to change the plight of the ordinary women, unemployed, poorly paid, living in poverty.

Neo-liberal macro economic policies reinforce and deepen the poverty, and dependence of women, particularly in developing societies such as ours. The implementation of the economic policies of the current architects of globalisation has a devastating impact on the economic and social plight of women, in at least three areas. Cutbacks in state expenditure, mean firstly job losses for women in the public sector, and secondly, the cutback in critical social services which women depend on to reproduce their families. This simply transfers the costs of social services that ought to be borne by the state to the household, and to women in particular. Thirdly, under the guise of `labour market flexibility` women are disproportionately the victims of retrenchments, underemployment, and casualisation. This means that women are increasingly concentrated, where they are employed, in low-paying, part time jobs, with little or no job security. Both the quality and quantity of jobs occupied by women are under attack.

We don`t intend to engage in a detailed critique of the positions of other parties. However it is disturbing that business in particular, has taken the neo-liberal agenda uncritically on board, with apparently little concern for the devastating implications of this approach for women in particular, and society in general. It has come as a shock to us that representatives of business have advocated that already exploited and underpaid women (as well as youth) should accept lower conditions of employment! They claim that this is the route to fostering new employment creation.

 

  • Labour`s proposals

    In labour`s `base document` (tabled in April this year) which set out the framework for labour`s proposals to the Job Summit, a range of policy interventions were proposed to ensure that these concerns were taken on board in an integrated way. Section IV of the document, on Women and Job Creation, proposes ten elements of an approach to comprehensively address the plight of women, and to empower them to themselves begin to act to change their situation:

          • Macro-economic framework

        A number of proposals are raised in labour’s document for a developmental macro-economic framework. Effective implementation of developmental programmes to address women`s concerns is not possible in the context of inappropriate macro economic policies. For example, low interest rates are needed to facilitate entry of women into small enterprises; re-regulation of capital markets and tariffs to stem job loss; and more expansionary fiscal policies to allow expansion of social services, social security, and public sector employment.

          • National Public Housing Programme

        Labour proposes a mass public housing programme, focussing on rental housing stock, to be driven by a housing parastatal. This proposal is critically important both in terms of job creation and in terms of building of infrastructure towards meeting basic needs – which has particular significance for women. The proposal explicitly encourages job creation for women. Further, its emphasis on breaking down apartheid geography, by building houses on well located land in the cities, promotes access of poor women to a range of facilities which were previously beyond their reach.

      • Public Works Programmes (PWPs)
      • Labour emphasises that the types of infrastructure and assets that are created should benefit women through meeting basic needs and improving infrastructure in ways that lessen the unpaid labour of women e.g. building of health centres, schools, childcare centres and housing as well as programmes to improve sanitation, electrification and roads.

  • An integrated policy development approach, which addresses obstacles to development of women in all areas of policy;
  • Mainstreaming women in development strategies, ensuring that the problems confronting women are not marginalised, but that their concerns are integrated into all policies and programmes;
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  • Gender-sensitive macroeconomic and industrial policies;
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  • Harmonising work and family responsibilities, including the arrangement of working time, and social support services and infrastructure to enable families to cope with family and work responsibilities;
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  • Targeted job creation for women;
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  • The role of public sector employment as a major employer of women;
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  • Public works programmes, both providing short term poverty relief, infrastructure to empower women, and training;
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  • Developing a regulatory framework, including anti-discrimination legislation;
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  • Education and training aimed at empowering women;
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  • Access to productive resources for women including land, natural resources, capital , credit, infrastructure, and technology.
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    This constitutes the broad framework within which our proposals need to be located. In August this year, the four constituencies in the negotiations tabled an `audit` of their concrete proposals and programmes. Labour has proposed 21 programmes, and a series of financing mechanisms, aimed at a large-scale structural intervention in the current crisis.

    All of labour`s proposals, if implemented, would have a profound impact on the economic and social crisis confronting women in our country. However, space only allows us to concentrate on a few of these, to indicate the type of impact which the proposals will have on women. These comments below should be read together with our proposals outlined in more detail in the `audit` document- this proposal is attached for members of the Committee to scrutinise in detail.

Labour proposes to specifically target women for employment in PWPs. These can provide not only temporary employment, but also training and experience that can enable women to enter traditionally male-dominated fields and generally empower women with skills that they have been denied. Innovative PWPs could potentially include literacy classes and information about health, nutrition and family planning. Thus, labour emphasises a broader approach than simple poverty alleviation but sees PWPs as building infrastructure and sustainable employment

  • Youth Brigades

This is an innovative proposal to skill and empower the young unemployed for participation in the labour market.

Young working class black women face particular barriers to participation in the labour market and education.

In poorer families young women are often discouraged from taking advantages of such opportunities because of household duties.

Youth brigades must be linked to education and skilling for women.

  • Wage Gap, Training and Quality of Jobs

Black women experience the worst forms of discrimination and disadvantage in the labour market and are concentrated in the most insecure low-paid and vulnerable segments of the economy. Labour’s interest is to ensure the implementation of strong interventionist policies that help overcome vertical and horizontal segregation and increasing casualisation.

The apartheid wage gap has a strong gender dimension which needs to be emphasised and consciously addressed.

Central to labour’s proposals is the emphasis on quality of jobs to counter the trend of casualisation.

Labour proposes a massive expansion of training, which should help to empower women to enter new areas of the labour market.

The proposal for job-sharing, the reduction of overtime, and the reduction in working hours, has special significance for women working in areas such as the service sector, which are characterised by long hours and low pay.

  • Taxation

Labour`s proposal for more progressive taxation, in particular VAT proposals are important for women, since the regressive nature of VAT impacts most strongly at the level of the household where women bear the brunt of poverty.

  • Industrial restructuring and sectoral summits

These proposals are aimed at expanding employment in sectors, and preventing job shedding in other sectors, some of which are dominated by women, e g textiles and the service sector, including through the development of industrial policies, beneficiation, re-negotiation of tariffs, and so on.

  • Public Sector Policies

The state should be a model employer of women – internationally the public sector often offers secure and better quality jobs for women. Labour proposes a National Framework Agreement for restructuring the public sector, including expanding it where this is necessary to achieve required levels of service delivery.

Retrenchments mean job losses for women – this is completely unacceptable when the services women are offering- they are e g the majority of teachers and nurses, are in short supply in the country

Procurement policies should have specific requirements in terms of targeted job creation for women and mechanisms to deal with their participation e.g. childcare, parental rights etc.

  • Informal sector

Labour, together with the community, supports proposals for formalisation of the informal sector, including the extension of labour market protection and regulation. Access to productive resources for women, including land, natural resources, capital, credit, infrastructure, technology and skills is supported by labour.

  • Stemming job losses in the economy

This is a key labour proposal – a central part of the unemployment problem is job shedding not just the failure to create new jobs. Labour will continue to defend existing jobs and struggle to enhance the quality of jobs.

The proposal for monitoring job losses is also aimed at scrutinising and reinterpreting employment and unemployment statistics- which currently tend to mask unemployment, underemployment, and casualisation- all prevalent amongst women. The practice of excluding ‘discouraged workers’ from the register of unemployed , particularly conceals the extent of the unemployment problem amongst women workers.

Labour proposes to extend the Social Plan, to assist workers in sectors in crisis, to go beyond industries which have very large closures, such as the mining sector. We have argued that the proposed threshold of 500 workers (under which retrenched workers do not qualify for social plan assistance), is too high in many sectors, and that the threshold needs to be sector-specific. This is important in sectors such as service, where women are the dominant victims of closures.

  • Social security network and income grants

Labour`s proposal on social security argues that “structural unemployment is a fundamental problem which won’t be resolved in the short-term, (this) means that various support measures have to be undertaken to alleviate the plight of the unemployed, and to prevent conditions of destitution. This will also facilitate re-entry of unemployed people into employment, and limit the phenomenon of ‘permanently discouraged’ unemployed people, whose only recourse is to crime, or outside of the formal economy”.

This is critical in tackling the poverty and deprivation in our country, which women experience most intensely. To this end, Labour has proposed a comprehensive set of measures to support those who are unemployed and living in poverty.

This programme involves a package of measures, some limited and short-term, and others longer term in nature. These include:

      • Basic income grants, to be allocated to all adults, aimed at the unemployed and those living in poverty. This will reduce women`s reliance on remittances.

      • Extension of UIF

      • Support for the social sector, the self employed and co-operatives

      • Concessions for the unemployed

 

  • Hearing the views of women

These hearings by the JOINT COMMITTEE ON THE IMPROVEMENT OF THE QUALITY OF LIFE AND STATUS OF WOMEN, are an important start to ensuring that the position of women is sharply addressed in the run up to the Job Summit. However, there is a need for a more active and public assertion, by women themselves, of their concerns. It is a negative reflection of our society, that voices of women have not been as directly and actively heard as they should be. This needs to happen, both in the run-up to the Job Summit, at the Summit itself, and critically in the process afterwards, where many of the issues will still have to be finalised.

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