Amendments will throttle job creation
Labour Law | Organised labour is hostile to any attempt to put young, low-paid, unskilled people to work
A REPORT by the office of South Africa’s auditor-general this week showed that just 5% of the country’s 278 municipalities received clean audits for the past financial year. None of the country’s eight metro areas received a clean audit.
Nearly three-quarters of them — 71% — depended on consultants to help them with their financial reports. Outsourced services cost municipalities more than R378-million last year, yet only 17 municipalities received clean audits, with no improvement in the statistics in the past three years.
The numbers illustrate a skills shortage and widespread mismanagement of taxpayers’ money.
But would more flexible labour laws solve the problem by making it easier to fire incompetent civil servants?
Loane Sharp, labour economist at Adcorp Analytics, said poor service delivery was the result of a collapse of basic managerial capability in the public service, not really of labour laws.
“Deployment of weak cadres to managerial positions has led to the public service being ‘captured’ by the public-sector unions, notably Cosatu, which has refused to allow its members to enter into performance or productivity agreements with their employer, the government,” said Sharp.
“This affects not only municipal service delivery, but provincial and national government functions as well, including policing, electrification, schooling, healthcare, transport and administration.”
However, there would be few negative consequences if labour laws were relaxed.
“Citizens would experience a significant increase in service delivery by the state. And employers would experience a significant increase in labour productivity. But there would be negative consequences for some workers, particularly those who are unproductive or incapable, since a loosening of labour laws would make it easier to sanction those workers,” he said.
In Sharp’s opinion, there are only two aspects of the labour laws that should be relaxed — “dismissal protections, which keep unproductive and incapable workers in positions which their on-the-job performance does not justify, and central bargaining, which drives a wedge between wages and labour productivity . . . the first makes workers unproductive; and the second makes workers expensive”.
The problem, Sharp said, was that the tripartite alliance, specifically Cosatu, was the biggest obstacle to job creation.
As long as the interests of Cosatu’s constituency — older, skilled and highly paid workers — dominated labour-market policy, measures to get young, unskilled and low-paid people into jobs, such as the youth wage subsidy, would be met with hostility, said Sharp.
It opposed any relaxing of labour laws, even though such loosening was the best hope for creating jobs.
This was demonstrated by the stalled negotiations on the labour-law amendments, which are expected to be promulgated by early next year. At the talks, the government appeared to give in to Cosatu’s push for a ban on labour brokers.
“The imminent labour-law amendments will have catastrophic, though not immediate, effects by curtailing the use of temporary or agency workers, by introducing hefty fines for companies that fail to meet affirmative-action targets and by criminalising workplace accidents,” said Sharp.
“The amendments represent the most significant tightening of labour laws since the Labour Relations Act in 1995.”
The act “decimated employment in the farming and mining sectors by introducing unrealistic minimum wages and promoting automation and mechanisation, and [it] produced a significant decrease in the labour market’s ability to absorb unskilled youth joining the labour market each year”.
The most contentious amendment relates to “temporary employment services”— essentially labour brokers such as Adcorp.
According to a World Bank development report on South Africa this year, 7% of the country’s workers, effectively about 410 000 people, find work through labour brokers.
The proposed amendments seek equal pay and benefits for any temporary worker hired for more than six months.
If the employer fails to offer an indefinite contract if there is a reasonable expectation of one, this will be construed as a dismissal. The contract worker must also be employed permanently, unless the company can justify the need for continued fixed-term contract work.
Critics of the new laws say such regulations are antithetical to the government’s growth path and job creation.
“Minimum wages in agriculture reduced farming employment from around two million people to 600, 000, but that took about 15 years,” Sharp said.
“Although companies have commitments and limited options right now, over time they will adjust to the law or circumvent it — most likely through indemnity from unfair labour practice written into clever commercial contract arrangements.” Comment on this: write to letters@businesstimes.co.za or SMS us at 33971
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