Time for business and labour to talk as economic crisis looms

Allister Sparks

ASERIES of events last week sent a chilling message that we are heading swiftly towards an economic crisis point. One was from Finance Minister Nhlanhla Nene warning that our economy is slowing down more than he expected and is now far below the average in a slow-growth world. Having come in at a pathetic 1% for the first quarter of this year, he now fears it won’t reach his expected 3% by 2017.

Another was from Anglo American CEO Mark Cutifani, noting that Anglo is looking to cut a third of its workforce to 98,000 through the sale of 15 assets and retrenchments in the next two years. Lonmin will shut five platinum mines at a cost of 6,000 jobs, while other mining firms are also shutting mines and shedding jobs because of rising costs and falling commodity prices.

Third was the Chamber of Mines tabling a final take-it-or-leave-it offer to five unions with which it has been negotiating for five weeks. The chamber says the mining companies won’t go beyond their present offers, which fall well short of the unions’ initial demands of 80%-100% deals. The unions are calling the ultimatum “intimidation”, so we could be in for another round of strikes in the already damaged mining industry,

Public sector workers have already been granted increased benefit packages of 11.5% over the next three years, costing the state another R66bn. This, while 90% of stateowned enterprises are running at a loss.

Now Economic Development Minister Ebrahim Patel has announced that the government is launching a huge jobs drive to take on extra workers in all state departments for maintenance, not infrastructure, jobs — presumably at the newly increased wage packages. He didn’t say by how much that would deepen public sector losses.

Put all this together and you get a picture of where we are heading.

We have known for a long time that we need a 5% growth rate for five to seven years to prevent our already horrendous unemployment rate from getting worse at a rate of about a million a year: right now, nearly half of our people younger than 35 years are not working. That 5% is what the National Development Plan (NDP) was designed to achieve. The NDP was formally adopted by the African National Congress at its Mangaung conference and became President Jacob Zuma’s banner issue in last year’s election campaign. But it doesn’t seem to be going anywhere, and its godfather, former finance minister Trevor Manuel, has left the government in frustration.

The fact is we have been nowhere near 5% growth ever since Zuma came to power. What does this mean in practical terms?

Three years ago, Nene’s predecessor, Pravin Gordhan, warned that government revenues (through low growth) were shrinking, while overexpenditure was soaring (through corruption, wastefulness and inefficiencies), to the point where the government might soon be unable to meet both its welfare payments and its infrastructure-development commitments.

Now it seems that critical moment is at hand. Nene said last week that money intended for capital expenditure would have to be diverted to pay for the increased statesector salaries.

So we are in a vicious cycle. While unemployment balloons, we are having to cut infrastructure development to pay higher salaries, which means cutting growth, which means more unemployment. The ultimate paradox being that we are paying higher salaries to increase unemployment. Which, of course, is nothing new in the voodoo economics of the Zuma administration.

But there is a tiny glimmer of light in the gloom. In his speech about Anglo’s impending staff cuts, Cutifani made a conciliatory overture to the unions and the government to see if they could negotiate a more flexible labour structure. He said he didn’t want to ask people to work more hours, but rather to reassess the entire labour scene, including migrant labour and other social issues. This is a vital issue I have been advocating for years, and it should not be confined to the mining industry or just those unions with which Cutifani is engaged.

It is particularly important that the nine private sector unions expelled from the Congress of South African Trade Unions, (Cosatu), led by the National Union of Metalworkers of SA (Numsa), be included. This group, with Irvin Jim and former Cosatu general secretary Zwelinzima Vavi among them, is forming a United Front and considering establishing a Labour or Socialist Workers Party, which could conceivably become a partner in a coalition government. If that happens, its labour policy will have a significant influence on SA’s future.

At the moment, Numsa is being labelled leftist. That may be true, but I’ve known Vavi for a long time as an eminently sensible man. He is the son of an Eastern Cape farm labourer with a visceral understanding of poverty and unemployment. I believe he has a strong realistic streak.

What I feel business and the unions need to reflect on is that both are still too influenced by the adversarial mind-sets inherited from the apartheid era. But that era is fading into the past and its legacies must be over- come. A new labour relationship is required. From the Numsa group’s perspective, it must surely recognise that the more the economy grows, the more its own membership will grow and the more influence it will have. The converse applies equally: a shrinking economy means fewer jobs, fewer members and weaker unions.

There will be times when aggressive confrontation is needed. The watchword is flexibility. Changing circumstances require changing strategies, and right now a new and much more flexible negotiating framework is needed.

Cutifani spoke of a “trust deficit” between the public and private sectors that had developed over the years, and urged that business and labour get together to overcome it. “If we are to create a more competitive SA, business and labour must work together,” he said. “Our current deep suspicion of each other is simply not sustainable and is evidence to the world that the Rainbow Nation is floundering, as it cannot get past self-interest and outdated ideological mantras.”

Exactly. So let key figures in business and labour start coming together to see if they can find ways of working more effectively for the benefit of both, which is to raise the growth rate and create more jobs. It is probably not something that can be done collectively in some grand forum that would be too prone to grandstanding. It is a process that can be started at ground level, with discussion groups leading to greater mutual understanding and the incremental building of a new labour relations framework.

But it requires more than one man to be the ball-carrier in this game. The country’s business leaders have been too reticent for too long, complaining in private about the constraints they feel but doing little about it. Cutifani has begun a process of open-hearted communication.

It is time for others to follow.

Our deep suspicion of one another is not sustainable and is evidence … the Rainbow Nation is floundering

Sparks is a former editor of the Rand Daily Mail.