What happens if you appoint a wolf as shepherd? A steady downsizing of the flock. The wolf, professing vegetarianism, calls it right-sizing and states his enthusiastic commitment to fattening the remaining sheep.
What happens if you appoint a dominant company to make the rules for its industry? It legislates its own dominance — subtly, slowly, insidiously, in the name of the public good.
This is why the bargaining council system is the single biggest obstacle to job creation in South Africa, and why small businesses have failed to become the “engine of the economy”.
The bargaining council system, grounded in the Labour Relations Act (LRA), allows large companies and unions to agree on minimum wages, overtime pay, provident fund contributions, medical aid and even holiday bonuses. The agreement goes to the labour minister, who legislates it for the entire industry.
Suddenly, the smallest business in the industry has to pay corporate remuneration packages. What a way for South Africa’s corporates to keep their industries clear of serious local competition. Concessions made to the unions at the bargaining council are compensated for by the high barriers to entry into the industry.
Nowhere in the world are medical aid, pensions and perks part of the small business scene. Workers are paid less but gain experience, allowing them to land better jobs at larger companies. Or they stick with the small company until it grows strong enough to pay pensions and medical aid.
Why don’t small businesses participate in the bargaining council negotiations? They don’t have time; survival is the aim. So when it comes to lobbying, small businesses cluster around chambers and associations resourced and driven by big business. It works well as long as the interests of large and small businesses coincide. When they differ, small businesses are on their own — and they are their own worst representatives, as we learned when the mismanaged National Small Business Council collapsed in 1998.
Other countries have statutory tribunals and even dedicated ministers and departments to look after small business. In South Africa the closest to this is an advisory body for the trade and industry minister legislated for in the Small Business Amendment Act. It has yet to be appointed.
Bargaining council supporters’ main argument is that the system provides for exemptions for small businesses. But who determines who gets exemptions? The wolf.
The LRA allows each bargaining council to write its own exemption rules. The same large companies and unions who set entry barriers decide who gets relief.
Most of the bargaining councils give exemption to micro-businesses with up to five workers. As soon as a shaky little business employs six workers, it must pay the same package to its workers as a company with 600 employees. No wonder small business owners employ as few people as possible.
Perhaps the worst council is that of the road freight industry, which only grants automatic exemption to businesses with two workers — effectively limiting it to owner-drivers. Sometimes other businesses are exempted, but there is no pattern. A report submitted by the road freight council to the Registrar of Labour reveals, without explanation, that a company with eight workers was denied exemption, while another of 22 workers was exempted.
Bargaining councils’ obligation to report annually to the Registrar of Labour on their treatment of small businesses has been introduced by Minister of Labour Membathisi Mdladlana.
In a recent interview, Mdladlana said an attempt to make the labour system more small-business-friendly was sunk when big business and labour “found each other” on the Millennium Labour Council. The compromise was four minor amendments to the Basic Conditions of Employment Act on overtime and leave. But the bargaining council system remained intact.
The annual reports Mdladlana ordered are unlikely to be of any use. Again, the wolf is reporting on his management of the flock.
Small business representatives are supposed to serve on bargaining councils. In practice, however, these tend to be owners who have moved past the start-up phase and have a vested interest in keeping other businesses out of the industry.
It is puzzling that so little attention is given to the harm done by the bargaining council system. The explanation is probably that those most damaged by it — small business and the unemployed — are voiceless. Both are badly organised and represented. They are unlikely to win a battle against big business and the unions unless the government intervenes.
Barrie Terblanche is editor of Big News for the Business Owner