It is the deal on which South Africa’s peaceful transition to democracy was founded, but the pact among the ANC, big business and organised labour at the heart of the post-apartheid order now ranks with corruption and mismanagement as one of the main threats to economic and social progress.
How else are we to understand unions striking to secure wage settlements at double the inflation rate, a year after a recession that wiped out a million jobs? Or salary raises averaging 23% for the directors of JSE-listed companies? Or a government that is diverting more of its resources into paying its employees than into laying the economic and social foundations of a better life for all?
The deal works broadly like this. The government accepts that it is possible to grow the economy and achieve some level of redistribution and redress only in market conditions. In return it gets revenues and jobs regulation, which it can use to increase the social wage and secure its legitimacy with the unions.
Big business gets property rights and a broadly liberal regulatory system, but in return pays plenty of tax, submits to BEE and tolerates a labour regime distinguished by restrictive collective-bargaining arrangements. Labour, meanwhile, secures consistent real-wage growth for those in employment and extraordinary power in party politics and public policy.
Formally captured in the National Economic Development and Labour Council’s ‘social partnership”, it is an increasingly narrow arrangement that, more often than not, fails the poor and unemployed, smaller businesses and South Africa’s long-term prospects.
Since the public sector strike last year we have reported on the rapid rise in government workers’ share of state spending — from R140-billion to R270-billion in four years. The petty bourgeois unions for teachers, nurses and clerks that now dominate Cosatu are capturing an ever-larger slice of national resources because of their power in the tripartite alliance and President Jacob Zuma’s insistence on playing political defence.
Now metalworkers, in a sector hammered by the global slowdown and the strong rand, have won a 10% pay rise after a strike. Chemical workers are still out and they are set to be joined by miners and perhaps those insatiable state employees.
Big listed companies can, to some extent, manage these increases. They have the resources to buy machinery that displaces workers, import more and rearrange processes to limit the impact of labour costs. Their growth may be capped, but they deliver the profits used to justify those huge increases for directors.
Smaller metal firms are resisting the 10% deal because they cannot so easily retool and outsource. They must lay off workers or shut down. The deal struck between the National Union of Metalworkers of South Africa and the Steel and Engineering Industries Federation of South Africa will ‘destroy” more vulnerable companies in a sector that shed 100 000 jobs in a year, argues the National Employers’ Association of South Africa.
Nowhere is this dynamic more obvious than in Newcastle, where the Southern African Clothing and Textile Workers’ Union (Sactwu) is using government to force higher wages on small firms because of worker protests. Factories have already begun to close as a result.
That Sactwu’s investment arm has shares in a heavily subsidised and protected clothing company, Seardel, which could never compete on pure economic merit, illustrates with clarity the structural conflict of interest.
Linked political and policy failures allow this carve-up to continue.
Chief among them is the extraordinary failure of post-apartheid education, which has left South Africa with a surplus of labour and a deficit of skills and has effectively excluded millions of people from the economy.
The labour regime compounds this, as the National Planning Commission and the treasury point out, by making it too expensive and risky for firms to hire young workers to train.
At the other end of the wage scale, our restrictive immigration policy excludes skilled foreigners who could compete for managerial jobs. Perversely, as recruitment firm Adcorp has shown, work permit hurdles for skilled workers drive up white salaries.
Despite the angry words between capital and labour it is cosy inside the walls of South Africa’s great carve-up. The comfortable don’t sacrifice and sacrifice lies at the heart of any meaningful social compact.
Only when the ANC fears the unemployed more than it fears Cosatu, and labour fears loss of political relevance, will there be compromise. Only when company directors can no longer eke profits and bonuses from a declining economy, or when the nationalisation threatens the market system, will they risk real action.
The economic development department said this week that the social pact envisaged in its new growth path, including discussions on wage restraint, will be developed only once the foundations for growth and job creation have been laid. What should be clear to the department is that such a social pact is the basis for inclusive growth — not its outcome.
Strike fever has once again hit South Africa with fuel employees, metal and chemical workers among others promising to cripple the country’s economy if their demands are not met. For more news click here.
