/ 1 November 2015

Yes and no to EFF’s list of demands

Red light: The Economic Freedom Fighters marched to the JSE with a list of 17 demands.
Red light: The Economic Freedom Fighters marched to the JSE with a list of 17 demands.

By numbers alone, this week’s march by the Economic Freedom Fighters (EFF) was impressive. Estimates from police involved in the event said the march was peaceful and put the number at 45 000 – far more than September’s anti-corruption march and even the student protests this month.

Driven by what the party called the “burden of the millions of the economically excluded, subjugated, oppressed, exploited and depressed South Africans”, the march started in Newtown at the South African Reserve Bank, continued to the Chamber of Commerce in Marshalltown and then on to the JSE in Sandton. A flood of red filled the streets, which grew as it got closer to its destination.

The EFF spokesperson, Mbuyiseni Ndlozi, said the march had taken a month to plan and had been on the organisation’s calendar since January. Their goal? To force JSE-listed companies to respond to the party’s 17 demands for change within 30 days, failing which they “will lead to a directed action against the identified companies” and render them “enemies of the struggle for economic freedom”.

Their demands were wide-ranging, from labour brokers to a minimum wage. The Mail & Guardian approached analysts about the feasibility of four of the demands.

Demand 1:

“All companies in the JSE should move towards socialisation of their ownership, meaning that they should give real and meaningful shares to their employees, who will in turn receive dividends at the end of each financial year. A minimum of 51% of all JSE companies should be owned and controlled by workers. This is different from the BEE [black economic empowerment] schemes which empower fewer individuals.”

Duma Gqubule, the founder of KIO Advisory Services, said socialisation of ownership in the economy should be a key imperative of economic policy and was achievable, particularly in mining. In this sector, it would require explicit targets for employees and communities within the 26% black ownership target.

He suggested that a 7.5% stake could be earmarked for both employees and communities, with half of each target comprising a free carried interest, or free shares.

“There should also be an additional 25% set aside for public ownership, on behalf of the people of South Africa, again with a free carried interest of about 10% over and above the BEE portion.”

Gqubule estimated that South Africa’s total mining assets were currently worth about R300-billion.

The Public Investment Corporation and the Industrial Development Corporation together hold about R35-billion of these assets. The firms could cede their shares in the sector to a professionally managed, and possibly listed, public mining company with a board that represents all stakeholders in the economy.

“The royalties that mining companies pay to the national treasury could then be split, with 40% used to further capitalise the public mining company, 50% going towards funds aimed at the development of mining host communities and labour sending areas, and 10% going to a new, professional agency responsible for awarding mineral rights and regulating companies,” Gqubule said.

Demand 2:

“All companies represented in the JSE must introduce a minimum wage of R4 500 for all their workers, and taking into consideration the sectoral monthly minimum wages contained in the EFF elections manifesto, which are: mineworkers R12 500, farmworkers R5 000, manufacturing workers R6 500, retail workers (cashiers and retail store assistants) R5 000, builders R7 000, petrol attendants R5 000, cleaners R4 500, domestic workers R4 500, private security guards R7 500, full-time waiters and waitresses R4 500.”

Lotta Takala-Greenish, a senior researcher in the School of Economics at the University of the Witwatersrand, said South Africa had several sector-specific minimum wages which were “important but not sufficient to influence the entire economy. They tend to average around R2 500.”

She said a national minimum wage was fundamental and the EFF’s demand was aligned with recent evidence that a wage of R4 125 is a minimum threshold to cover basic needs and costs commensurate with living in South Africa.

Takala-Greenish said there were characteristics across labour markets that justified the need for a “relatively high and nationwide minimum wage”.

“Wages do not only function as compensation for their input, but are the basis for being able to sustain that input by fulfilling the physiological, psychological and other social needs of the workers as well as their dependents.

“Companies can respond to wage increases in multiple ways such as reducing other input costs, increasing output costs, or changing production. The appropriate level for wages therefore needs to incorporate an understanding of the individual and varied needs of employers and workers as well as the interaction between them,” she said.

Demand 3:

“All companies in the JSE should ban labour brokers, and permanently employ their workers, with proper medical aid and retirement benefits.”

But research by Haroon Bhorat, Sibahle Magadla and Francois Steenkamp from the School of Economics at the University of Cape Town, showed that banning labour brokers has resulted in job losses.

The data was pulled from a survey by the Confederation of Associations in the Private Employment Sector.

The research analysed the effects of an amendment to the Labour Relations Act, signed into law in 2014, which ensured that labour brokering or temporary employment service (TES) employees who earn less than R205?433.30 a year are deemed “indefinite employees” after three months of continuous employment.

“For every 100 TES employees, about 50 of these workers lost their jobs” because of retrenchment or termination, the research noted.

But some workers benefited from the change: about 27% of employees were taken on either permanently or on contract. More than 22% of employees were unaffected by the change. The negative effects were felt most strongly in the manufacturing, finance, real estate and business services, and public and social services sectors, the researchers found.

Demand 7:

“All the retail stores in the JSE should source a minimum of 70% of their goods and services from South African producers, particularly food, confectionery, beverages, textile, leather, furniture, plastic, and many other basic products that are traded in South Africa.”

Investment marketer and analyst Christopher Skhokho Gilmour said this demand was “perfectly understandable as it would help to create and sustain employment”.

But South Africa’s economics are not in the red berets’ favour.

“The proportion of imported components that goes into finished goods in this country, whether for internal consumption or for export, is very high,” he said.

This was because South Africa has a relatively small economy with a relatively small economically active population, so manufacturing processes and practices are not as globally price competitive as they might otherwise be if they had economies of scale.

“Take confectionery as a good example. A lot of sugar confectionery in South Africa comes from Brazil, where that country not only has much cheaper sugar prices than South Africa, but also has far greater economies of scale in its manufacturing processes. The only way to prevent large-scale importation of these products is via anti-competitive practices such as onerous import tariffs.”

He said the same went for textile importation from the Far East.

“In order to be price competitive, South African manufacturing needs a far greater skills set among its population coupled with a far greater commitment to intensive investment in its manufacturing base.”

Productivity also needs to be substantially higher, Gilmour said.

“If we were to just demand that 70% of everything comes from local production, we will be saddled with inferior quality, expensive manufactured goods. That, unfortunately, is the sad, harsh reality.”