While there is general agreement that there are huge developmental problems in large parts of South Africa , including a massive unemployment problem, there is no consensus on how to solve these.
Since early this year, the ANC has broached the issue of exempting small businesses from certain regulations and collective bargaining arrangements as a way of creating jobs. Every time the issue has raised its head, Cosatu has chopped it off.
In a discussion document entitled “Development and Underdevelopment” that went to the ANC’s National General Council (NGC), the organisation again repeated its call for the relaxation of labour laws.
In the ANC NGC, there was heated debate over this issue which Cosatu again quashed. But Numsa’s vice president has warned that the issue “will come back to Nedlac”.
The “Development and Underdevelopment” document further analyses how to overcome the two-economy divide.
In the table that appears on the next two pages, we summarise the ANC’s proposals from this document together with Cosatu’s response to the ruling party’s strategy.
Cosatu’s overall view is that it is unlikely that the three development models that the ANC cites to guide us will succeed in this country. Instead Cosatu wants to see an active industrial strategy that develops viable sector strategies, creates sustainable employment, establishes a cooperative financial sector, and uses “government agencies, worker pension funds and the Financial Sector Charter commitments to encourage appropriate investment”.
Also in this section, ANC secretary general, Kgalema Motlanthe, urges readers not to get immersed in the debate over whether there are one or two economies but rather to use the idea of two economies as an analytical tool to help decide on interventions.
Disagree with those who say our labour laws are flexible? Read extracts from Les Ketteldas’ (Department of Labour) input to the National Bargaining Conference earlier this year and absorb the statistics.
Issue
ANC
Cosatu
Internat-ional exper-ience of devel-opment
The ANC document cites 3 examples of development models:
1. The Marshall Plan was devised to deal with the devastation caused by WW2 in Europe .Financed largely by the US to ensure that communism did not gain a hold in the region, the US paid around 2% of its GNP for four years.
2. East Asian growth and development programme – From the 1950s, the US ploughed money into Japan , South Korea , Taiwan to keep the area ‘communist free’.
3. European Union (EU) – In 2004, 10 new countries joined the EU all of which had national incomes “well below the national average”. The EU developed a plan to transfer resources from richer to poorer regions.
Common factors of all these plans were:
* a “powerful strategic consensus” on the part of the affluent to agree to grants, soft loans and other forms of aid to underdeveloped regions.
* a realisation that it could not be left to the market to lift up those areas
* a strong state to plan and implement.
None of these countries developed according to the Washington Consensus (development through private capital, leave everything to the market, integrate countries with the global economy)
Cosatu questions whether strategic consensus is possible in SA. Mining capital and white capital dominate in SA (unlike Asian countries) and can take their capital elsewhere if too much pressure is put on them to cough up the capital for the ‘underdeveloped’.
If the state wants to counter this it needs:
* strong mass-based organisations’
* “clear mandates at all levels of government to prioritise employment creation and growth”
* gradual shifts in ownership of capital to state-owned enterprises, coops, broad-based BEE, workers’ pension funds.
However Cosatu criticises the document for failing to analyse the structural factors behind the underdevelopment of the countries in the three examples. Cosatu argues that these countries are different from African countries (like SA) which rely heavily on commodity exports. Once the international prices of these fall, the economy fails.
Although it agrees with the ANC that the Washington consensus model will not work, it says that it is unlikely that SA will receive support along the lines of these three examples. As the ANC itself points out: the developed capitalist countries are “freed of any challenge equivalent to the perceived threat posed by communism” that forced the US to cough up in the 1940s/’50s.
Instead Cosatu argues that the real challenge is to get “domestic policies right and mobilise domestic funds to support them. If that spurs growth, foreign capital will follow.”
Issue
ANC
Cosatu
Dual-ism in SA
There are two economies in SA: the first is advanced, sophisticated, has skilled labour and is globally competitive. The second is informal, marginalised, unskilled and inhabited by the unemployed and unemployable.
To develop the second economy requires raising the “level of investment and economic activity” and reforming the labour market, while continuing to provide
* grants (govt has done this during the last decade)
* productive investments
* investment in infrastructure
* measures to support local development
* invest in education, training and health.
Key to this is to:
* reduce the cost of capital in the second economy and allow for a more competitive currency that will raise investment and exports
* make labour laws more flexible.
Cosatu is critical of the ANC’s interpretation. It says that the ANC seems to be saying that the structure of ownership and production in the formal sector has “nothing to do with persistent unemployment and poverty”.
Instead Cosatu believes that all of the following measures have reduced job growth and growth in general:
* the formal sector has become more capital intensive
* concentration of ownership in the formal sector has led to capital looking overseas for investments
* conservative financial and retail sector stifles development of small and micro enterprises
* low wages in formal sector
* govt’s programmes have targeted export, capital-intensive industries.
Cosatu believes that developing the ‘second economy’ requires a serious structural change in the ‘first economy’. It views the ANC’s strategy of reducing the “cost of capital” and making labour laws “flexible” as mirroring the World Bank’s latest argument of “letting the market determine the structure of production and ownership.”
Lower-ing the cost of capital
The ANC is against reducing the cost of capital by tinkering with interest rates. However it believes that even if the cost of capital is lowered, it will not necessarily lead to employment growth because the cost of labour has gone up.
Financing BEE deals can drain scarce capital assets in this country.
The options to ensure cheap finance for the second economy are:
* government subsidies
* acquiring cheap loans from organisations like the World Bank
* prescribed assets.
Other options are using development institutions like DBSA, IDC and other parastatals, converting assets of those living in the periphery into legal title so that they can access collateral from them.
Cosatu views this section of the ANC’s strategy as very weak.
Cosatu believes that the state must be more proactive in intervening in financial markets. It says that the government could use its state-owned financial institutions like the DBSA and IDC more effectively. It is worried that there is no analysis of why Ntsika has failed (this is a dti project to fund entrepreneurs), and no discussion of whether establishing a cooperative movement would help.
It is worried that the ANC’s idea that the ‘second economy’ “has all the assets it needs in its immovable property, especially housing” could mean that the ANC does not want to touch the issue of land reform or capital grants.
Instead Cosatu wants to see an active industrial strategy that develops viable sector strategies, creates sustainable employment, establishes a cooperative financial sector, and uses “government agencies, worker pension funds and the Financial Sector Charter commitments to encourage appropriate investment”.
Issue
ANC
Cosatu
Labour market and small bus-iness
The ANC suggests having flexible labour laws for:
* young people
* workers in companies employing less than 200 workers
* workers in export-processing zones
* workers in labour intensive industries.
Centralised bargaining should not cover smaller employers, minimum wages should provide slower pay increases, and it should be easier to dismiss workers.
Cosatu’s response is scathing:
* SA’s labour laws are the same as those found in many other countries with lower rates of unemployment
* statistics show that:
– since 1994 employers’ profits have risen faster than workers’ pay;
– it is not difficult to hire and fire workers
– if labour laws were stopping growth in employment then domestic, farm and informal work should have grown the most but they have grown the least
– only 20% of private sector workers are covered by bargaining councils and councils grant more than 80% of applications by small companies for exemptions from minimum wages
– the minimum wage in these centralised bargaining forums is often very low (just look at petrol attendants’ wages!)