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State undermines its own jobs pledge

Feb 21 2011 11:12 Troye Lund

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PRESIDENT Jacob Zuma tried in his state of the nation speech to put his money where his mouth is by announcing R29bn in funds and incentives aimed at getting the private sector to come to his 2011 job creation party.

But the president’s job promises and pledges are completely undermined by five new bills that come with a job-shedding guarantee.
 
As new Minister of Labour Mildred Oliphant ignores calls to scrap these bills entirely – and as questions arise about when, if at all, common sense will prevail – the irony about their job-shedding potential is made more acute by the fact the department of labour’s own regulatory impact analysis (RIA) acknowledges the disastrous potential these bills hold.

The RIA says: “While permanent employment might increase… it is a fair assumption that total employment will decline.”

It conceded the proposed penalties “could contribute to company contraction and entrenchments, and even company closure, resulting in job losses and negative impacts on economic growth”.
 
The suite of bills – which represent the first major legislative intervention of Zuma’s term – underscore how the substance of key legislation in SA is increasingly informed not by economic reality but by political power plays in the ANC and its alliance.

They also, says Idasa’s Judith February, point to the tight political spot Zuma finds himself in as he navigates between factions in the alliance to secure a second term at the ANC’s 2012 elective conference.

Three of the five bills propose changes to existing labour laws: the Labour Relations Act (LRA), the Basic Conditions of Employment Act (BCEA) and the Employment Equity (EE) Act.

The fourth labour bill, the employment services bill, is new. The fifth – the draft land tenure security bill – will mean farmers draw the shortest straw if passed.

Farmers will operate under more stringent labour regulations, plus a new land tenure system that constrains their property rights and gives extensive new rights to farm residents and their extended families.

For example, farm residents will have the right (which can’t be “unreasonably restricted”) to own livestock. They’ll be entitled to graze animals, grow crops, conduct “commercial farming” and be given skills. They will also have rights to water, electricity, education and “development” – apparently at farmers’ expense.

"Farmers will be prohibited from evicting farm residents without a court order, which will be more difficult to attain than it already is.

"Farmers will also face imprisonment for up to five years (without the option of a fine, it seems) for any constructive eviction: for failure to allow a burial on the farm, for example, or for cutting off access to water and electricity,” says South African Institute of Race Relation’s (SAIRR's) Anthea Jeffery.

The underlying idea of the land bill seems to be to encourage farm residents to move off farms to agri-villages. While government hopes farmers will donate land for those new settlements, residents of agri-villages won’t own any of the land within them.

Instead, they’ll merely have temporary permits that the state will be able to withdraw. That, says Jeffery, will end up reinforcing poverty.
 
Absurdly, agriculture is the sector that multiple government policy documents identify as having the most potential for increased employment.

When it comes to the four labour bills, the proposed ban on labour broking has hogged headlines and dominated the labour bill debate.

But it’s not the only issue employers should be taking note of, says business law firm Cliffe Dekker Hofmeyr.
 
In line with Cosatu’s campaigning, the main bill – the LRA amendment bill – aims to make all jobs permanent. All seasonal workers, including farm workers, will have to be employed permanently unless the employer can justify a fixed-term contract.

Even if an employer can rationalise fixed-term contracts, he/she will have to offer contract workers the same benefits as permanent ones.

It will also become far more difficult at the end of a fixed-term contract for employers not to renew it, especially if the employee has a reasonable expectation the contract will be followed by “indefinite employment”.

All temporary and permanent employees will also be required to be given “benefits of similar or equal value”. The labour minister will also be able to set minimum wages for workers as well as minimum annual increases, regardless of productivity or financial constraints.
 
“Though nobody is legally entitled to pensions or medical aid benefits, in practice permanent employees are often given them. Wherever permanent staff have been accorded such benefits temporary staff will have to be given the same (or monetary compensation instead). That will be very costly to employers, especially in sectors that currently employ large numbers of temporary staff,” says Jeffery, who uses the construction sector as an example.

Building companies can have up to 50% of their staff working on fixed-term contracts without pensions or medical aid.

Costings for building projects are worked out on that basis. “If those companies are obliged to provide pensions and medical aid to all their staff, employment costs will increase sharply. Some companies might not survive. Others might have to retrench large numbers to remain profitable,” adds Jeffery.
 
Other proposed changes include new rules about sub-contracting and overtime. It’s proposed companies that sub-contract will be made jointly liable for unfair labour practice by sub-contractors.

At the same time, it will become a criminal offence for workers to work longer than the law stipulates. Contraventions are punishable by a fine of R10 000 and/or 12 months in jail.
 
The new employment services bill is designed to give government more control over appointments and vacancies in the private sector.

This bill – which requires employers to notify government of every vacancy and appointment, including temporary ones – also limits the scope of work done by private employment agencies and envisages a set of state-run employment agencies that place jobseekers for free.

The question, of course, is how an already stretched public service is going to administrate these new provisions?

As for employment equity, the new amendments are geared to speed up – if not force – affirmative action in the private sector.

Companies with an annual turnover over prescribed limits will have to make faster progress towards the ultimate target of 87% black representation at all other levels, senior management included.
 
Employers won’t be able to use foreign black workers to fill quotas and they won’t be able to rely on defences previously allowed by law, such as skills shortages or financial constraints.

While the new EE amendment bill calls for stiff penalties for non-compliance (equivalent to 2% of turnover for a first offence, rising to 10% of turnover for a fifth offence within three years), the department’s own impact assessment of those penalties warn they’re large enough to close companies down.

The politics that underpins all these bills is oblivious to the fact SA’s labour market is already one of the most rigid in the world.

It scores exceptionally badly on various labour-related aspects of the World Economic Forum’s Global Competitiveness index.

Of the 139 countries surveyed in 2010/2011, SA ranked 135 for hiring and firing practices, at 131 for flexibility of wage determination and at 112 for pay and productivity.

As a result, atypical (as opposed to permanent) employment has grown rapidly over the past decade. Figures cited by the SAIRR show it’s increased by 151% – from 1.55 million in 2000 to 3.89 million last year.

While Cosatu can’t be faulted for its ideal of every work-seeker finding a permanent and well-paid job with benefits, that’s impossible in an environment of low economic growth, poor skills and limited productivity.

“Hence, the choice which confronts South Africans is very often between temporary, atypical jobs or no jobs at all,” says Jeffery.
 
Zuma will undoubtedly let his ministers front up on the politically tricky issues associated with these bills as they begin their journeys through parliament.

But even if Zuma’s path of least resistance secures him Cosatu’s backing for a second term, it’s guaranteed to aggravate inertia and drift in government and it won’t incentivise employers to create the jobs Zuma claims to be such a priority.

* This article was first published in Finweek.

* To read more Finweek articles, click here.
 
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