State undermines its own jobs pledge

2011-02-21 11:12

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.

  • Alain - 2011-02-21 12:10

    Remind me again why I am in business?

  • Laura - 2011-02-21 12:43

    why is it impossible for the government to see the ramifications of passing such bills when it is painfully obvious to those with even an iota of common sense. They are killing any shred of entrepreneurial spirit, but they wouldn't understand that, as the only entrepreneurs that they associate with are their cadres.

  • Laura - 2011-02-21 12:44

    why is it impossible for the government to see the ramifications of passing such bills when it is painfully obvious to those with even an iota of common sense. They are killing any shred of entrepreneurial spirit, but they wouldn't understand that, as the only entrepreneurs that they associate with are their cadres.

  • zane - 2011-02-21 12:54

    why do we have this useless anc govt in charge of anything if they only good at destroying everything that works

  • JJR - 2011-02-21 13:01

    What can you do? The majority of people are pro these communist ideals. Essentially it is the middle class and poor who will suffer most. Assets are redistributed while large companies start failing. The rich will have enough cash to consolidate their holdings and then pick up the opportunities that go with this type of downside. Please guys...we beg you to work with us for a bright future for ALL, not some.

  • Frosty - 2011-02-21 13:04

    I'm a contract worker. My contract lasts for 1 year with 6 months leave before renewal of my contract. Does this mean that I can now sit around and do nothing for 6 months and still get paid? The company will go bankrupt immediately as there is no profit to be made for 6 months. I will then have to find a new job of course, but I will have to go on the government register and wait. Then I will also have to change my career because it is essentially only possible as contract work. I love my job but now I'll have to take on some k@k job just to be able to get one. Ummmm... No thanks.

  • Felcon - 2011-02-21 13:10

    @Alain ... I was thinking the same thing!

  • Vickerman - 2011-02-21 13:21

    How stupid can the ANC Gumment be? Even I am surprised by how short sighted these dimwits are on these issues. This is the result of making the slave the king - total breakdown of systems and complete illogical, unreasonable and senseless reasoning. All this is done to get the dummed-down electorate to vote them back into office next time around for a couple more years of self-enrichment. No-one can tell me that the gumment has any interest whatsoever in the growth of our economy, for the sake of the country. It seems they really are bent on destroying everything there is here in as short a space of time as possible.

  • Gibbo - 2011-02-21 13:38

    Why the hell would anyone now want to start a company when it will be run from Luthuli house. Who do these dimwits think they are. Everything the anc touches they DESTROY. The proof is every parastatal, municipality and company that the anc has got its toxic haNds on. The only reason COSATU wants more jobs is to have more union members paying fees thereby enrinching the COSATU bigwigs. Job losses mean less money for COSATU.

  • Andy - 2011-02-21 15:18

    Hahahahaha....THIS new "Group Areas Act" of the ANC in the labour field surely would make Verwoerd smile in his grave. tHE anc IS EVEN STARTING TO SURPASS THE "APAATHAAID" LAWS!!!!!!!!!

  • SF - 2011-02-21 20:26

    As of April latest, those on medical aid will be paid more to fund their own medical aid, that way there are no benefits paid. There will be no pension funds etc, etc. I was seriously contemplating applying for some of the Zuma funds, not any more, now I will ensure my business stays under the turnover threshold, including taking in as much cash as possible and hiding it from the tax man, mechanize as much as possible and reduce contract employees steadily to the bare minimum by the time the laws are promulgated. Good luck, self destruction is upon us, now, I am contemplating emmigration. Nationalism is for putzes, we are citizens of planet earth, and I will look for that which allows me to grow and porsper

  • SF - 2011-02-21 20:29

    "The new employment services bill is designed to give government more control over appointments and vacancies in the private sector" - I understood the bill to mean only the public sector, if I misundersttod, then we are all dictated to, wrap it up boys and girls, time to go.

  • bogardt - 2011-02-22 20:19

    The role of the government should be is to create a save environment for the entrepreneur that is conducive to growth in the private business sector and as a result job creation that is sustainable.Not just a job that is meaningless and only with a promise that will last until the next election. Instead, for short term political gain they want to control and dictate through very absurd labour laws to the private sector to run into the same chaos as the public sector, nationalize mines until the golden goose is also down the toilet. Show me one government controlled department or sector that is successful, Health, Education, Correctional, Roads, Police, Eskom, SABC, ASA, cetera.? .................. (entrepreneur definition: a person with guts who is prepared to put everything on the line, invest, borrow money, assuming huge risks, facing labour unrest, work a 18hour day with sleepless nights for the sake of maybe a small profit) Makes you think what are the people with brains doing here!!!

  • Masilo - 2011-03-03 11:17

    Vickerman, what do you mean by saying "This is the result of making the slave the king", it seems to me that you possess an aprtheid mentality fed by counter revolutionary forces which misses aprtheid days.i think you must apologise for that statement my friend.

  • Gerhard - 2011-03-04 08:53

    I seems like our government has lost all sense of reality. Here's an update guys: money 'still' makes the world go round, and if you kill business, you are killing the goose that lays the golden eggs. The reality is that many businesses owners do not have to be in South Africa, we could take our ventures elsewhere. As a young entrepreneur, I will definitely not employ more people, but less. I will also increase mechanization. That is if I decide to stay in South Africa. Which seems to be going dangerously close to more risk than reward. But it seems like political agendas trumps common sense. Again!

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