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THE LABOUR MARKET AND GEAR, AT THE SACOB DIRECT MEMBERS' DINNER, 19 MARCH 1997

Chairperson;
Distinguished guests;
Ladies and Gentlemen.

"We cannot rebuild our society at the expense of the standard of living or ordinary men and women. We cannot develop at the expense of social justice. We cannot compete without a floor of basic human standards." (International Labour Office, Visions of the Future of Social Justice, Geneva ILO 1994, page 184)

The Growth Employment and Redistribution (GEAR) strategy aims to drive economic restructuring in our country in the direction of growth and substantial job creation.

This is the challenge facing all of us. We must translate the political gains of our young democracy into real, material improvements in the lives of all South Africans.

To bring about real improvements in the lives of all South Africans, we need an economy which is growing fast and competitive, which creates enough jobs for people wanting work, which provides sufficient resources for health care, education and other basic services, where the places we live are safe and where the places in which we work are productive.

This is the challenge facing all of us. We must translate the political gains of our young democracy into real, material improvements in the lives of all South Africans.

To bring about real improvements in the lives of all South Africans, we need an economy which is growing fast and competitive, which creates enough jobs for people wanting work, which provides sufficient resources for health care, education and other basic services, where the places we live are safe and where the places in which we work are productive.

GEAR argues that the formal private sector has created almost no new jobs in the past ten years. This has resulted in rapidly rising unemployment and underemployment.

GEAR says we should meet these challenges by restructuring our labour market so that it adequately combines flexibility with regulation, improving productivity, shifting investments to more labour-intensive parts of our economy and ensuring that wages keep pace with improvements in productivity. And there is also the proposal for a broad national social agreement to implement theses broad policies.

Let met elaborate GEAR's labour market proposals in more detail by starting with the question of "regulated flexibility". It's a question which I know gives sleepless nights to some of our social partners (perhaps even some of my officials). Or at least the occasional headache.

We can't afford to be simplistic about flexibility. One person's rigidity may be anther's job security. The concept of flexibility is a loaded dice.

For us to answer what we mean by regulated flexibility requires exploring the imperatives that face labour regulation in South Africa.

GEAR identifies these imperatives as the need to improve labour relations, to increase flexibility, raise productivity and to overcome fragmentation in the labour relations system. My own reading of this is that we want to achieve a situation where the labour market operates at its most efficient level.

Stability in employment is a prerequisite for peaceful labour relations, for investment in people, and for us to engage in world-class production requirements.

The countries all of us most want to emulate recognise the importance of stable employment as a foundation for building a vibrant economy and society. Countries of South East Asia, including Japan, have made it very difficult to dismiss or retrench workers.

We are not planning to copy those countries line by line here. But the experiences of those South East Asian countries whose success we long to mimic, suggest that we carefully define the kind of flexibility our society needs.

Generally, "flexibility" means the ability to re-deploy - not retrench - labour to meet the changing needs of an economy and society. Our working, practical definition of "flexibility" should ensure we attain our economic and social aims in ways that lessen the antagonism between employers and employees.

In South Africa we have rigidities in employment that grow out of gender discrimination, job reservation, grading and training systems that do not provide portable skills. These rigidities inhibit the best employment of workers according to economic conditions and capacity.

Inflexibility in wages arise because of old-style grading and wage-setting mechanisms which do not take account of political, social and economic realities. But it can also result from discrimination, which depresses pay for some workers and inflates it for others.

And wage inflexibility may result from unusually high prices for basic food, clothing and housing - as appears to be the case in South Africa.

Rigidities within management may also prevent effective employment of labour in enterprises. Often this results from inflexible and hierarchical management practices, unnecessarily narrow job descriptions, and a narrow skills base.

In South Africa, as GEAR indicates, we can't really talk of a single set of regulations for the labour market.

Instead, we have inherited a system where different laws applied depending on the economic sector and the race and gender of the workers.

The regulatory framework bequeathed to us has three main characteristics.

First, in formal manufacturing and services, regulations protected full-time workers, in line with developments in Europe. These workers had access to sectoral bargaining, broad union rights, and social insurance.

Originally, these rules arose to protect the privileged minority of white and, to a lesser extent, coloured workers. But from the late 1970s, the former government extended them to some African workers, after sustained and determined workers' struggle which resulted in non-racial trade unionism re-emerging as a force to be reckoned with.

But as major labour laws were extended to increasing numbers of African workers, employers found ways around these.

Your know the story as well as I do: the introduction of contract and casual labour; the failure to register workers with the UIF; Workers' Compensation Fund and the weakening of industrial councils.

The agencies of the former government, set up to protect a minority of workers, also could not provide similar services for the majority. This has been our experience with the UIF, protected employment and training centres.

In the formal manufacturing and services sector, some regulations built in unnecessary rigidities. Dispute resolution needed lengthy, legalistic procedures, which did little to promote constructive solutions.

The industrial council system reflected the variations within the formal sector.

Some provided a strong basis for sectoral bargaining, with well-defined, large sectors and strong organisations for employers and employees and regional wage variations which were sensitive to different conditions. Negotiated rates for unskilled workers in poorer areas range between a fifth and two thirds of pay in metropolitan regions.

But other industrial councils defined industries that could never drive economic or social policy, such as millinery and hairdressing. And workers covered by these industrial councils are still disproportionately non-African.

Some councils also adopted policies hostile to outsiders, especially emergent micro enterprises. Long-standing rules on subcontracting in clothing and on working-time in the building trade are examples of this problem.

But this regulatory framework did not extend to African workers in agriculture, mining and domestic labour - more than a third of the formal labour force for whom major labour laws simply did not apply.

Actually, industrial councils cover only about one in five of all formal employees outside agriculture.

Wage determinations are supposed to cover employees whose industries have no industrial council. But sectors with wage determinations have only about 2 million workers, most of whom earn more than the minimum anyway.

About three quarters of workers covered by wage determinations are in the retail trade. But their pay was set at between 12 and 23 percent of the average wage for the sector - low enough to have virtually no economic impact on employers.

In the informal sector, too, the major laws directed at labour markets did not exist. Instead, contract and family laws governed work relations. And apartheid laws and local regulations prevented most African businesses from succeeding.

Generally, the widespread disregard for workers' rights poisoned labour relations. In no sector did the regulatory system provide effective procedures for resolving disputes and confrontational relations added heavily to costs.

Regulations also did not provide incentives for efficient, innovative management or for effective, training systems.

Now, political changes and the opening of the economy have brought new challenges compelling the existing labour regimes to change. Even if they wanted to, employers simply cannot control labour as they did in the past. Nor can they hope to compete internationally on the backs of cheap, poorly trained employees.

The discriminatory, inflexible and fragmented regulatory framework established before the birth of our young democracy can no longer survive.

We need regulations which promote efficiency for employers and employees, and adequate security to prevent abuses and encourage investment in skills development.

We cannot simply eliminate all regulations on the labour market. That would intensify conflict and breed abuses. Also, regulations can help reduce discrimination and encourage training - critical steps to overcoming rigidities.

Instead of scrapping all regulations, we must design ones which do not impinge unnecessarily on efficiency.

One way of doing this is for Government to provide the framework and incentives which encourages bargaining between employers and employees.

Government will provide the framework for constructive negotiations and business and labour should take responsibility to strike and appropriate balance between employment creation and employment security.

We are now putting this framework into place.
We have introduced quicker, more effective systems to resolve disputes.
We are working to restructure labour-market institutions and procedures to deliver faster and better results and to reduce the bureaucratic burdens for all participants.
All major labour laws will apply throughout the economy, while taking sectoral differences into account.
All our laws will cater for the special conditions of small and emergent companies and poorer regions.
We also see a massive improvement and extension of training as critical for long-term job creation and economic growth. This boost to the training system should be complemented by measures which encourage employment equity.

The new Labour Relations Act has already established one labour law for all workers. It has vastly improved dispute resolution through the CCMA system. Already, negotiated settlements have increased from about a quarter to about three quarters, with much faster settlements as well. This should please employers who often complain more about the cost of poor labour relations that about wages.

The new LRA requires all sectoral bargaining councils to establish clear criteria for exempting small and micro enterprises, and an independent body to grant exemptions.

It also provides a framework for voluntary setting up of workplace forums. If they succeed, workplace forums should contribute to the flexible, participatory relations within companies.

The new LRA covers employers and employees who are able to bargain collectively. We must also upgrade the law covering workers who cannot yet negotiate effectively with their employers.

A new employment conditions law should provide stronger protection for vulnerable workers in all sectors. It will establish a core of minimum conditions around working time, maternity leave, pensions, annual leave and notice.

It should encourage higher productivity and more modern labour relations in the low-wage sectors, without accelerating loss of jobs.

It will support a shift away from the courts to improved conciliation plus orders by inspectors, which should reduce the hassle factor.

Our strategy for upgrading skills will establish a high-powered, well-funded, demand-led training system. This should vastly improve the flow of information to employers, employees and training providers, so that they can define courses to meet the needs of the economy in the medium term.

The new training system will promote much wider access to training for new workers and potential entrepreneurs, as well as historically-excluded groups, such as black women and rural people.

Proposals in GEAR provide a good basis for moving towards a labour market that meets our immediate economic needs and the longer-term interests of our society.

We need to co-operate - business, labour and government - to ensure rising productivity and a better life for all our people.

That is why GEAR proposed that these policies be incorporated in a broader national social agreement. The Comprehensive Labour Market Commission enhanced that proposal by calling for a Job Summit.

An effective social agreement cannot be reduced to haggling over the immediate returns to different partners. It must put us on the road to sustainable growth and development. It must create more jobs, increase investment, boost production and raise living standards.

For a Job Summit to be meaningful all parties should commit themselves to restructure the economy over the next five to ten years. I am sure we will all meet this challenge.

I thank you.

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