14 April 1998
Budget Vote No.22 Labour

SACOB would like to express its appreciation for the opportunity to comment on the Labour Budget Vote. We will not be giving oral evidence but wish to offer the following written comments:

The Minister of Labour's Five-Year Plan for labour market reform was adopted in 1994 and is nearing completion. At the time no macro-economic framework was yet in place, a social partnership in the form of NEDLAC had not yet been established and no investigation of the labour market had yet been done. It was also a time when no job summit had yet been held to focus on the priorities needed to create jobs on a large scale.

South Africa now finds itself in a situation where the unemployment problem is worse than ever and jobs simply are not being created. The magnitude of the problem is debatable but it is nonetheless formidable. It deprives the economy of its most powerful form of delivery to the poor - jobs. It is the cause of poverty and hardship for many millions of South Africans and a major source of the inequality of income and opportunity which persists in South Africa today. With a general election coming up the government, and the Minister of Labour in particular, will have to explain to the people of South Africa why jobs are not being created and why the unemployment problem is getting worse.

SACOB would like to submit it, as we have done on numerous occasions in, the past, that the South African labour market is being over-regulated. The programme of labour market reform embarked on by the government is ambitious to say the least. In a matter of four years South African society, and business in particular, has had to come to grips with four major pieces of legislation.

Business can, of course not, and has never, objected to a properly regulated industrial relations system, to the training and development of people to basic conditions of service and to employment equity in the workplace. Under ideal circumstances each of the major pieces of labour legislation dealt with in NEDLAC would have been properly considered and a piece of legislation agreed and passed that would have brought a proper balance between the rights of employers and employees and that would have contributed to the freedom of employers to expand their businesses and to employ and develop a labour force according to their needs. Unfortunately the labour laws are more often than not blatantly biased in favour of labour.

While elements of these laws must be, and are, supported, the cumulative effect of the legislation will simply be to inhibit job creation further and could in fact lead to more job losses and even evasion of the law. SACOB would like to stress that these are not empty words but are based on a widespread reaction from its members in many different sectors of the economy.

A particularly worrying aspect of the programme of legislative reform is the impact that all the new regulations and onerous obligations will have on small business. It is universally recognised that the small business sector is the only sector that can effectively create jobs on a large scale. The fact is, all the more pertinent in the South African situation where large scale job losses in the formal sector have occurred and will continue to occur. SACOB therefore finds it very difficult to understand the logic of proceeding with the implementation of the Basic Conditions of Employment Act while awaiting the results of an investigation to determine the effect of the act on small businesses. We will have to await the outcome of the Employment Equity Act negotiations but this act also has the potential to have a devastating effect on small business.

SACOB is strongly of the opinion that the programme for labour law reform did not properly prioritise the needs of the South African labour market and furthermore that it did not, in the absence of a macro-economic strategy at the time, dovetail with other measures of economic restructuring. While tariff protection for local industry for instance, has been cut sharply over the past few years the labour market has become more tightly regulated.

It is recognised that labour legislation is not the only determinant of job creation and unemployment. Another economic growth rate of about the current low economic growth rate of about 2% which exacerbates the unemployment problem. The sooner South Africa's economy can be expanding at the 5 to 6 per cent growth rate contemplated in the Growth, Employment and Redistribution Strategy (GEAR), the easier it will be to identify appropriate employment strategies.

Given the factors outlined above, the planned Presidential job summit referred to by President Mandela in his opening address to Parliament becomes a very important event indeed. The summit will provide an opportunity to examine the causes of unemployment and to propose sustainable solutions. It is crucial that the summit takes place so that business also, as major job-creator, can contribute to the debate on how to create an employment friendly environment.

It is noted that the projected increase in the Department of Labour's budget is due primarily to the phasing in of the new skills development strategy, to be included in the human resources development programme.

SACOB welcomed the release of the Green Paper on Skills Development and supported its vision core strategy, principles and objectives. Negotiations in NEDLAC on the Skills Development Bill have been taking place over the past few months but have not yet been concluded. We understand that the Bill is being redrafted and thus do not yet know its precise terms.

However, SACOB would like to use this opportunity to bring to the attention of the Committee one aspect of the Bill of serious concern to business. Although business would be prepared to commit to a minimum investment in training, it would only be prepared to do so on certain conditions. One of these conditions is that any training levy must not be in the form of an additional tax.

Any levy dedicated for a specific purpose, which is not directly beneficial to the contributor and which is centrally administered through a bureaucratic governmental structure, is regarded by business as a tax. The 20% of the proposed levy-grant scheme revenue earmarked for national social and strategic training priorities in the Skills Development Strategy would fall directly within the broader definition of a tax. The ratio of tax to GDP already stands at about 26%, above the 25% limit set by government itself in the GEAR strategy, and the "training tax" as proposed would therefore further exacerbate this situation.

SACOB is very concerned that the idea of 20% of total levies paid by employers being used for non-business training will be incorporated into the final version of the Skills Development Bill. Such a levy can only be considered if there is a clear commitment to reduce other taxes correspondingly so that the overall tax burden at least stays the same.

SACOB firmly believes that it is not the duty of employers to pay for social training projects - this should be funded primarily by taxpayers through the central fiscus where these needs can be weighed up with other national priorities within the parameters of fiscal disciplines. Secondary funding from donors for specific purposes as in this case where the European Union has contributed R248 million is, of course, another matter.

The explanatory note to the budget makes mentioned of the fact that the Department provides funding for the CCMA, NEDLAC and the Central Organisation for Trade Testing. No mention is made of the new institutions with wide mandates which are envisaged in terms of the Basic Conditions of Employment Act, the Skills Development Act and the Employment Equity Act.

In its responses to these individual pieces of legislation SACOB expressed concern about the financial implications of all these new institutions and their supporting bureaucracies. We wish to reiterate here our concerns about the financing for the resources required to ensure that the proposed institutions are efficient and effective.

SACOB trust that the above comments will be of assistance in the deliberations
of the Portfolio Committee.