by Stef Terblanche

Ominous developments on labour and employment fronts

Employment data statistics in South Africa

The IMF’s David Lipton warns about social unrest
David Lipton.jpg

With the Gupta wedding hogging the limelight, South Africans may be forgiven if they failed to notice another snake in the grass: the latest ominous developments on the employment front. Some labour unions have already been laying the groundwork for what could be another “strike season” from hell.

The latest employment data released by Statistics SA last week show that government is not making progress in beating unemployment, and by extension poverty.  The data show a worsening of the unemployment rate to 25.2% or 4.6 million people from 24.9% in the fourth quarter of last year, adding a further 100 000 people to the ranks of the unemployed – read “hungry” – in terms of the narrow definition for unemployment.

Both the formal and informal sectors shed jobs at 25 000 and 13 000 jobs respectively while the number of discouraged work seekers increased by 73 000 in the first quarter of 2013.

The stats also surprisingly show 8 000 jobs being added in the mining sector in the first quarter, with a massive increase of 54 000 jobs in the agricultural sector. Both sectors were subjected to serious labour unrest and cost increases late last year and early this year. Talk was rife in both sectors of large-scale layoffs.

It is not clear how Stats SA arrived at these surprising numbers, but leading economists such as Nedbank's Isaac Matshego, Chris Hart of Investment Solutions and Mike Schussler of Economists.co.za have questioned these figures.

Another surprise figure was that the manufacturing sector added 23 000 jobs while everybody else, including indications from South Africa’s purchasing managers’ index (PMI), seemed to think that jobs were being shed in the manufacturing sector. Just how reliable this data is, or how open it is to manipulation, remains a topic for debate.

With more than a quarter of all adults being unemployed the labour “ticking time-bomb” that political and business leaders have all been warning about, is growing increasingly explosive.

On the one hand the ruling ANC has managed to temporarily appease its impoverished and unemployed supporters with a vastly expanded social welfare net. But the escalating township protests and labour unrest, among other things, show that below-the-breadline government hand-outs will not in the long run  keep the lid on a potential social explosion.

With the surge in labour unrest over the past year, the loss of members by Cosatu unions, the rise of new independent trade unions and the proliferation of strike committees led by non-unionised workers, the ANC’s labour allies discovered that people will not remain in the alliance fold no matter what.

On the political front the ANC may have the same experience in next year’s general election. New political parties have already emerged to its left and in the centre, all challenging the same untenable status quo. For the ANC-government the choice between one of two alternatives has become unavoidable.

On the other hand it can try to keep Cosatu, which in the past always significantly bolstered its election efforts, at its side. This will entail assisting the federation to recover from recent losses through above-inflation wage increases, maintaining or strengthening investor unfriendly, pro-labour legislation and retaining labour relations systems biased in favour of Cosatu.

This would probably also continue the trend of a growing government share of the overall labour force, which already stands at a whopping 3.072 million people or 22.6%. In the first quarter of this year alone a further 44 000 employees were added to the state’s labour force.

This situation is unsustainable and could eventually backfire badly as failure to grow the economy and thus the tax base and render government’s ever-growing wage bill unaffordable. That would mean retrenchments, shifting the burden back to the social welfare net, and a probable backlash from labour unions and the jobless poor.

The problem might even be much bigger. In a statement Neren Rau, CEO of the South African Chamber of Commerce and Industry (Sacci) said the chamber is “concerned over the 36.7% broad unemployment rate ...” When using the broad definition, the number of jobless people increased by 173 000 in the first quarter.

This in itself serves as a powerful warning that the current culture of knee-jerk industrial action and the increased rigidity of labour regulations stifles employment creation and in turn threatens the stability of the economy.”

He points out that the government has replaced the trade sector, which contracted by 66 000 over the same period, as the single biggest employer in South Africa.

The other choice for government is to take the less popular, but in the long run more rewarding course of reforming labour legislation, freeing up the investment potential, and implementing the National Development Plan (NDP). 

The NDP itself fingers all the labour-related obstacles to stimulating growth, creating jobs and reducing poverty. However, till now the government has consistently stalled implementation of its own plan.

The inescapable fact is that either option is likely to have some negative impact on this year’s wage negotiations season and beyond.

Rau says the high level of unemployment is a result of a rigid labour market and “near-constant industrial action that cripples economic activity”. 

He describes the “almost fatalistic recognition in the public debate” that South Africa is once again approaching a "strike season" as problematic because it “assumes there is an inherently antagonistic relationship between workers and employers.”

Even before this year’s “strike season” has come into full swing, the country has already seen a (now suspended) go-slow campaign by teachers and a protracted strike by bus drivers, disrupting the lives of thousands of hapless commuters across the country struggling to get to work, and undermining the country’s costly efforts to establish efficient and reliable public transport. It is also taxing the country’s road infrastructure, adding thousands of private cars during peak traffic. In Cape Town alone it is estimated as adding between 25-30% more vehicles. 

The Food and Allied Workers’ Union (Fawu) has meanwhile threatened new strike-  and protest actions in the agricultural sector. Fawu claims that farmers have started a process of replacing permanent workers with temporary workers supplied by labour brokers for out-of-season work. Last year the sector was badly hit by unprotected strikes and unrest in the Western Cape.

Meanwhile in reaction to the latest disconcerting unemployment figures David Lipton, senior deputy MD of the International Monetary Fund (IMF) warned that failure to address the structural problems in South Africa’s economy would hurt its growth prospects and its efforts to reduce unemployment, creating a threat to social stability.

In a lecture at the University of Pretoria, he singled out low employment, real wage growth that had outstripped productivity, resultant low competitiveness and exports, rigidities in labour and product markets, and power and transport bottlenecks as problem areas requiring urgent attention.

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