The good, the bad and the uncertain...

The labour scene remains of paramount importance in South Africa, affecting just about everything from politics to economics, social issues or even national security. Right now it is a mixture of the good, the bad and the not so sure, with the “good” being a widely hailed revolutionary wage deal in the clothing and textile sector.

The good news of a breakthrough clothing-sector deal, however, is being counter-balanced by the “bad” which concerns analyses of South Africa’s 2010 strike season from hell. And the “not so sure” relates to the Congress of SA Trade Unions (Cosatu) reserving judgement on the textile sector deal, while the full impact of this year’s strike season has yet to be established.

Industry, the media, business and some political parties this week heaped praise on the “Rubicon-crossing” wage deal concluded between the Cosatu-affiliated SA Clothing and Textile Workers Union (Sactwu) and employers in the industry.

The groundbreaking deal allows employers to pay new employees 20-30% less than the minimum wage for the sector in a bid to bolster youth employment, create more jobs, grow the once flourishing sector and throwing it a desperately needed lifeline in its battle against cheap imported Chinese clothing. The sector has also suffered under what employers regard as high minimum wages.

What makes the deal so remarkable is that Sactwu’s parent federation, Cosatu, has been dead set against a similar entry-level wage model first mooted by Finance Minister Pravin Gordhan to encourage youth employment. But Cosatu has yet to give its blessing to this deal, with its spokesman Patrick Craven reportedly saying the federation was still studying the deal to see what it was all about.

The deal allows a reduction in the minimum wage of 30% in metro areas and 20% in other areas. But it comes with stringent conditions attached. It will run for a trial period until March 2014 by which time the scheme will be expected to have increased sector employment by 15% or 5 000 jobs.

The deal has built-in measures to prevent replacement of existing workers with cheaper new-entrant workers at the lower wage rates, among others. And employers have had to agree to six-monthly monitoring of their employment records, with anyone found abusing the deal being excluded from it.

When minister Gordhan first proposed a R5bn youth wage subsidy to encourage youth employment and job creation, Cosatu strongly opposed the idea. It is currently still being debated in the National Economic Development and Labour Council (Nedlac), with government hoping to launch it in April 2012. The Sactwu deal may just give new impetus to those discussions, providing Cosatu does not come out against it.

The difference between the two models is that in the Sactwu deal there is no state subsidy provided for employers to bolster the hiring of first-time employees. While Cosatu shot down Gordhan’s proposal, it was welcomed by business, some political parties and even South Africa’s second largest labour federation, the Federation of Unions of SA (Fedusa).

While the deal probably comes too late to fully save South Africa’s ailing clothing industry, it does throw it a lifeline that could lead at least to a partial revival. In addition, the creation of new jobs could also allow increased union membership at a time when this has been on the decline. Sactwu would have been especially hard hit.

The deal can also serve as a test to establish whether lower entry-level wages will truly boost employment. And it can be used as a starting point to further develop it or to develop specifically adapted models for other sectors. The ball is now in Cosatu’s court to accept the deal, and for the sector to make it work.

Meanwhile, the positive excitement around this deal may have been somewhat tempered by the release of a report by the Department of Labour showing that South Africa lost 20,674,737 workdays due to strikes in 2010... the highest number ever.

While a greater number of strike incidents were recorded in 2006 and 2007 with 99 and 75 strikes respectively compared to 2010 with 74 strikes, the strikes in 2010 lasted longer and therefore accounted for more workdays lost, with a resulting implied financial loss for both workers and the economy.

Nonetheless, the number of strike incidents increased from 57 in 2008 and 51 in 2009 to 74 in 2010, which is also higher than the average of 71 work stoppages over a period of five years between 2006 and 2010.

While the entire public sector – national, provincial and local government – was affected by strikes in 2010, the Department’s research found that six major strikes accounted for almost 96% of all the workdays lost. These were the strikes at municipalities, Transnet, Passenger Rail Agency of SA, Dis-Chem, Northam Platinum's Zondereinde operations in Limpopo, and in the public service.

The question that remains is: what will as yet to be concluded research show the impact of strikes in 2011 to have been? And what will the consequences be for the economy, growth, job creation and poverty alleviation?

Meanwhile Professor Frederick Fourie of the University of the Free State, in a paper presented to the Biennial Conference of the Economic Society of South Africa, has found that the debate on unemployment in South Africa is “fragmented, resulting in inconclusive analyses and narrow, flawed proposals to address the problem”.

Fourie says a critical survey of academic research done on South African unemployment in the past 10 to 15 years reveals that “the work, though impressive, is split into at least three sub-discourses: those of macroeconomists, labour economists and poverty analysts” which often have no or little common ground.

For that reason, he says, a coherent and consistent picture of the unemployment problem and possible solutions to it has yet to be found. This fragmentation, Fourie says, consequently also manifests itself in the policy field with different interest groups promoting favoured research.

Finally, Fourie says: “Sustainable and consistent remedies for unemployment and poverty will require an integrated analysis that covers the formal sector, the informal economy and survivalist and subsistence activities. And especially the various linkages and transitions between these segments. Policy measures based on such an analysis are much more likely to have significant benefits.”

Sactwu-style breakthroughs aside, it seems South Africa still has a long way to go in addressing one of its biggest problems.