COSATU+on+IMF+Country+Report+on+SA,+Sept.+2005

Press release on the International Monetary Fund Country Report, in particular the comments on the development and regulation of the South African Labour Market – September 2005
The Congress of South African Trade Unions remains deeply sceptical of the International Monetary Fund’s Country Report 05/345 on South Africa, released in September 2005, in particular the comments made in relation to the continued need for more labour market flexibility in South Africa. While the report attempts to provide some anecdotal evidence to suggest that the South African Labour market remains inflexible in certain areas, it continues to lack sufficient evidence and research on those areas identified as being too inflexible - the high cost of dismissals, rigid collective bargaining structures and minimum wage setting in vulnerable sectors. While the IMF continues to argue that South Africa has a high degree of labour market inflexibility, its own evidence clearly indicates that “based on standard indicators for industrial countries, previous staff work (Alleyne, 2000) suggests that South Africa’s labour market flexibility is roughly in line with that of countries in the Organisation for Economic Cooperation and Development (OECD).” (IMF, Country Report, 2005). Evidence presented by the South African Small Business Partnership, in its June 2005 report suggest that labour legislation is not the main reason for slow growth and employment creation amongst small business. Of all the business respondents surveyed (1794), 25% listed the lack of confidence and demand in the economy as the main reason for constraints in employment creation, 20% of those suggested that government regulations in general (tax and trade compliance in particular) and labour legislation as the second highest, with only 10% listing high labour cost as a reason for constraint in employment creation. Business growth follows a very similar pattern in the survey done. COSATU does not believe that there is a high cost in dismissal procedures. Firstly, it is important to segregate dismissal procedures followed; i.e. disciplinary dismissals and operational dismissals (retrenchment). Secondly, it seems that when ‘evidence’ points towards the high cost of dismissals the most extreme cases are used. Lastly, there is no data available that measures the true cost of dismissals in South Africa. It remains our view from our own experience that employers have relatively easy procedures for dismissing employees, particularly when it comes to operational dismissals. Depending on the size of the company and the number of employees affected, this procedure in most instances does not take longer than one month. Furthermore, there is no evidence that our collective bargaining structures are over-centralised as suggested by the IMF. There are 48 Bargaining Councils in South Africa, covering only 26% of the employed (Labour Force Survey). Those covering Chemicals and Clothing and Textiles are fairly new and there is no centralised bargaining arrangement in mining. If we exclude the public sector this total would be significantly lower. Thus a significant number of employees are not covered by a Bargaining Council. Their wages and conditions of employment are determined through plant based bargaining, individual contract negotiations or no bargaining at all, with wages and conditions of employment being set by the employer. This is the most significant, since we have a low level of union density in South Africa. It is therefore a myth, in our view, that our system of collective bargaining is rigid and we do not support the IMF view that this is a contributory factor in low employment growth. Lastly it is our view that sectoral determinations are an important measure to deal with the most vulnerable sectors of our economy. Sectoral determinations have been set in the Domestic, Retail and Wholesale, Agriculture and Private Security, precisely because workers in these sectors are the most exploited. There is sufficient evidence to show that these workers earn the lowest wages, have the worst conditions of employment and enjoy very little protection from existing labour legislation, if not unionized. In addition, the wage sectoral determinations in these sectors are relatively low and have not had an impact on stifling job creation. Contrary to the IMF’s views, many of these sectors, such as retail and wholesale, domestic work and private security, have seen modest employment growth in their sectors. COSATU believes that the high level of unemployment in South Africa cannot be blamed on the labour laws and minimum protection of standards that South African workers enjoy. Once again the IMF has failed to provide significant evidence that our labour laws are inflexible and a hindrance to employment growth.
 * Paul Notyhawa (Spokesperson), Congress of South African Trade Unions, E-Mail: paul@cosatu.org.za**