2005-10-11,+Gwede+Mantashe,+Wolpe+Seminar,+Labour+Flexibility

= Labour Market Flexibility: Will the Social Pact Help? =

In 1996 Guy Standing of the ILO conducted a research into the labour market flexibility in South Africa. The outcome was that labour market flexibility or lack thereof is not one of the problems facing the South African economy. Many research projects have been conducted since then, including the one conducted by the Department of Labour in 2004. There is no research finding to the effect that labour flexibility is a problem in South Africa. As a matter of principle neo-liberal economist have kept this issue on the agenda, ignoring all these findings.

The most vocal is the IMF, which has praised South Africa for implementing “sustainable” economic policies that should translate into economic growth. Consistently the IMF has added the rider that our labour market needs to be more flexible and almost blame it for less than expected economic growth.

We can only assume that the debate is about impressing the IMF. That would be the reason for this issue to be driven from the Treasury, instead of the Department of Labour. It is located where the other elements of the neo-liberal policies are located. Labour market flexibility will be adding to:-


 * Trade liberalization


 * Liberalisation of financial markets.


 * Reducing government involvement in productive economy, hence the drive for privatization of the state owned enterprises.


 * Commodification of basic needs like electricity, water, education and health.

In brief our view is that this debate is about intensifying the implementation of the neo-liberal economic policy.

This takes me to the question of what our understanding is of labour flexibility. Employers want to have the right to utilize labour optimally at lowest cost. The emphasis is on the right to hire and fire with ease. We can understand labour flexibility when we look into the mechanisms used to achieve it:-

1.	Employers see workers as cost-items. They would like to have the right to adjust this cost to the fluctuations of the various economic factors that impact on the performance of the company. Many companies would like to have a small core of workers. The rest of the workforce be on flexible terms. This can be achieved through:-

i.	Casualisation and part-time work.

ii. Use of Labour brokers to supply labour according to production needs.

iii. Fixed term contracts and seasonal contracts

This is what is known as numerical flexibility.

2.	Employers would like to have freedom to make flexible shift arrangements. This includes:

i.	Quick change over, where workers change shift within twelve (12) hours of the previous shift.

ii. Three (3) shift cycle, where capital assets are utilized 24 hours a day.

iii. Full-calendar operation, where production is allowed for seven days a week, without Sundays compensated as Sunday overtime.

3.	There is a movement towards flexible production processes. This takes different forms:-

i.	Constitution of production team so that production in one unit does not disrupt the whole production chain.

ii. Multi-tasking entails every team member doing everything and anything. Operators are trained to effect repairs in case of breakdown.

iii. Production is externalized. Instead of one factory producing the whole unit, some part get produced somewhere else. Instead of a single factory we will deal with a network of micro-factories. The extreme example of this will be where production can be in different countries. Outsourcing of various services and ultimately the core production is another example.

iv. Mechanisation of production, shift from labour intensive to capital intensive production.

4.     The last mechanism is the labour flexibility based on the control of the wage bill. This allows the company to employ fewer workers and allow them to work overtime within the restriction of the wage bill. This allows adjustment to demands without the obligation to employ more. Outsourcing is also used to keep the wage bill low. This ensures that the company has no obligation to provide some of the basic covers, like pension, medical aid, health facilities.

The BMW, Roslyn is an extreme example where workers bank their overtime for times when production demand is low.

If one looks into all the mechanism used to implement labour market flexible one is obliged to agree with Bridget Kenny that:

“Current relations of production are characterized by the need for cheap labour, efficient organization and profits before people”. Webster, E. and Von Holdt, K, 2005:217.

As we sit here today all these practices are widely used in the South African economy. The law of the land allows them without any restriction. Even the Labour Relations Act which is praised as being progressive does not provide any protection in the case of termination. Section 189 of the LRA is emphasizing the process rather than protection. No, employer will be stopped from dismissing workers for operational reasons if he/she follows the prescribed steps. A very profitable company can retrench without restriction. In cases if insolvency workers get left stranded. They are not treated as preferential creditors. Protection is therefore minimal, making it easy to fire. What is clear in South Africa is market hegemony wherein the democratic state is marketising employment relations.

The question that must be answered is; What is this flexibility that is still needed? Flexibility as we see in the economy has destroyed jobs instead of creating them. It has replaced quality jobs with job of poor quality. It has resulted in deskilling of workers. Trade unions engage employers in all the aspects of labour market flexible. Does the government want to take away this right to engage employers from the unions and entrench labour flexibility in the legislation? In other words do we think it is desirable for our economy to legislate the right of employers to exploit? Do we see poverty wages and removal of standards as the correct accumulation path for our society? The view of the labour movement, as confirmed by the National General Council of the ANC, is that we don’t need a policy on the intensive utilization of labour at the point of production. Bridget Kenny captures this reality in simple terms:-

“ The state introduced a series of labour regulations meant to protect workers’ rights. However; these measurers have not only failed to curb casualisation, they have reinforced the prerogative of capital to marketise relations. This new workplace order might be called market hegemony, whereby the dictates of competitiveness, growth and cost cutting have structured workplace relations” Webster, E and Von Holdt, K., 2005: 226

Will the social pact help? My view is that a social pact works only in cases where the parties are equal. Where all the parties can see the benefit. If government rides rough shod on the other parties the social pact does now work. Where the government and capital form a formal or informal partnership to impose their will on labour a social pact does not work. Parties must be serious about engagement, and commitment of senior leadership is critical. The lack of seriousness poses a threat on NEDLAC. If we can’t ensure that the basic social dialogue structure works, talking of a social pact is, in my view, ambitious. Ministers must give time for NEDLAC. CEO’s of major corporations must avail themselves. Unions must be represented by national leadership.

South Africa has experimented with a number of accords, which all either collapsed or became minimalist on the basis of parties treating each other with contempt or arrogance becoming too strong for reason. I would like to refer to three such accords:


 * the R.D.P, an accord between the democratic movement and the people.


 * GEAR, an accord between capital and the state.


 * G.D.S. a tripartite accord.

Globally many institutionalized accords are under seige. Co-determination in Germany is going through stressful period. The election results reflect the pain. The IRISH social partnership has delivered the desired results. This relative success can be ascribed to few factors:-


 * commitment by all parties


 * benefits that have accrued to all parties


 * strong leadership


 * directed investment to clearly identified sectors.

My submission therefore is that social pacts require commitment. No party should come from within the partnership but elevates itself above others.