Contents

Stop privatisation now Workers of the world fight privatisation	Campaign update how other unions are mobilising Private water companies fail to deliver
The threat to our right is not yet over

Stop privatisation now!

COSATU is calling on all workers to support its campaign to stop government selling off assets which belong to the people - privatisation. The federation has issued a Section 77 notice to Nedlac and is organising demonstrations, lobbies and, if necessary strike action, to end the government's programme to privatise state assets, enterprises, services and undertakings.

What is privatisation, and why do we oppose it?

Privatisation is when government hands over the management or assets of government services to private interests. Government says this will lead to more efficient and better services for everyone.

But our experience is different.

• Privatised services don't provide well for the poor, who can't pay, because private interests must make profits. Government says it will ensure the poor get good services through contracts and regulations - but it doesn't have capacity to enforce them.

• Privatisation makes it harder to maintain cross subsidies - when rich communities or industry pay more, so that poor households can pay less. As a result, the prices for services for the poor tend to go up.

• Privatised companies don't take the broader economic needs of the country into account, for instance by buying goods locally as a way to create jobs, and providing affordable services in remote regions.

• Government just pushes for privatisation of all sorts, across the board, without a policy to say when it makes sense to change how the state operates.

• It is difficult for the government to manage wholesale restructuring and privatisation. As a result, it is making a lot of mistakes, like paying far too much to foreign consultants and managers.

In the anti-privatisation campaign, COSATU demands:

• Government must stop privatisation at once, until it has a policy on restructuring the state. It must not privatise basic services or national infrastructure.

• The policy on restructuring the State must ensure improved services for our communities, especially for the poor, and must help keep and create quality jobs.

• Any proposal for restructuring that will require privatisation of any kind must be subject to broad and open public debate, and agreed to by Parliament or, in the case of local government, by the town council.

How privatisation works

Privatisation takes many forms but they all have one thing in common - they turn over the government's functions to private owners or managers. In the process, they undermine the ability of the state to deliver basic services, like water or sanitation. Often they lead to higher costs and worse quality of services for the poor, and cause big job losses. Examples include:

1. Selling parastatals sometimes called state-owned enterprise,to private owners.. This has happened to some local government bus companies and the state-owned forests. In the case of the forests, 10 000 jobs were lost.

2. Selling shares in parastatals to 'strategic partners' usually foreign companies.

3. An example of this kind of privatisation was the sale of about 30% of Telkom to US and Malaysian firms. Even though the government owns a majority in Telkom, the foreign partner seems to have veto power over many of Telkom's decisions - for instance on employment and investment. Since the foreign shareholder came in, local calls have increased in price by over a third, while international calls, which mostly benefit the rich and business, have fallen even more. And Telkom has lose over 15 000 jobs in the past three years.

4. Commercialising parastatals, which means making parastatals act like private businesses, looking above all to make a profit. Often, the first step is to register them as companies under the Companies Act, even though they are still government owned. This is what was done with Eskom under the Eskom Conversion Act, and with many city services, including water and electricity, under the iGoli 2002 process in Johannesburg. Once the parastatals have to start making profits, like private business they start to resist serving the poor. Instead of being dedicated to a developmental role, they start acting like a private company.

5. Letting private companies compete with parastatals that provide basic services. This policy effectively privatises the sector, rather than the parastatal itself - but it has the same effect. The private companies focus on serving the rich and big business, and cut costs to them; the parastatal has to compete, and so ends up neglecting the poor as well. As a result, it must also cut prices to the rich and business, and can no longer use those returns to subsidise poor households. That is the main reason for the increased price of local phone calls.

6. The government plans a similar scenario for electricity. It plans to sell 30 per cent of Eskom's electricity generating plants to private companies. The initial proposals were that the private generators could sell electricity directly to industry. The result would be that industry would no longer subsidise household use, and electricity tariffs for families would rise between 20 and 50 per cent. Government says it will not let tariffs rise so much, but it still wants to private electricity - and it does not say how it will stop the cost from rising.

7. "Contracting out" or "outsourcing" support services in hospitals, schools and local government. That means that private employers now provide services that used to be provided by government employees.
   Outsourcing moves the workers concerned out of the public-sector bargaining unit. They lose their hard-won rights to decent pay, benefits and job security. Often the service provided gets worse. That is what happened when government outsourced the payment of old-age pensions.

8. It is also a form of privatisation when government makes people pay for services they historically got for free. This is happening in education, where school governing bodies charge learners fees, and use the money to hire people, expand buildings and buy computers and other equipment. The schools with rich students get better-qualified teachers, better facilities and materials. This perpetuates the inequalities inherited from apartheid, with the poorest schools still in the former homeland areas.

9. The current subsidy system for housing plays into privatisation. Government only gives subsidies to people to build private houses. It does not develop low-cost, government-owned rental housing, which could be more affordable and better quality.

How does privatisation affect working people?

Private companies don't want to serve the poor. Businesses take over government assets or services in order to make a profit. Even if government pays them a subsidy, they often skimp on service provision. After all, they can raise their profits and cut costs by cutting standards, especially for the very poor, who often find it hard to organise to demand better services.

This problem is particularly severe in South Africa, because we have very unequal incomes even compared to other developing countries. Moreover, because of apartheid, infrastructure is worst in the poorest communities - especially in the former homelands. That means that we are trying to improve infrastructure precisely in the areas where the people are least able to pay.

Supporters of privatisation argue that government can set targets for services in contracts with business, or in regulations. That way, they say, government can make sure private companies serve the poor. But government doesn't have the resources to monitor and regulate the private partner effectively.

Once government has turned over its own delivery systems and staff to the private company, it is hard for it to go back to providing the service itself. That puts it in a weak bargaining position, and it often ends up paying more and accepting worse standards for poor communities.

Privatisation often means retrenchment

Privatisation often leads to retrenchment, as the new owners try to cut costs. Unlike government, they do not take into account the cost of job losses for the economy and the society. Like private management generally, they often see retrenchments as efficient in themselves, even if alternatives could be found that would raise productivity without losing jobs.

Since it was partially privatised, Telkom has lost over 15 000 jobs to retrenchments and outsourcing. Yet in this case, Telkom management even signed an agreement that the partial privatisation would not lead to retrenchment.

Government also proposed leasing Spoornet's two most profitable rail lines, Orex and Coallink, to private companies - and cutting up to 20 000 jobs in the rest of its system. But research by SATAWU proved that government would actually get higher revenues and maintain services better if it didn't privatise the lines, and now government is reviewing its plans.
Since 1994, the public service has lost over 100 000 positions. Some of these were due to outsourcing and privatisation, especially in the state forests and hospitals.

What happens to development?

Since the RDP, the democratic movement has argued that poverty in itself prevents economic growth and development. Poor people can't afford the basic services they need to get a higher income. These services include water, electricity, healthcare and education. Government must extend these services to working class communities in order to make it possible for people to support themselves. But privatisation makes it harder, not easier, to get services to the poor.
Similarly, rising unemployment makes poverty worse, adding to the problems we already face. Job losses due to privatisation and commercialisation made up a big part of the million jobs South Africa lost in the 1990s.

Most of the public-sector job losses affected lower paid workers in rural areas, where jobs are already in short supply. After all, in both the Northern Province and the Eastern Cape, the government is the largest single employer. As a result, the job losses worsened poverty and inequality.

Privatisation blocks participation

In a democratic state, the people give a mandate for what goods and services the state should provide, through elections for the government. Private managers do not and should not have the power to decide what government will deliver or not. That has to remain in the hands of the government.

Who wants privatisation, and why?

If privatisation is so bad for the country, who wants it? Business wants privatisation because it opens up new opportunities to make a profit - at the cost of the state. This is particularly important for big foreign and local companies, which get to buy our public assets cheaply.
Consultants and banks also make a lot of fees out of the privatisation process. For instance, consultants make millions out of advising government on how to privatise; and then the banks make more millions for helping government sell shares and assets. These groups maintain a constant pressure for privatisation.

Privatisation is also important for some parts of black business, because it opens up new opportunities. After all, black enterprise is largely shut out of much of the economy by bigger white companies. To compensate, many proposals for privatisation say they will sell government assets and services to black companies, in the name of black economic empowerment.
This strategy undermines support for black economic empowerment. It ignores the fact that parastatals and the public sector now can do far more for black economic empowerment than private business.

The role of the national Treasury

Another reason for privatisation is the GEAR economic strategy, which requires cuts in government borrowing and taxes. To make up for the cuts in these areas, the national Treasury wants to sell shares in the big parastatals, which will earn it billions - at the cost of services to the poor. It hopes to make up for not budgeting enough to meet the needs of the people by bringing in private investors. It has called for the sale of shares in all the major parastatals in order to get more money for the budget.

The national Treasury has also pushed privatisation in the form of public/private partnerships. In these 'partnerships', the company helps build infrastructure in return from a profit for operating it - for instance, from rates for water or toll roads.
For this reason, it has made some funds for local government dependent on setting up public/private partnerships. It gave Johannesburg R500 million on condition that it pushes through the iGoli 2002 restructuring plan over labour's objections.

COSATU argues that government must spend more, not by selling off assets, but by borrowing more and putting higher taxes on the rich. Rising living standards and better infrastructure will ultimately lead to more rapid growth, and borrowing and taxes can decline again.

What we demand

COSATU is opposed to privatisation because it makes it impossible for the state to ensure social and economic development. Every state has to ensure administration and security for the people. But a developmental state also has four other functions, which require that it have strong resources and capacity.

1. The developmental state must provide an adequate social wage to combat poverty. Poverty in itself imposes great hardship. It also makes it impossible for people to get a job or find other ways to earn an income. The social wage - services the government provides, like health, education, basic water, electricity and housing, as well as welfare grants - is critical to give people a basis for participating productively in the economy. Parastatals and local government, as well as government departments like health, education, welfare and police, must play a leading role in extending basic services to improve the social wage.

2. The developmental state must establish a new growth path for the economy. We need an industrial strategy to drive reconstruction and development. For that, we need good electricity, water, roads and telecommunications for small and micro enterprise as well as big companies. It also means we need to strengthen the role of financial parastatals like the Industrial Development Corporation (IDC) in developing new economic activities. COSATU supports sector job summits to define ways for each industry to create jobs and to develop. The parastatals must help implement the agreements from the sector summits.

3. The developmental state must ensure more equitable distribution of assets. Critical programmes include providing infrastructure and housing, land reform, education and training, and support for small and micro enterprise. Again, parastatals have a central role in this process.

4. Finally, the developmental state must ensure greater democracy in the economy and the state itself. We need to ensure that the majority of our people have a say in key economic decisions. One of the main ways to do that is to strengthen the role of the state and parastatals, which must represent the people.

Clearly, the developmental state can only fulfil its role if it has enough resources and capacity. That means we do need to restructure many state agencies. But we do not need to weaken them, as privatisation does - rather, they must become stronger and better able to meet the needs of our people.

To carry out this kind of restructuring, we need developmental restructuring, not the new managerialism. Developmental restructuring requires:

1. A definition of what the state agency should be trying to do, by setting targets, for instance to meet basic needs;

2. Broad consultation with those affected, including workers and communities, to determine the best way to achieve those aims.

Consultation takes time - but it leads to solutions that meet people's needs better, without building in costs for the poor like retrenchment and higher costs for services.

In COSATU's Section 77 notice of dispute to NEDLAC, we call for:

• An end to privatisation until a government policy is in place on restructuring the state.

• A policy on restructuring the state that ensures everyone knows about the proposals and has a chance to comment on them.

• A commitment from government to ensure that the relevant democratic structures - national or provincial Parliament, or the local city council - must vote on any proposals to privatise government functions.

If we do not achieve our aims, we cannot hope for development, job creation or growth. We have developed a programme of action to back up our demands. These involve every affiliate and union members. If conciliation at NEDLAC fails, the campaign will lead to a two-day general strike.

Workers of the world fight privatisation

COSATU is not alone in its battle against privatisation. All over the world, workers are suffering the effects of past privatisations and fighting to stop any more in the future.

Britain
Britain's biggest union, UNISON, says it might use industrial action to fight the privatisation of public services. "The Government must ensure that the public sector has the lead role in providing services such as health and education."

Delegates at the union's annual conference backed a motion in support of workers who take legal industrial action to fight privatisation. Delegates also backed a series of Parliamentary lobbies to press home their campaign. Some delegates heckled the Transport Secretary when he defended the government's decision to consider allowing the private sector to provide some public services.

Dave Prentis, UNISON's General Secretary, says the government's commitment to investment was welcome, but he adds: "Their apparent obsession and love affair with the private sector is depressing. It is simply not true that the private sector is more efficient and effective. It is our members who bear the scars of privatisation.
"We reject any further privatisation of our members. We will oppose it and we will defend our members."

India
Leading Indian trade unions have threatened to launch a nationwide strike to protest against the government's policy of privatisation and relaxing rigid labour laws.
In a joint statement, national labour federations criticised Prime Minister Vajpayee for his recent statement that liberalisation of the economy was aimed at raising employment and reducing poverty.

The union leaders said they would agitate against the "thoughtless privatisation of profit-making and potentially viable public sector undertakings including defence-sector industries."
Meanwhile electricity workers in Uttar Pradesh are succeeding in their campaign to halt privatisation of electricity services. In 1999, under pressure from the World Bank, the Indian government accelerated privatisation of the energy sector, despite evidence of serious problems with this policy in India and other countries.

In 2000 the workers in the UP Electricity Union mobilised to oppose the government's policies. After two weeks of industrial action, when some trade unionists were imprisoned, an agreement was reached whereby the UP government would not proceed with privatisation for at least one year, until it had been able to evaluate the experience in other Indian states.

But in July 2000, the World Bank interfered with this settlement, saying that a loan to UP would not be provided unless privatisation of the electricity services was introduced within three months - effectively insisting that the agreement between the UP government and the electricity workers be broken.

The trade union confederation, Public Services International, believes the World Bank should not impose privatisation of energy as a condition of loans. "Energy is too critical to the sustainable and equitable development of communities to be subsumed to the pursuit of profits."

According to the PSI Sub-Regional Secretary for South Asia, Jay Bhan, people are receptive to the link between public provision and lower, fairer tariffs, compared with higher costs to households under privatisation arrangements.

Brazil
Brazilian President Cardoso's plan to centralise state control over water supplies as a prelude to World Bank/IMF privatisation, has met with strong opposition. A national coalition of unions, consumers, greens and local water organisations (FNSA) has been successful at mobilising opposition to the plan.

Against a background of a two-year drought affecting hydro-electric generation as well as water supplies, FNSA held a large meeting in Brasilia late last month to discuss the issue. The President of the House of Representatives subsequently agreed to postpone a vote on the Cardoso plan in order to seek consensus on the issue.

USA
The world's largest private prison operator, the Corrections Corporation of America, which imprisons 61,000 people, is in trouble. Three years ago its share prices were nearly $45; today they are worth less than $1, a 98% drop.

Meanwhile, in Alabama, the Tallulah juvenile prison that was re-taken over by the state corrections department following its failure as a privatised operation, while it is now again run by the state, apparently it is still owned by private operators. The local newspaper has described this as "a rip-off, pure and simple".

Nigeria
Nigeria's senior government workers, ill at ease over an on-going privatisation exercise, have prescribed autonomy for parastatals, as an alternative to switching ownership to private investors.

The workers' new position was a compromise in their face-off with the Federal Government over sales of the parastatals.
Delegates to the fifth triennial conference of the Senior Staff Association of Statutory Corporations and Government-Owned Companies, argued that enthronement of a private sector monopoly regime for public utilities is "unstrategic, capable of fuelling avoidable industrial crises and inimical to the nation's economy…Effectiveness of parastatals is a reflection of quality of governance."

The association's President-general, Peace Obiajulu, said the privatisation exercise would further worsen the plights of Nigerians, as the populace would be made to contend with higher tariffs, diminishing employment opportunities and a blighted future for present and future generations.

She said the way the Bureau of Public Enterprises (BPE) is going about the privatisation exercise strengthens the need to halt it, as it has now been manifestly shown to lack transparency and is a design by certain individuals to corner the national wealth for their selfish interests.

She said that pro-privatisation elements usually forget that any good government has social responsibilities to the citizens. "The nation cannot afford to hand-over its precious utilities to profit-seeking investors as the resultant private sector monopoly would compromise people's expectations, even under a democratic dispensation."

"Privatisation is another time-bomb, being planted, to combine with naira devaluation, planned deregulation of petroleum products and inflation inducing policies, to unleash further hardships on Nigerians," she added.

"Rather than offer out national assets as scraps, the parastatals should be granted immediate autonomy, while those private investors having interests in them should set up their own facilities, in competition with the autonomous public outfits, for improved services."

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Campaign update - how the unions are mobilising Activities for the Anti-Privatisation Campaign
Activities Meetings and Build-up programmes 11 June to 3 July 11-27 June - ESKOM Conversion Bill protest action programme 29 June - Campaigns Sub-Committee 3 July - Meeting with Education, Media, Public Sector & Campaigns Mobilisation 10 July to 20 July Special RSSCs - 10,11,12 July Local General Meetings - 16-20 July Sectoral Councils / Actions 23-27 July Industrial Area Meetings - 13-22 July Social Protection Training Workshops Mpumalanga - 12-13 July Wits - 17-18 July W. TVL. - 17-18 July E. Cape - 19-20 July KZN - 24-25 July F.S/N.C - 01-02 & 3-4 August W. Cape - Mid August Build-up for National Strike 28 July to 28 August 28 July - Cape Town, SACP Veterans Dinner 29 July - Durban & Rustenburg, SACP rallies Regional Actions -(Pickets, Demos & Community Rallies) - 1-16 July 14 August - N.C./F.S & KZN 15 August - Wits, W.Cape & W.TVL 16 August - Mpumalanga, N. Province & E.Cape 17-24 August - Meetings with Civil Society 28 August - Anti-Privatisation material to be distributed at the Conference against Racism Two Days Stay away 29-30August - National strike action in all regions		Details To brief the alliance & MDM on COSATU campaigns - 3 July The issue to be discussed in the Alliance Summit in August All identified campaigns to be integrated into the Anti- Privatisation Campaign (SACP 80th Anniversary, Anti- Racism, 9 August, Pension Surplus, Social Development - NHI & BIG) To conclude the S77 meetings at NEDLAC Material and the Campaigns Bulletin to used for mobilising The leadership to be deployed to the Regional, Industrial areas & the Local meetings Sectors participating are parastatals (CWU, NUMSA, NUM & SATAWU), manufacturing (FAWU, NUMSA, SAAPAWU & SACTWU), service (SACCAWU, SAFPU, SASBO, PAWE & RAPWU), mining/energy (CEPPWAWU & NUM) and public sector (NEHAWU, POPCRU, SADNU, SADTU & SAMWU) Labour Law Amendments to be jointly run with Anti- Privatisation campaign The Social Protection Education Workshops taking place in the regions are to cover the Anti- privatisation Campaign Western Cape to participate in the preparations for the veterans dinner celebrating the SACP 80th Anniversary and to highlight the Anti-Privatisation Campaign KZN and W. TVL. to mobilise workers to attend the SACP 80th Anniversary celebrations where speakers will highlight the Anti-Privatisation campaign Regions to send their programmes and budgets for the build-up programmes for the strike action Leadership programmes from the regions to be ready by 1 August for mobilising To hold meetings with Civil Society at national and in the regions before August KZN region to assist in distributing material at the Conference against Racism National Strike - 1st Day - Rallies and 2nd Day Marches and memorandums KZN memorandum to be handed over to the venue of the Conference against Racism All regions to make applications for the marches and demonstrations.

 

The threat to our rights is not yet over

NEDLAC's Labour Law Negotiating Task Team met on 27-28 June and 8-9 July. They focussed on the Millennium Labour Council (MLC) agreement on the government's proposed amendments to the labour laws.
The first meeting referred the following issues to a legal drafting team:

1. Probation period
2. Bargaining councils
3. Employment Conditions Commission
4. Formal hearings
5. Labour court judges
6. CCMA
7. Section 189 (retrenchments)
8. Section 197 (transfers upon insolvency)

The drafters were asked to refer to the MLC document, international conventions and the South African constitution. They will also develop provisions to deal with bogus unions.
The issue of Variation by the Minister was referred to a bilateral meeting between labour and government, which must take place before the matter is referred to the legal drafters. Amendments should exclude maritime work.

Emphasis was placed on the importance of establishing the bargaining council in the private security sector. On the agricultural sector the proposal in the MLC document was to be referred to the drafting team for possible legal drafting, failing which business and government should then revisit the matter.
The following issues were to be resolved on 4 July by the three convenors:

1. Section 189

2. Independent contractors

The following issues were deferred to the meeting on 8-9 July:

1. Insolvency Act
2. Charging of fees by CCMA governing body.

This meeting made progress on a number of issues, including the CCMA and parts of Sections 189 and 197, and referred them for legal drafting.
The objectives on the CCMA are to simplify the process of considering the fairness or otherwise of dismissals, shorten the process used to give effect to its mandate, create certainty for users and staff and make the CCMA more effective.

On Section 189 a conceptual agreement has been reached and the convenors will discuss the details for further legal drafting and it will be discussed finally at the 18-19 July meeting.
It was also agreed that the parties' chief negotiators would meet with the legal drafting team on 13 July to clarify outstanding issues.

Government would revert on all the amendments on 13 July. Thereafter there would be a new revised draft to be discussed at the 18-19 July meeting.
Government also tabled a number of new amendments to both the Labour Relations and Basic Conditions of Employment Acts. These were noted and will be discussed at the Task Team's next meeting.

Overall there were issues where it was easy to reach agreement and others where it was difficult even to agree on the concept outlined in the MLC document. However it is important to note that:

1. Business appeared to be deeply divided on a number of issues, particularly around retrenchments. Elements of business, particularly Business SA, are bent on undermining the MLC agreement. This attitude from business nearly derailed the negotiations.

2. Government lack a clear mandate on a number of issues, for example retrenchments, Sunday work and Section 197. This lack of a clear mandate has had a negative impact on the progress of the negotiations. Business exploited this loophole and was again reluctant to commit itself, as manifested by its reluctance to sign off a number of issues.

Labour adopted an engagement strategy aimed at influencing the two parties through bilaterals. These proved more effective in creating progress in the negotiations.

Labour is generally unified in its approach, except on public sector issues. FEDUSA raised concerns that the amendment on the public service would have a detrimental effect on their affiliates. Labour continued with the strategy of bilaterals which facilitated progress on a range of issues.

It is important to evaluate business strategy, particularly the BSA's, which questions the legitimacy of the MLC process. We must isolate BSA and its stand on the amendments. Their stand vindicates the correctness of the April CEC call to members that it would be naïve and dangerous to drop our guard before the amendments have been approved not only by NEDLAC but by Parliament as well.

Our members are called on to remain in the trenches ready to defend their gains and to consolidate their victories. The need for a general strike and mass mobilisation remains.

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Private water companies fail to deliver

International, many local governments in poor countries, advised by the World Bank, have agreed to turn the supply of water over to foreign, private companies. These cities include Rio de Janeiro in Brazil, Gdansk in Poland and Manila in the Philippines.

They signed long-term contracts to ensure the expansion of water services to the poor. In virtually every case, the company has insisted on renogatiating the contract after two or three years to reduce the targets.

In effect, the foreign company sweetens the pill of privatisation by agreeing to high targets initially. Only later, when the city itself can no longer deliver water, does the company say it can't deliver on the taregets.

One of the biggest companies involved in this type of negotiations is the Compagne Lyonnaise d'Eaux (the Lyonnais Water Company), a French business. Despite protests from SAMWU, Johannesburg Metro just signed a long-term contract with this company to manage Johannesburg's water.

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