COSATU Submission:

Labour Audit for the Jobs Summit

7 August 1998

 

Contents

  1. Introduction

  2. Summary of Labour's Proposals

  3. Job Creation Programmes Proposed by Labour

    1. Publicly Owned Housing Programme.

    2. Provision And Upgrading Of Rural And Urban Infrastructure.

    3. Youth Brigades.

    4. Promotion Of Domestic Investment.

    5. Expand Domestic Demand And Demand For Locally Produced Goods & Services

    6. Public Sector employment.

    7. Public Sector Procurement Policy For Job Creation And Job Retention.

    8. Regulating And Formalising The Informal Sector.

    9. Stemming Job Losses In The Economy.

    10. Monitoring Job Losses In The South African Economy

    11. Productivity & Equity

    12. Job Sharing

    13. Expansion Of Industry Training.

    14. Improvement of the Quality of Employment

    15. National Industrial Restructuring Programme to Create Job Creation

    16. Beneficiation Programme In Labour Intensive Parts Of The Economy

    17. Tariff Review to Promote Job Growth

    18. Improvement Of Customs And Excise Functions.

    19. Support Measures For The Unemployed

    20. Income Grant.

    21. Social Plan

  4. Financing Mechanisms

    1. Umsobomvu Fund

    2. Prescribed Asset Requirement

    3. Job levy / Solidarity Tax

    4. Progressive Taxation

    5. Utilising The SASRIA Funds

    6. Pay As You Go System.

    7. Using The Resources Of The IDC / DBSA / CSIR.

    8. Training Levy





  1. Introduction

    2. Following the Supervisory Committee meeting of the Job Summit process held on Tuesday, 28 July, organised labour has undertaken a comprehensive audit of policies, programmes and processes, and in this framework document we set out our proposals core in respect of each of these areas.

    We have drawn from the work of the five working groups, the previous discussions in the Supervisory Committee, current government programmes, Nedlac agreements and our own proposals for the Job Summit.

    In assessing the strategic relevance/importance of particular proposals for the Job Summit, we have taken into account their effect on changing the pattern of employment creation, and job loss in the South African economy, in a large-scale and sustainable way, given that the crisis of poverty and inequality doesn’t allow for a gradualist, trickle- down approach to eliminating unemployment.

    Our core concerns are to

    Organised labour believes that large-scale structural interventions are needed to put us on a jobcreating trajectory, which will also bring the majority into the economic mainstream, and through redistribution of assets and resources, lay the basis for a new growth path.

    This requires a national, integrated and mutually reinforcing package of proposals, which kickstart both a short and longer-term dynamic of employment creation, and achieves the required balance. We want to avoid either extreme of concentrating in a one-sided way on:

    For this balance to be achieved, we need a framework of appropriate policies, programmes, and projects to be agreed at the Job Summit This requires that there be at least agreement on the core elements of the policies and programmes to be endorsed or initiated by the Job Summit. Where possible, this should include the thrust of proposals on institutional and legislative reform, financing proposals, and timetables.

    Most important, however, is to reach agreement, and achieve enthusiastic backing, for initiatives, which will have a significant impact on unemployment. There needs to be realistic expectation as to the level of detail which can be achieved by the time of the Job Summit, as well as what constitutes realistic technical and other requirements which should be met by proposals. Further where there is agreement on the need for a proposed programme we need a commitment by all parties, to focus on resolving technical or other challenges i.e. bringing the necessary political will to bear on clearing obstacles to their realisation. This responsibility does not rest with one party alone. Substantive work will have to be done in the post-summit process to flesh out details of financing, institutional questions, timeframes etc.

    This implies support for developing new as well as consolidating existing institutional, legislative and financial mechanisms. Otherwise, existing lack of capacity can become a permanent barrier to transformation and employment creation.

    Commitment to integrate costing of programmes into the 1999 / 2000 budget, where feasible, is welcomed. However, it may not be realistic in all cases to expect costing, and operationalisation of proposals to be integrated into this budget cycle. In some instance, programmes may only require budget allocations further down the line. In this case, major interventions should be integrated into a revised MTEF.

    Fast-tracking may also be required to ensure that high-priority Presidential Jobs Projects are not unnecessarily delayed in the budget cycle. Agreement is needed on where programmes are to be funded by off-budget mechanisms, such as prescribed assets. These mechanisms are spelled out in our proposals.

    The key programmes proposed by labour are national and comprehensive, with an impact in all regions, both rural and urban. Where agreement is reached on a national programme, we should be able in the pilot phase of implementation, to begin implementation in areas or sectors where that capacity already exists.

    Labour’s proposals for employment creation are unapologetically comprehensive, because of the scale of the problem we are attempting to address, and the urgency, which is required. It deliberately avoids a piecemeal, purely short-term response to the crisis to ensure that there is an appropriate intervention, which holds out the prospect of a dramatic reduction of unemployment in a sustainable way. What labour is proposing is a large-scale national intervention of the Marshall-plan type, which other societies have embarked on to deal with social crises on a similar scale. This ambitious intervention is precisely the vision which underpins the strategy contained in the RDP. We believe that this strategy remains correct, and that we need to ‘think big’ to deal with a national crisis on the scale we are facing. Gradualist, incremental solutions to the problem, which leave the structural issues unaddressed, are bound to fail.



  2. Summary of Labour's Proposals

    3. We now set forward our proposals for consideration.



  3. Job Creation Programmes Proposed by Labour

    1. PROGRAMME NUMBER ONE: Publicly Owned Housing Programme.

      2. Purpose: This proposal sets out details of a comprehensive housing programme, to build a targeted one million houses through the provision of publicly owned housing rental stock.

      Link to Job Summit: It is proposed that the Job Summit would endorse the quantitative targets, the nature of the housing programme, the time frames and the funding mechanisms. After the Job Summit, a more detailed implementation mechanism would be put into place.

      Proposal: Housing offers an important opportunity to

      • meet basic needs,

      • generate a substantial asset base in the society,

      • create direct jobs in the construction and indirect jobs in supplier and customer industries,

      • provide economic activity and jobs through the multiplier effect of the spending generated by a massive housing programme,

      • develop partnerships between all constituencies and

      • offer opportunities for enhancing labour intensity.

      In addition, the multiplier effect of housing spend offers greater opportunities for active industrial policy measures which can harness such economic activity towards the goals of sustainable efficiency and the restructuring of industries.

      A mass public housing programme will also be linked to a restructuring of urban planning to ensure integration of affordable housing into well-located areas, to break down apartheid geography, and its associated social and economic costs.

      We propose that one million housing units be built, for provision of public housing on a rental basis. This programme should be driven by a national housing parastatal.

      At least 300 000 such housing units should be built every year over the next three years. In the fourth year, the remaining 100 000 units should be completed.

      Job Impact: Such a programme will employ hundreds of thousands of workers. Our initial calculations show that over this period between 150 000 and 220 000 direct construction jobs can be created. An estimated 200 000 to 330 000 indirect jobs may be created. (This uses the direct to indirect ratio supplied by the Department of Housing and the Building Industries Federation of South Africa). Indirect jobs would flow from the construction material sector and from the home furnishing industry. In short, between 350 000 and 550 000 jobs can be created per year over a three-year period by implementing such a policy. This excludes the multiplier effect in the South African economy.

      These are conservative figures. If we instead use the spending: job creation ratio in the government’s Employment Strategy Framework, a programme of the magnitude proposed here would create a total of 1 430 000 jobs.

      Funding considerations: The cost of such a programme would approximately be R30 to R35 billion over a four-year period, at current prices. It can yield a continuous stream of income from occupants to help pay for the cost of construction.

      It will pump high levels of wages into the local economy, hence stimulating economic activity into other sectors, and creating further jobs in the country. The key sources of finance proposed are the fiscus, the corporate sector and the retirement and life assurance industry.

      We propose a public works programme on housing be financed from government, business and labour in the following manner:

      • First, through a major contribution from the fiscus (government sector).

      • Second, a three-year levy of 5% on the pre-tax profit of businesses (the business sector).

      • Third, the introduction of a prescribed investment requirement on pension and provident funds, the life assurance industry and the assets of the Public Investment Commissioners to invest 5% of funds in special government bonds/ Public Development vehicles to finance this, and the next project.

      In excess of R50 billion could be raised in this way.

      Institutional issues: for such a programme to be effective a number of institutional matters would need to be addressed. We have proposed the setting up of a housing parastatal responsible for co-ordinating the financing and overall management of the programme, and to secure economies of scale and hence a decrease in prices.

      We seek that labour-based construction methods be utilised, and that projects are designed to this specification, in order to ensure that we maximise employment on the projects. A wealth of experience on labour-based construction exists in certain of the presidential lead projects, in the projects started under the National Economic Forum, and the work done by the International Labour Organisation in many other countries.

      We propose that the long-term unemployed, women and youth be targeted for employment in these programmes. We propose further, a wage applicable to such programmes be negotiated through Nedlac. This wage should be set at a level which combines the need for fair labour standards and a living wage, with the requirements of job creation through what is in essence a public works programme.

      Finally we propose that the element of the Masakhane campaign which focuses on payment for services, be considerably strengthened. One element hereof could be a payroll deduction of rent, the terms of which should be negotiated in a National Rent Payment Agreement concluded at NEDLAC.

      This programme would not replace the programme of home ownership, but would instead be complemented by it. The option to buy, at any stage after occupation, either individually, or through housing collectives, can be built into the scheme, to foster and encourage ownership and responsibility. Adequate protection against speculation and downward raiding should be built in.

    2. PROGRAMME NUMBER TWO: Provision And Upgrading Of Rural And Urban Infrastructure.

      3. Societies devastated by war, or economic depression, have used public works and related programmes as a short-term measure to bring the unemployed into employment, and to build essential infrastructure. This has been done in the United States, Japan and Europe, with great success.

      Infrastructure development will have a number of different sources: First, the necessary infrastructure that would need to accompany the mass housing programme set out in the early section. Second, a programme to provide services where none exist in both the rural and urban areas. Third, the need to upgrade services which had been provided previously at standards below those consistent with the requirements of a modern economy and an equitable society.

      We propose an accelerated programme of public works in the provision of electricity, piped water supply, sanitation, child-care facilities and health care clinics to previously disadvantaged areas. Programmes to provide roads and major dam and canal works, and to address telecommunication inadequacies, should be put into place. This entails a major upgrade of urban infrastructure, and provision of rural infrastructure.

      Such a programme will lead to increase employment in the short-term, but crucially, it is a fundamental part of improving the performance of the urban and rural economy. It will reduce commuting time. It will reduce labour "downtime" caused by illness due to inadequate sanitation and water supply. It will have a positive effect on national output and productivity levels in the economy.

      Existing government programmes embrace a number of these elements. What this programme seeks is to put forward a comprehensive integrated approach, which brings in much more resources, seeks delivery on a massive scale, and speeds up the delivery pace. It seeks to bring in the stakeholders more systematically.

      Institutional mechanisms: we propose a Cabinet Cluster Committee made up of the following departments: Public Works, Telecommunication, Energy, Water, Health and Housing, to meet with the stakeholders to develop an implementation plan for the programme.

      Financing mechanisms: We propose the funds generated through the mechanism set out in Programme One (Housing), together with additional allocations from the fiscus, be used to finance this proposal. Using existing budgetary tools at departmental level, and the ratio of housing: infrastructure spending, we should calculate the cost of this package of proposals.

      Job Summit: The Job Summit should announce the programme, the funding mechanism, and the amount of funding earmarked for the programme.

    3. PROGRAMME NUMBER THREE: Youth Brigades.

      4. Purpose: The purpose of this programme is to provide an opportunity for young people who have left school, but not yet commenced employment to take part in a period of public service, and in the process gain skills, some experience of service provision and a modest allowance which is paid to them. The broad aim of the programme should be to instill social consciousness among the youth, take them out of the psychology of hopelessness fostered by long periods of unemployment and assist them to become employable.

      Job Summit: It is proposed that the National Youth Brigade Programme be announced at the Job Summit, and that the resources available for such a programme be committed.

      Proposal: It is proposed that the National Youth Brigade programme should offer opportunities for at least 500 000 young people up to age 29 to volunteer in the National Youth Brigade, for a twelve month period. Each year a new intake of youth would commence. The first phase of the programme should be implemented from June 1999, and be in place for a five-year period. During the period of the programme, a total of 2,5 million young people would serve in the youth brigades.

      Young people so enrolled would be exposed during the period of service to extensive vocational training, career counseling, and ultimately placement where possible in full-time jobs. They would during this period further provide public services not currently provided through the state.

      This programme targets one group in society most vulnerable to unemployment. The Programme should ensure:

      • that full time workers are not displaced through the operation of the schemes of this programme, and

      • that youth volunteers receive a sufficient financial allowance to attract them to the programme, and to be a real alternative to crime

      • that we do not develop a dual labour market.

      Each volunteer in the National Youth Brigade will receive an allowance of R400.00 per month, which would cost the fiscus R2,4 billion per annum in direct allowances. Additional costs for managing this programme would need to be calculated.

      Financing mechanism: See details under the Umsobomvu Fund.

      In addition to the above, the National youth service/youth brigade must be linked with curriculum restructuring in tertiary education and other bands of learning. The objective of such curriculum restructuring will be to integrate compulsory community service for graduates, for example like the one for Doctors. This will be linked to qualifications, whereby no one will graduate without having performed compulsory community service.

    4. PROGRAMME NUMBER FOUR: Promotion Of Domestic Investment.

      5. This programme seeks to expand the pool of domestic savings, and ensure a more efficient conversion of savings to investment.

      The principal tools available to ensure implementation of this programme, are:

      1. Expansion of the contractual savings base, through extending provident coverage to workers in all sectors through the setting up of a National Provident Fund, with universal contribution and benefit coverage. In addition, the living wage policies pursued by unions result in increased contributions to such a fund, and there is scope to increase the contributions by employers.

      2. Investment guidelines involving the contractual savings base, should be negotiated with direct involvement of worker representatives aimed at ensuring the channeling of these funds into productive investment.

      3. Strengthening the local asset deployment requirements set by the Financial Services Board, to ensure that domestic savings are invested in projects in South Africa.

      4. Introduction and strengthening of mechanisms to avoid speculative financial flows, and instead to encourage investment in productive activities. Examples of these include the use of 'speed bumps' on foreign capital, and the introduction of a mechanism similar to the 'Tobin tax'.

      5. Strengthening of mechanisms to reward the reinvestment of profit into expansion of productive capacity, such as the Secondary tax on Companies.

      6. Concentrating resources available for sectoral restructuring initiatives, through a National Restructuring Fund, to finance the introduction of new technology and work organisation directed towards job creation and job retention.

      7. Business should commit to an 'invest local' campaign to promote domestic investment, and clear proposals should be solicited from the business community during the next few weeks, prior to the Job Summit.

    5. PROGRAMME NUMBER FIVE: Expand Domestic Demand And Demand For Locally Produced Goods & Services

      6. Purpose: this programme seeks to maximise the aggregate domestic demand, and to increase the specific demand and consumption of locally produced goods and services.

      Proposal: The key elements of this programme are

      1. To pursue a living wage strategy in the South African economy, and to ensure that the share of national income which is appropriated by remuneration, increases. This entails a deliberate set of tools to identify low wage pockets of employment, and to use industrial, training and wage policies to lift earnings.

      2. To reduce the wage gap in companies, and hence to release resources for the lower paid, who spend a greater portion of their income on consumption

      3. To develop monetary policies which are appropriately expansionary, instead of contractionary policies, which results in lower consumption, closure of businesses and loss of jobs.

      4. Lower consumer taxes on basic requirements, which will release resources for consumption and savings. VAT is a regressive tax, and should be qualified in two respects: first, through zero rating of all basic foods, medicines, water, domestic electricity and education, and second, through a 'super VAT' on luxury goods.

      5. A 'buy local, buy fair labour' campaign to encourage the purchase of locally manufactured goods and services, made under fair labour conditions. This campaign would require support of retailers, and consumers.

    6. PROGRAMME NUMBER SIX: Public Sector employment.

      7. Purpose:

      • For the public sector (the public sector encompass parastatals and the public service) to promote employment creation. The public sector is the largest single employer in the country and can play a significant role in employment creation.

      • A new National Framework Agreement (NFAII) for restructuring the public service is required to provide a broad framework for the transformation of the public service. It must also address areas where the public service needs to be expanded and where it should be scaled down.

      • Stop the current policy to retrench 50 000 public servants.

      • Integrate job creation as an element of the existing National Framework Agreement on State Asset Restructuring.

      • Encourage expansion of investment by parastatals.

      Programmes:

      1. An audit of the public service in areas where there are serious shortage of personnel such as Health and Education. This requires a breakdown of public service personnel in terms of occupation, salary, and other relevant factors. In addition, an audit of the 50 000 personnel that government propose to retrench is also imperative. This should provide a profile of their skills, occupation and location. Government must commit itself to timeframes within which to conduct the audit of the public service.

      2. A review of the redeployment strategy to identify what were its major weaknesses.

      3. On the basis of such an audit a restructuring strategy should be worked out. This should be captured in the National Framework Agreement II. What is required is an analysis of how many of the 50 000 public servants can be redeployed within the public service. This should be informed by the capacity to re-skill these public servants for purpose of redeployment. Some of these public servants need to be redeployed in areas where there are critical shortages of personnel and resources. Where appropriate, social plan interventions should be explored.

      4. The NFA II should also cover the re-organisation of the public service. The Presidential Review Commission Report, and other major policy proposals, should be scrutinised in formulating a strategy to reconfigure the state machinery from national, provincial and local spheres of government.

      5. Further, the NFA II should serve as a platform to fast track service delivery. A broad programme for service delivery should be worked out and integrated into the NFAII.

      6. The National Framework Agreement on State Asset Restructuring must be reviewed. Job creation must be inserted as an important component of the NFA. There is a need for broad discussion on the NFA including whether to extend its time frame as the current agreement comes to an end in April 1999. Although the Agreement states that it can be extended, it is vague on the mechanism to achieve this.

      7. All parastatals must be required to review their programmes, specifically their implication for job creation. Job losses within the parastatals must be discussed within the NFA. Further, these entities must place on the table their investment plans so that they can be assessed for their job creation impact. Clear timeframes should be set for such a process. Effectively, this will be a post summit process, which should be dealt with in the structures established through the NFA.

      8. The Job Summit declaration should capture the broad approach to public sector restructuring, including the need to expand the public service in areas where it is deficient. A moratorium on the proposed retrenchments in the public service should be declared until a restructuring strategy has been developed.

    7. PROGRAMME NUMBER SEVEN: Public Sector Procurement Policy For Job Creation And Job Retention.

      8. Purpose : Public sector procurement has a major impact on the South African economy in terms of investment and consumption spending and could be used by government to achieve a range of socio-economic goals - that of domestic employment creation and retention in particular. In the 1995/96 financial year total government purchases channeled through the procurement system (central and provincial government, and local authorities - but excluding parastatals) amounted to R56 billion; this then constituted an estimated 13% of GDP.

      Link To Job Summit: It is proposed that at the Job Summit a number of initiatives could be implemented which would not only preserve existing jobs but also lead to the creation of new jobs, and improvement in the overall quality of jobs.

      Proposals :(A further document is available which sets out the proposals in more detail.)

      The national, provincial government, local government and parastatal procurement systems must be overhauled in order not only to ensure a harmonisation of tender conditions and procedures; but also to ensure that minimum policies that favour job creation / retention are also pursued. The following changes to the national procurement system are proposed:

      1. Improved price preferences for locally manufactured products, and ensuring that no other price preferences (on their own) will allow for an imported product to be chosen over a locally manufactured one. For example, the price preference applicable to black business should not be used to procure imported goods, where local goods are available.

      2. Strengthened Industrial Participation/Counter Trade arrangements which would favour arrangements which create jobs in the RSA;

      3. Requiring successful tenderers where they provide imported goods to the state to show that they have paid their import duties; and that successful tenders must show that they comply with all SA labour laws;

      4. Tender specifications should be written in a manner that they favour labour intensive South African manufacture / service provision;

      5. Where imported goods valued at R0,5m or more are procured, responsible Ministers from procuring Departments who buy such goods must sign declarations that they are aware that their Departments are buying such goods and that they have taken into account the impact on local jobs.

      6. Where appropriate, tender evaluation criteria making reference to the RDP should ensure that RDP criteria specifically relates among others, to the numbers of additional permanent SA jobs that will be created;

      7. A new procurement policy should be introduced that will affect all levels of government.

      Institutional mechanism: We propose that the cabinet cluster committee proposed by government, together with representatives from all the provinces, should drive implementation of these new guidelines.

      Financing: Some of the proposals do not in themselves necessarily require any additional funds. For example attaching more stringent requirement to counter trade arrangements does not cost the exchequer anything; nor does requiring importers to sign declarations that they have paid their import duties; nor requiring successful tenders to prove that they have honoured all labour laws, etc.

      However provisions that provide for improved domestic price preferences may cost the state more revenue. The jobs created or saved, makes this a worthwhile investment.

    8. PROGRAMME NUMBER EIGHT: Regulating And Formalising The Informal Sector.

      9. Purpose: This proposal seeks to regulate and formalise the informal sector, to ensure

      • an improvement in the economic viability of the sector

      • the elimination of underemployment and disguised unemployment in some informal sector activities

      • improvements in the quality of jobs of workers in the sector

      • improved tax coverage of the sector to ensure a wider fiscal base for the payment of public goods and services, and

      • incorporation of the sector in the national economic statistics, to ensure an accurate count of growth, employment and remuneration.

      Proposal: Labour proposes the following measures

      1. Existing support measures for small businesses should be extended to activities currently in the informal sector, directed at bringing them into the regulatory net. Specific measures with appropriate financing should be introduced directed at improving technical and business skills in areas such as pricing, marketing and book-keeping.

      2. Coverage by all training boards of informal sector workers in the training programmes offered, and a set aside of a certain number of places in training, to ensure improvements in the skill of workers in this sector.

      3. Extension of the Labour Relations Act to cover all applicable informal sector activities, and an improvement in the inspectorate capacity of the Department of Labour to ensure that both education and enforcement is possible.

      4. A campaign to register informal sector activities for tax purposes, with incentives to ensure that the informal sector is brought into the tax net.

      5. The collection of information on the activities of the informal sector, based on the above, and their incorporation in the national statistics base.

    9. PROGRAMME NUMBER NINE: Stemming Job Losses In The Economy.

      10. Purpose: Creating new jobs is unlikely to significantly impact on overall unemployment figures unless active measures are also taken to stem ongoing job losses. We need to ensure that "new" jobs – such as those arising from SMMEs – are not simply a transfer of a portion of jobs which are then lost in other enterprises/sectors. The objectives of this programme are thus twofold:

      • At a quantitative level, to retain existing jobs or to minimize jobs which are lost

      • At a qualitative level, to protect job security and quality, and to ensure that conditions of employment and remuneration are maintained and improved.

      The following proposals indicate potential measures from a range of policy areas.

      1. The LRA should be amended to provide for greater job security for workers. In particular, the provisions dealing with ‘dismissals for operational requirements’ should apply the ‘no alternative’ test, to ensure that retrenchments only take place when no other alternative exist.

      2. Business should agree to a moratorium on retrenchment in each industry until sectoral summits are convened to develop concrete programmes to avoid job losses.

      3. Supply-side measures put into place by government (for example in relation to technological innovation or export promotion) should not lead to job losses and should actively discourage this. This refers also to directly productive government spending and to government spending which leverages/impacts on private sector investment.

      4. Procurement policies should stipulate that a firm awarded a government contract may not undertake job shedding during the period of the contract.

      5. Regulation over the SMME sector and assistance to the sector should be strengthened to improve job security in these enterprises.

      6. The informal sector should be formalised so that labour market legislation is also extended to this sector. The Labour Relations Act is of particular relevance here in terms of job security.

      7. Productivity improvements which are not matched by equal or greater growth in output, are likely to lead to job losses. Because of this relationship, any productivity agreements reached at firm, sectoral, or other level requires a national commitment that jobs will not be lost through productivity improvements.

      8. Where South Africa has lowered individual tariff rates below our WTO commitments and these have resulted in job losses, these must be increased up to the WTO binding rate. Alternatively, when tariffs next come up for reviewal we should just not reduce our tariffs any more than our obligations.

      9. Public service restructuring should not lead to retrenchments. This is based on an assessment of social backlogs in South Africa being so great that, even if certain sections of the public service may be overstaffed, public servants in these sections could be redeployed in other more needy departments or areas.

      10. Privatisation should similarly not lead to job losses. This may entail amendments to the NFA which prioritise pre-restructuring job impact assessments; elevate job effects in the taking of the restructuring decision; and which strengthen the job protection provisions in the course of restructuring.

      11. There needs to be a particular focus on ending retrenchments and evictions of farmworkers, in the context of current trends particularly on white-owned commercial farms.

      12. The Social Plan Agreement should be tightened to strengthen the sections seeking to avoid retrenchments.

    10. PROGRAMME NUMBER TEN: Monitoring Job Losses In The South African Economy

      11. Purpose: this programme, which is a support programme for Programme Nine (Stemming Job losses in the SA Economy), intends to generate data on the extent of job losses, to encourage a greater sensitivity to job losses, and to give policy makers in the public and private sectors, the information necessary to commit to an effective set of steps to stem job losses.

      Proposal: Labour proposes the following:

      1. A requirement be introduced from 1 January 1999, that all companies listed on the JSE should reveal in their annual reports, the extent of gross job loss and job gain, in the period under review in such reports.

      2. An amendment be effected to the Labour relations Act, to require that any company which employs more than 100 workers, and which retrenches more than 10% of its workforce in any given year, reports such retrenchment to the Department of Labour.

      3. All publicly funded corporations and institutions, such as the IDC and the DBSA, reports twice annually to parliament on the gross job loss and job gain in activities and enterprises that they finance and support.

      4. All parastatals report the job losses and job gains by region, to parliament, on the same basis as above.

      All the information above should specify the number of full-time permanent posts, and separately, the number of part time, temporary and contract posts, with the aim of progressively phasing out the non-permanent forms of employment.

    11. PROGRAMME NUMBER ELEVEN: Productivity & Equity

      12. Purpose: this programme seeks to foster and support initiatives to improve the efficiency and productivity of companies, and to harness this increased productivity for job creation and social equity.

      The agreement should reflect the realities of productivity in the South African economy. Specifically, it should recognise that labour productivity has grown in real terms each year for at least the last five years. In addition, Unit Labour Costs in real terms have decreased over this period. The share of national income received by labour has declined.

      The sources of inadequate productivity performance need to be identified. In our view, these include

      • Poor training of blue-collar workers

      • The effects of the low economic growth on capacity utilisation

      • The lack of world-class technology and work planning systems

      • Real weaknesses in the competence of the managerial layer

      • The residential policies of the past which require workers to spend long periods to and from work

      • An inadequate health system and too low an investment in preventative health care.

      Any productivity and equity agreement should include at least two fundamental requirements:

      • A guarantee that no jobs would be lost as a result of productivity improvements. The effect of this is to ensure that productivity gains are translated into job growth, not job displacement or job loss. This can only be effected when tied to a broader strategy of expansion of markets (domestic and export) and market share. A portion of the gain of productivity would therefore need to be reinvested into new productive capacity to create new jobs.

      • Closing of the wage gap. The effect of this is to ensure that the benefits of productivity is concentrated at the lower end of the income earners, in order to help finance the closing of the wage gap.

      A national productivity and equity framework agreement needs to be negotiated through Nedlac, to cover all industries. The agreement should cover the goals of improving managerial, labour, capital and raw material usage. It should cover equity issues such as the distribution of productivity benefits and the re-organisation of relations on the shop-floor.

      The main purpose of a nationally negotiated framework agreement is to secure commitments on the extent of productivity improvements that need to be effected.

      These would cover specific goals in regard to managerial output, as well as identifying improvements regarding workers and the employment of capital. The agreement would not hammer out the specific mechanisms to improve productivity, since these would need to be done at sectoral and company level.

      This framework agreement could then be used as a basis, in industry level negotiations, to address how to achieve the concrete targets of productivity improvements.

      The detailed plant level negotiations on the implementation of specific measures to be followed, should be negotiated between shop steward committees and managers.

      A productivity and equity framework at a national level would need to have clear commitments from business and government in a range of areas under such constituencies direct control, dealing with

      • the prerequisites for productivity growth

      • the sharing of productivity gains

      • the creation of new jobs, and

      • security of employment for currently employed workers.

    12. PROGRAMME NUMBER TWELVE: Job Sharing

      13. Purpose: this programme is intended to share the available jobs, where practicable, more equitably through a reduction in working hours and in overtime work.

      A number of countries, and some companies, have sought in recent years to expand jobs, or avoid job loss, through reduction in the hours worked by any individual worker. The BCEA provides strong support for this strategy, and labour now proposes that the provisions in the BCEA be strengthened to ensure that unemployed people be able to gain employment in full time jobs through the two mechanisms set out below.

      Proposal: Labour proposes that working time be reduced as follows:

      1. A reduction in the statutory hours of work without loss of wages, from the 45 set out in the BCEA to a 40 hour working week. While an 11% reduction in working hours may not result in a full 11% increase in employment, even the achievement of some of that target will result in significant job expansion.

      2. A reduction in the extent of overtime worked, through a campaign by unions and employers to discourage use of overtime, and instead the use of incentives to facilitate employment of full time staff.

    13. PROGRAMME NUMBER THIRTEEN: Expansion Of Industry Training.

      14. Status: this project addresses a critical structural problem to job creation and job retention, namely the low-skills base in the South African economy.

      Proposal: the proposal is to increase the training levy from the currently agreed 1% of payroll, to 4% of payroll over a period of time.

      There is an agreement between all four constituencies in Nedlac, that the systematic expansion of training, particularly focused on workers who are currently poorly skilled, is a prerequisite for sustainable economic growth. Three critical issues need to be addressed to ensure the appropriate training delivery namely

      • the correct training programmes, focused on developing appropriate skills

      • institutional capacity, in standards setting, in training delivery, and in monitoring the quality of training and

      • sufficient and adequate funding of such training.

      Many successful economies including developed economies with a much higher skills level and without the education crisis that South African has had, invest heavily in vocational training and skills development. Labour proposes the following programme.

      Phase One:

      The fast tracking of the existing agreements on the setting up of SETAs and the implementation of the 1% levy, from the currently targeted date of March 2000, to1 May 1999.

      Phase Two:

      The increase in the levy from 1% to 2% of payroll, with effect from 1 May 2000, and an equivalent expansion of the training programme.

      Phase Three:

      The increase in the training levy to 3% of payroll, with effect from 1 May 2001, and an equivalent increase in the extent of training.

      Phase Four:

      An increase in the levy to 4% of payroll, with effect from 1 May 2002, and an equivalent increase in the training programme, focused on the number of trainees, the duration of training, and the quality of training.

      This programme envisages a step-by-step improvement in training resources, which would go to the institutional arrangements set out in the National Skills Act, but it spreads it over a period to allow for the consolidation and expansion of the institutional capacity created in the Act. Particular attention should be paid to recruiting groups such as youth, women and the rural and urban unemployed, into the training programmes financed from the 20% "top slice" of the levy as provided for in the National Skills Act.

    14. PROGRAMME NUMBER FOURTEEN : Improvement of the Quality of Employment

      15. Labour proposes that the Job Summit commit all constituencies to improve the quality of employment in the labour market. There are a number of specific measures and programmes which can give effect to this commitment. The current tendency to downgrade the quality and security of employment should be reversed.

      1. The resort to temporary jobs and contracting out should be replaced to employ full-time staff wherever possible.

      2. The use of labour brokers should be more tightly regulated.

      3. Career-pathing should be a more active measure in all companies.

      The core components of a common approach include that in the first phase there be full extension of collective agreements providing for a living wage and provident/pension funds for atypical forms of employment.

    15. PROGRAMME NUMBER FIFTEEN : National Industrial Restructuring Programme to Create Job Creation

      16. Proposal: Labour proposes a series of initiatives between business, labour and government, in each industry, to identify the measures required to expand and protect jobs and improve conditions of employment. This in turn requires increases in our share of the domestic market and an expansion of exports.

      The form of the initiatives should be through initially convening industry summits, similar to the Gold Summit. The industries should examine, inter alia:

      • investment

      • work organisation

      • appropriate technology

      • new product development

      • marketing

      • tariff policy

      • industrial support measures

      • export opportunities

    16. PROGRAMME NUMBER SIXTEEN: Beneficiation Programme In Labour Intensive Parts Of The Economy

      17. Purpose: to create jobs in value added parts of the supply chain, instead of being primarily an exporter of raw materials.

      Proposal: The programme to promote the beneficiation of local raw materials should be intensified. The availability of steel, gold and a range of minerals, and agricultural products such as wool and wood, provide opportunities to process these raw materials in South Africa, and create jobs locally.

      There are two sources of funding to ensure world class manufacturing and support capacity, in these areas.

      First, the IDC should be required to allocate funds from its investment portfolio, and its reserves, to these job creation projects.

      Second, the private sector should commit to invest in job creating projects. The conglomerates should be challenged to support a major programme of raw material beneficiation, particularly in labour intensive sectors.

    17. PROGRAMME NUMBER SEVENTEEN: Tariff Review to Promote Job Growth

      18. Purpose: to avoid job losses caused by, or aggravated through, tariff reduction within the context of our international obligations.

      Proposal: Labour proposed that wherever tariffs are being reduced below the WTO binding level, or are reduced faster than required by the WTO levels in labour sensitive industries, they be frozen at the current levels, pending an investigation on the job impact, and a discussion about the possible increase to the WTO bound levels.

    18. PROGRAMME NUMBER EIGHTEEN: Improvement Of Customs And Excise Functions.

      19. Purpose: This proposal seeks to enhance the customs and excise infrastructure of South Africa, in order to protect existing jobs which are lost through illegal imports flooding the South African market.

      It is common cause between the parties that a large number of the jobs lost in consumer sensitive industries over the last five years has been the result of a massive increase in the illegal imports of clothing, electronics, shoes, toys and other consumer items. Indeed, unions have estimated two years ago that more than 30 000 jobs had been lost due to such illegal importation. The real figure is likely to be substantially higher.

      Proposal: The proposals which had previously been agreed to between the parties are set out as follows:

      • improving the technical resources at ports of entry

      • the setting up of manned border posts with the BLNS countries and having dedicated places of entry for goods

      • speeding up computerisation of all ports of entry and providing information on a timely basis

      • establishing the norm of a minimum of five percent of all consignments being checked and specifically applying this target to each employment sensitive sector

      • increasing the number of inspectorate posts

      • increasing the quantum and flexibility of remuneration packages for technically skilled customs staff

      • rotating customs staff between different posts

      • utilising private sector technical assistance for customs related activities

      • publicising the identities of companies guilty of fraudulent customs clearance transactions

      • improving and publicising the award system for information on customs fraud

      • including labour intensive sectors of manufacturing in the invoice analysis audit

      • providing an effective control over exports of goods subject to incentives

      One of the difficulties in implementing the above programme has been the lack of financial resources. Some progress has been made, but the Job Summit offers an opportunity for a speeding-up of the process, for the allocation of additional resources to ensure full implementation of the plan, and for a statement to be made at the Summit which will go someway towards creating confidence in the process.

      In addition to these, labour proposes the following:

      • that dedicated ports of entry be nominated for specific products, in order to ensure that limited technical capacity is concentrated for effectiveness,

      • the SADC project urgently deal with the Customs and Excise controls in every member country, and that tariff agreements be subject to demonstrated Customs controls procedures in participating countries,

      • a special anti-corruption unit similar to the Heath Commission be set up to focus on commercial customs crime.

      Current estimates are that it would cost about R600 million, over five years, based on infrastructure upgrades (R250 million) and the costs of additional salaries and training for an extra 700 persons. Once the above is in place, it is estimated that SARS will require R40 million per annum extra for normal operating costs. Some internal estimates by the VAT & Customs Enforcement Group calculate the value of revenue lost due to inadequate Customs controls, at R7 billion.

      It is now proposed that a task team be set up to determine the amount of money required to bring about the institutional changes required. This task team should report within the next few weeks, drawing on the work already done in this area within government, and report to the Supervisory Committee.

    19. PROGRAMME NUMBER NINETEEN: Support Measures For The Unemployed

      20. Purpose: Recognising that structural unemployment is a fundamental problem which won’t be resolved in the short-term, means that various support measures have to be undertaken to alleviate the plight of the unemployed, and to prevent conditions of destitution. This will also facilitate re-entry of unemployed people into employment, and limit the phenomenon of ‘permanently discouraged’ unemployed people, whose only recourse is to crime, or outside of the formal economy.

      Proposal: This programme involves a package of measures, some limited and short-term, and others longer term in nature. These include -

      • Basic income grants (see programme 20 attached)

      • Extension of UIF

      • Support for the social sector

      • Concessions for the unemployed

      Extension of UIF: The process of reviewing and restructuring the UIF needs to be expedited as a matter of urgency, to extend its coverage beyond the current extremely limited provisions, which cover less than 10% of the unemployed at any point in time. The incremental extension of partial UIF coverage, needs to be combined with more universal support measures, in particular the basic income grant. The financing of more comprehensive UIF requires greater contributions from the fiscus. In addition, we propose that the ceiling of income which defines contributors, should be increased, with appropriate capping for the higher paid.

      Support for the social sector: Measures to support self-employment of the unemployed need to go beyond the focus on small business, which is beyond the reach of most unemployed. In particular, mechanisms need to be established to support and promote the development of a social sector, in rural and urban areas, through providing the necessary training, technical support, information, and financial assistance. Special attention needs to be given to the promotion of co-operatives, both for retrenched workers, and those who have not entered the formal labour market. In the rural areas, these projects need to include the release of land specifically targeted for collective projects by the most vulnerable groups.

      Concessions for the unemployed: Special rates and concessions need to be introduced for the unemployed in all areas of society, including transport, public amenities, and other services. The private sector should also commit itself to this approach.

    20. PROGRAMME NUMBER TWENTY: Income Grant.

      21. Purpose: To provide a basic income grant for poor South Africans, particularly for the unemployed. This will have positive economic spin-offs in expanding effective demand for basic goods and would be in line with the Bill of Rights' commitment to expanded social assistance.

      Link to Job Summit: It is proposed that the Job Summit endorse the implementation of a basic income grant as a key element of the Welfare White Paper's commitment to the implementation of a "comprehensive social security system". Further, the Summit should emphasize the importance of ensuring that increased resources are made available for bringing the bulk of poor and unemployed people, who presently fall outside of the social security net, under the coverage of the social security system. The Job Summit should recommend processes for the establishment of an implementation plan for a Basic Income Grant system.

      It is important that the Job Summit make recommendations on this matter as widespread poverty and the high unemployment rate translate into hardship and insecurity for the millions of South Africans who will be looking to the Job Summit for some tangible assistance.

      Proposal: The implementation of a Basic Income Grant system, where all South Africans receive R100 per month. In order to ensure that the system targets the poor and unemployed, those earning over R3 000 p.m. pay back the amount they receive as a tax and people earning over R5 000 p.m. pay back double what they receive (amounting to a R1 200 per annum 'solidarity tax'). The balance should be financed through one of the other financing mechanisms proposed in this document.

      The key advantages of such a Basic Income Grant are that it will help to alleviate poverty; it favours large households - which tend to be poorer - as they pool income; it leads to a more equal intra-household distribution of income - empowering women and younger people; it contributes to making people economically active through giving them access to cash resources; it contributes to improved health status and improved ability of children to learn at school; it stabilizes consumption spending and demand - particularly increasing demand for locally produced goods; reduced administrative burden and reduced danger of corruption and transfer is an entitlement and is not dependent on the discretion of officials; includes everyone in the financial system (if grant is paid directly via bank accounts).

      The financial implication of the implementation of a Basic Income Grant of R100, assuming a take up rate of 75% in 6 years, is estimated as follows, for 1999 - 2000 R8-R9bn; 2000 - 2001 R13-14bn; for 2001- 2002 R16-17bn. Peaking at about R23bn in 2004 - 2005. If the basic grant is set at R50 per month, the cost will begin at R4-5bn and peak at about R11bn.

      If targeting is preferred - and the Basic Income Grant is targeted at say the poorest 50% of households - the level of transfers will be reduced, but the administrative costs and potential for corruption would be increased. Under such a system, transfers would begin at about R6bn in 1999- 2000 and peak at approximately R15-16bn in 2004 - 2005.

      Any system aimed at targeting only the 'unemployed' with a transfer of say R200 per month will require a similar level of resources as the targeting of the poorest 50% of households, and will lead to similar increases in administrative costs and increased potential for corruption.

    21. PROGRAMME NUMBER TWENTY ONE: Social Plan

      22. Purpose: The purpose of the Social Plan is to put in place a key active labour market strategy which can assist in avoiding job loss and minimising the negative impact of job loss in declining sectors through the commitment of resources to the appropriate re-skilling of workers.

      Link to the Job Summit: It is proposed that the Job Summit should advance the negotiations that have been taking place in Nedlac and should map out a clear process with regards to the implementation of Social Plan policies.

      Further, parties to the Job Summit should:

      1. make a commitment that the criteria for Social Plan policies should embrace the widest range of industries and companies, with differential thresholds outlined for the application of Social Plan policies to various sectors and

      2. in line with the overall goal of minimising job loss, a commitment should be made that the existence of Social Plan policies will not be used as a justification for job shedding policies in the private or public sectors.

      Proposal: Social plans must focus on improving individual survival skills and maximising the chances of obtaining sustainable employment in the shortest time possible. Positive action strategies need to be integrated into social plans, prioritising employment opportunities for the most marginalised sectors of society.

      Any tendency to shift inappropriately or prematurely to retrenchments needs to be checked through legislative and institutional means. Legislative and institutional arrangements must place maximum incentive on exploring job retention strategies, and implement a more legally rigorous process aimed at ensuring all possible steps have been taken to avoid job loss.

      Clearly defined criteria need to be formulated outlining the economic circumstances under which retrenchment can be seen as unavoidable, aimed at ensuring that retrenchments are not used as ‘quick-fix’ economic solutions.

      Job Impact: This primary employment impact of Social Plan policies will be to limit job loss and limit the long-run impact of job losses in declining industries, through enhancing the re-employment potential for retrenched workers.

      Post Summit process: The Job Summit should map out a clear and speedy process through which Social Plan policies will be agreed upon and effectively implemented.



  4. Financing Mechanisms

    1. FINANCING MECHANISM ONE: Financing mechanism: Umsobomvu Fund

      2. Labour is strongly opposed to the demutualisation process involving Sanlam and Old Mutual, and accordingly do not support the proposal that a levy be introduced as finance for the Umsobomvu Fund. We are currently meeting with the two mutuals, in an effort to seek a resolution. We put forward an alternate proposal to finance the Umsobomvu Fund, instead of the demutualisation levy. We point out that this proposal is subject to agreement that the demutualisation levy is inappropriate on the grounds that demutualisation itself is not an appropriate programme for Old Mutual and Sanlam to follow.

      Labour proposes that the value of one days output of the South African economy be donated to the Umsobomvu Fund. The value of output would embrace the return to all factors of production, including wages and salaries of workers.

      A call would be made on all workers and business people to register with the Umsobomvu Fund for such a contribution, and publicity should be obtained through the local media for participating companies. Shop stewards and managers would decide whether to work on a weekend or public holiday without additional remuneration, or whether to forego one days pay, and the value of one days production (excluding pay).

      Each participating company would receive the president’s Umsobomvu Award. The value of the contributions from this source would be between R1 billion and R2 billion. We further propose that the state supplements this with a fiscal transfer.

      There are certain dedicated job creation levies/taxes proposed elsewhere in this document and proposed by other constituencies. Consideration should be given to some of these funds being housed in the Umsobomvu Fund.

      We propose that the Fund be governed by a civil society board with nominations from government, labour, community and business.

    2. FINANCING MECHANISM TWO: Prescribed Asset Requirement

      3. Purpose: To unlock resources in the retirement industry, and the long-term assurers, which are currently being invested primarily in speculative instruments. The redirection of a portion of these funds to social and job-creating investment can be achieved through this programme. While this will involve slightly lower returns on investment, the social and long-term economic impact of leveraging this finance will more than compensate for this sacrifice by workers and other members of these funds. At the same time, the investment in government bonds presents a low or no risk avenue for investment, and hence is part of prudent financial management of funds.

      Proposal: All retirement funds, the life assurance industry, and the assets of the Public Investment Commissioner, should be required by legislation to invest at least 10% of their asset base in government bonds dedicated to social investment, and employment creation.

      The first five percent of the prescribed investments should be dedicated to housing and infrastructure public works programmes identified in programmes one and two. There should be a bias towards investments in activities which are labour intensive and which have high employment multipliers in order to maximise the job-creation impact of prescribed assets investments.

      This prescribed investment requirement is far smaller than that imposed by the previous government. Nevertheless, this moderate requirement could leverage at least R 50 billion for social investment given that the asset of these institutions is well over R500 billion. Although the risk on prescribed asset investments is low, government should act as a guarantor to ensure that positive rates of return are earned on these investments.

    3. FINANCING MECHANISM THREE: Job levy / Solidarity Tax

      4. Purpose: The Deputy President in a speech to parliament on the 29th of May 1998 suggested the introduction of a Solidarity Tax, along the lines of the tax introduced in West Germany in 1991 to fund unification. He asked the question "are the relatively rich who as the result of an apartheid definition are white, prepared to help underwrite the upliftment of the poor, who as the result of an apartheid definition, are black". Labour supports the adoption of a similar Solidarity Tax, adapted to South African conditions.

      In West Germany a 7,5% surcharge was imposed on individual income tax, as a solidarity tax. In South Africa a RDP tax was introduced. Unlike W Germany however, it was on a one-off basis. Further, in South Africa, there was a cut-off point, below which low-paid workers were not taxed.

      Proposal: We propose that a solidarity tax, specifically dedicated to employment creation projects, be levied on all South Africans, above a cut-off point, to be negotiated. The tax could be levied for an initial period of five years, subject to a process of review, to ensure it is achieving its intended objectives. In order for people to be able to directly see and monitor where the proceeds of this tax are channeled, it should be placed in a dedicated fund, such as the Umsobomvu Fund, and should be a joint government/ civil society fund.

      The tax should not apply to the low-paid, since it would be self-defeating to drain meagre resources from those living on the edge of poverty, and force them into even greater dependence on state assistance.

    4. FINANCING MECHANISM FOUR: Progressive Taxation

      5. Purpose: This proposal is intended to restructure the taxation system in the medium and long term, to ensure that sufficient resources are generated for the fiscus to sustain the on-going programmes, and to do so in a manner which is equitable and progressive.

      Proposal: Labour proposes the following:

      1. The re-organisation of the income tax system to ensure greater progressivity from the top to the bottom.

      2. The setting of a 55% tax rate on annual incomes above R400 000.

      3. The introduction of a capital gains tax, with a minimum threshold.

      4. The introduction of a special excise tax on luxury goods.

      5. An increase in the level of corporate taxation. A campaign to close loopholes in company tax and to take strict action against the 30% of companies who currently are not paying tax.

      Labour has tabled detailed motivation for each of the above at Nedlac, and will make such available at task group level.

    5. FINANCING MECHANISM FIVE: Utilising The SASRIA Funds.

      6. Purpose: This proposal is intended to be a source of funding available to the state for job creation programmes.

      Proposal: The South African Special Risk Association (SASRIA) was established in 1979 in terms of Section 21 of the Companies Act to provide insurance against loss of property due to protest and civil disturbance. Over the years, SASRIA has accumulated substantial reserves, and by the end of 1979, the accumulated reserves amounted to R 9, 4 billion. The accumulated reserves has been described as substantially exceeding prudent reserve requirements, and we understand that cabinet has considered that SASRIA's surplus assets should be applied towards the reduction of state debt. We now propose that R5 billion of the SASRIA reserves be applied towards job creation, since the longer term social and economic benefits of such a massive injection of funds applied towards job creation is the most effective use of this resource.

    6. FINANCING MECHANISM NUMBER SIX: Pay As You Go System.

      7. Purpose: this proposal is intended to release resources in the short to medium term, to the goal of job creation and the meeting of basic needs.

      Proposal: Consideration should be given to the introduction of a Pay As You Go system of financing the public sector pension fund. Currently, the resort to a largely ‘fully funded’ system results in huge commitments from the budget to the payment of pension contributions and interest on loans made by government from these funds (to finance, among others, these very payments!). Through a new system, in the short to medium term, substantial resources could be released for job creation, generating in its wake more jobs and taxes, and greater economic growth.

      Such a proposal would have to be structured to ensure no erosion of benefits of past and present workers covered by the pension fund, solely as a result of the change in the funding mechanism.

    7. FINANCING MECHANISM NUMBER SEVEN: Using The Resources Of The IDC / DBSA / CSIR.

      8. Purpose: to identify funds available in the IDC, DBSA and CSIA, which would be deployed to job creation programmes.

      Proposal: we propose that a four-person committee be set up to report within two weeks on the sources of funding available in public institutions, which have either development funding, or industrial research funding available, which may prudently be deployed towards job creation.

      One instance is that of the Industrial Development Corporation (IDC). The IDC has received a new mandate from government, which incorporates the objective of job creation. The IDC currently generates an after tax profit of about R450m, of which about R60m is paid to the state in the form of a dividend. In addition, it has reserves of about R8 billion. In the case of the IDC, a clear directive that the current annual profit, after payment of current taxes and dividends, together with a portion of the reserves be dedicated to the financing of those industrial development projects which would maximise sustainable job creation, is required. A sum of R1 billion or more could be set aside on this basis.

      Similarly, the CSIR undertakes a range of scientific and technical research, in co-operation with the private sector. The CSIR needs to ensure that its resources are deployed in a manner which maximizes the jobs, which can flow from the application of new technologies or new processes.

      Appropriate reporting requirements should be set for each of these institutions, to ensure that there is an explicit setting out of the results of their deployment of resources.

    8. FINANCING MECHANISM NUMBER EIGHT: Training Levy.

      9. Purpose: this proposal sets out the financing mechanism for a dedicated levy to finance industrial and vocational training.

      Proposal: the National Skills Act sets out a mechanism to levy 1% of payroll for purposes of training. We propose the following:

      Phase One:

      The fast tracking of the existing agreements on the setting up of SETAs and the implementation of the 1% levy, from the currently targeted date of March 2000, to1 May 1999.

      Phase Two:

      The increase in the levy from 1% to 2% of payroll, with effect from 1 May 2000, and an equivalent expansion of the training programme.

      Phase Three:

      The increase in the training levy to 3% of payroll, with effect from 1 May 2001, and an equivalent increase in the extent of training.

      Phase Four:

      An increase in the levy to 4% of payroll, with effect from 1 May 2002, and an equivalent increase in the training programme, focused on the number of trainees, the duration of training, and the quality of training.

      This programme envisages a step-by-step improvement in training resources, which would go to the institutional arrangements set out in the National Skills Act, but it spreads it over a period to allow for the consolidation and expansion of the institutional capacity created in the Act.





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