JOBS SUMMIT

On March 3, 1999

Support Labour’s call for one day’s wages for job creation!

Work for jobs for the unemployed!

Scrap poverty!

On March 3:

Workers must donate their wages
Managers must donate their salaries
Owners of the workplace must give the profit for that day

The money will go into a Special Trust Fund to support projects agreed at the Jobs Summit in October 1998.

Hiccup over GEAR

If we are to believe some media reports, the only issue that Cosatu ‘won’ in the Jobs Summit was that of housing. However, cde Vavi, Cosatu Deputy General Secretary, believes that "important gains were made. Many of the agreements reached go beyond statements of intent or principle; they represent serious interventions at policy level."

Other victories for labour are:

the buy local campaign
the youth brigades and Aids brigades
learnerships.

"There were also some issues that we never thought would even get onto the agenda. These were issues like prescribed assets – that certain funds must be put into job creation or into infrastructure; the issue of the restructuring of the GEPF," says Vavi.

When negotiations started, "other parties started from outright rejection of labour’s proposals as ‘unrealistic’. Through the negotiations process we managed to get undertakings to consider all these issues," adds Vavi.

One of the big hiccups at the Jobs Summit was over the issue of Gear. Cosatu’s understanding was that the Anc had agreed in the Alliance Summit that the framework of Gear would be changed. However when parties got to the Summit, it became clear that the Anc’s understanding was that the adjustments would be done "within the framework of Gear" and did not mean a change to Gear at all.

The biggest ‘loss’ at the Jobs Summit for Vavi was the issue of retrenchments. Cosatu’s proposal called for the amendment of the Lra to allow for workers to strike on an employer’s decision to retrench. "We thought we had an agreement until a few days before the Summit. We need to decide where we go on this issue now."

And what about Government’s proposals on Sdis and Idzs – what is Cosatu’s view on these? "Our main worry is over the displacement of labour from one area to another. That would be defeating the purpose. Also the export orientation of these projects. We want increased demand created internally. But we do like the idea of promoting tourism. But let’s face it – tourism is targeting those who can afford to fly in. There is no attempt to promote tourism among the working people!"

March 3

But perhaps the major issue coming out of the Jobs Summit for labour is that of ‘one day’s output for job creation’. The date has been set for March 3.

"It is we who have proposed it. We must do it and get non-members and management to do it. Workers must give their wages. Management are expected to contribute in two ways on that day – first by giving their own salaries to job creation and second by giving the profit of that day away," explains Vavi.

Unions must start discussing this issue now. How are they going to collect this money – will it be through signing individual forms with their employer, through a Bargaining Council agreement or through a levy on all members through the Union’s constitution that will come to the Union. "That debate must begin now for each and every affiliate," advises Vavi.

Labour will be launching a trust for this money sometime in January 1999. Each affiliate has to put in an initial R1000. "We have also asked investment companies to show their commitment and to put money into the trust. Once it is set up, Exco will elect worker reps to sit on the Trust. We will also invite prominent members of society to serve on it," adds Vavi "and if business offers significant contributions to the Trust, we may want to extend and invite some business reps to sit on the Trust as well."

The money raised on this day will be put into one of the Jobs Summit projects.

What we wanted	What we got
Changes to Gear	Changes to Gear targets but the Gear framework is not changed. agreement that the RDP is the primary policy of government and the country

Financing mechanisms: one day output prescribed assets; restructuring of Gepf solidarity tax/ job creation levy on cos greater government spending on job creation increasing progressivity of tax system increasing training levy over time	Agreed Task force to look into this and Gepf Rejected Resources provided in MTEF rejected parties acknowledged that this will need to increase in future

Projects public housing programme Youth brigades Income grants for unemployed Amendments to lra Productivity agreement Sector summits Tariffs Social plan Customs and excise Buy local	1^st phase 50 000 units with labour intensive construction methods and for rental. working for water, Clean and Green Cities Campaign, Community Based Public Works Programmes; Aids brigades Government is committed to implementing Rejected Rejected agreed for those sectors that have high potential for job growth; DTI to assist with financing government will include Nedlac parties in next round of WTO negotiations. Framework agreed on to avoid retrenchments agreed, government has allocated R734m to the programme over 5 years. special label to be given to those products that conform to certain criteria: must be quality product, and conform to environmental and labour standards

Extra issues agreed education and training learnerships Umsobomvu Special groups: women special groups: those with disabilities	Programmes will be aimed at improving schools parties will support learnerships in terms of Skills Development Bill government to establish from proceeds of demutualisation. Projects will target women to improve their skills, education, improve their access to finance for SMMEs, provide early childhood education for ages up to 6. quotas to ensure that disabled people are employed, get procurement contracts from the public sector, receive training.

In Cosatu Regional Shop Steward Councils held across the country in mid-January, delegates discussed and planned how to make March 3 a success. If you did not attend find out how you can take up this campaign, in your factory, your region. Without your support this campaign will fail! Let's show that we do care about unemployment, we do care about poverty, we do care about making a better life for all!

Restructuring the GEPF

One of Cosatu's proposals to the Presidential jobs Summit was a call for the how it is going to be restructured, but it was agreed that there will be a task force and a process to look into the matter," says cde Zwelinzima Vavi, Cosatu Deputy General Secretary.

In this article we summarise Cosatu's views on why the fund should move away from the objective of being fully funded.

Background: GEPF's impact on Dept

Since mid 1980s, government debt has risen dramatically. In 1989 it was just R80bn, but by 1996 it had increased almost 4 times to R300bn. This massive rise means that government spends billions of rends each year 'servicing the debt' - paying the interest on the money that it owes. In 1997/8, of government's national budget of R186 billion, it had to spend R40 billion to 'service its debt'.

Unlike many other African countries, only 5% of this debt is owed to institutions outside this country - i.e. foreign debt. 95% of this debt is owed to institutions in this country.

One of the reasons for the big increase in debt was the apartheid Government's decision in 1989 to switch the GEPF from a 'pay-as-you-go' Fund to a 'fully-funded' fund. (see box on next page)

This resulted in the growth in the Government Employees' Pension Fund's assets from R31bn in 1989 to R136bn in 1996. It also meant that in 1991 alone, the surplus left after paying all the beneficiaries their pensions, was R14billion. And from then the surplus has been growing by about the same amount each year. By the end of 1996, this surplus had reached R111 billion.

But by changing the Fund to a 'pay-as-you-go', or to something between fully-funded and 'pay-as-you-go', it means that government could access and use some of the surplus for accelerated development.

Why do some people fear a 'pay-as-you-go' system?

Some fear that if the Fund becomes a 'pay-as-you-go' Fund, then it makes workers' pensions more vulnerable. Because if many workers were to suddenly lose their jobs and lots more people suddenly needed paying out, then the number of workers left to contribute to the Fund might not be enough to cover the benefits that were being paid out to members.
Others fear that once government starts to take the accumulated assets of a Fund or some of its surplus, then there is no knowing when it will stop and the real losers will be the beneficiaries of the Fund.

BUT:

At present, the Fund is easily funding benefits from the contributions of government and the workers themselves, even though the proportion of pensioners to public sector employees may today be higher than it is likely to be in the future. In 1996, contributions from employers and workers were almost R 10 billion, while total payments were just over R8billion. Income from assets was almost R 13billion. As the proportion of pensioners to employees declines in the future, this should take even more pressure off the pension fund.
Government has clearly stated its commitment to meeting its pension obligations and has signed collective bargaining agreements guaranteeing pensions to public servants. This is why public sector unions like Nehawu, Sadtu are supporting calls for it to be restructured. Their logic is that if government can free more money, then it can spend it on securing more jobs for teachers, nurses for the future. A secure job for the future is more use than a severance package!

What will the benefits be of restructuring the GEPF?

If government had shifted to a 'pay-as-you-go' system it is estimated that government would have had an extra R 10,2bn (2,1% of GDP) to spend in 1996 and R8,5bn (1,6% of GDP) in 1997. Share of government debt to GDP (in 1997) would have been 29,9% instead of the actual reported level of 58,6%. This would have dramatically improved South Africa's risk profile internationally.
This extra money could minimise controversial, painful and short-sighted cut-backs. For example in health and education expenditure, which, as outlined in the MTEF, (Government's Mid Term Economic Framework) are set to decline in real terms over the next few years. (see pages 35-36)
· At the moment, more and more of government's money that it is putting into the GEPF is being invested in equities (on the stock exchange) by private asset managers. If . the Fund were to be restructured, government would have more discretion and control over a greater portion of its fiscal resources.

How could it be restructured?

It could change from a pre-funding system to one which only allocates the actual pension payments for any given year. Or Cosatu would be prepared to agree somewhere between these two, since the current fund is only just more than 70% funded. Any change would have to be done in a very transparent way.

(Thanks to Cosatu Parliamentary Office and Sangoco/Aidc for information)

More about the GEPF

Who does the GEPF cover?

It covers all people employed by government across the country.

What is a 'pay-as-you-go' pension fund?

Together with employee contributions, only that amount is allocated in the budget to the GEPF that is estimated will be paid out that year.

What is a 'fully-funded' fund?

More money is received in the Fund from government and those still working, than is paid out to those not working. The surplus is then invested to cater for future needs. Pensioners are paid from income generated by investment capital, not just from contributions by those still working. At the moment the GEPF is just more than 70% funded.

Why did the fund change from a 'pay-as-you go' to an almost 'fully funded' fund?

Cosatu suspects that it changed because "white civil servants under the previous regime felt insecure about their pensions under the new government."

The previous regime saw it as a way of protecting civil servants' pensions after the new government came to power.