Volume 11, No.1 - Feb- May 2002

Transport

 

Labour saves government from disaster

 

 

By Karl von Holdt (NALEDI Senior Researcher/adviser to SATAWU)

In 2000 government announced its plan to break Spoornet into separate businesses and concession them to the private sector. Last year, after more than six months engagement with SATAWU and the two Fedusa unions, Salstaff and Utatu, the government has accepted that this plan makes no developmental, business or financial sense.

What persuaded government to change its view? What enabled labour to engage so successfully in this case?
The main business of Spoornet is rail freight. It also operates the long distance passenger service, Shosholoza Meyl, and the luxury Blue Train. The government plan was to separate the highly profitable heavy-haul operations - CoalLink which runs to Richard's Bay, and Orex which runs to Saldanah - from the loss-making General Freight Business (GFB).

CoalLink and Orex would be concessioned to private-sector operators. GFB would be forced to become profitable through a drastic turnaround and then it would be concessioned. The low-density GFB lines would be separated off, some to be concessioned to low-cost operators and others to be closed. Shosholoza Meyl and the Blue Train would also be concessioned.

There were three main aspects to the labour critique of government's proposals. Firstly, government had not assessed the socio-economic costs of its plans. Operating as a stand-alone business would force GFB to close unprofitable lines and abandon unprofitable customers. This would mean disconnecting some regions from the rest of the country by terminating their access to cheap transport.

It would also force more freight onto the roads, increasing the costs of road maintenance and making transport more expensive for government and citizens.

For example, research into eight loss-making low-density lines in KwaZulu Natal showed that the combined annual losses of the eight lines amounted to R30-40 million. However, if these eight lines were closed the additional annual cost to the state and ultimately the public of road upgrading and maintenance to carry the diverted freight would be R130 million per annum. There would also be additional costs such as pollution, traffic congestion and road accidents.

It is for these reasons that many countries acknowledge that rail transport is cheaper and more desirable than road transport, and provide various forms of state support for rail.

Secondly, no financial or business analysis had been made of GFB to assess whether it was in fact possible to establish it as a sustainable stand-alone business. Labour argued that the profits from CoalLink and Orex were necessary to sustain GFB. Without these GFB would be unable to fulfil its developmental role of attracting additional freight from road to rail and continuing to operate unprofitable lines and traffic.

Thirdly, a drastic turnaround programme would entail unacceptably high levels of job losses and retrenchment.
In response to labour's opposition, the Ministers of Public Enterprises and Transport agreed at a National Framework Agreement meeting to establish a joint government-labour Task Team to investigate the restructuring of Spoornet. After about three months, when agreement had been reached on some issues, a new technical working group was established, including management, to analyse the business and financial plans of Spoornet more closely.

The results of the technical working group demonstrated quite clearly that an integrated Spoornet which retained Orex and CoalLink was completely viable, and could meet its own investment requirements. This disproved Government's argument that Spoornet was not viable, and would require the injection of capital raised from concessioning.

The technical working group also demonstrated that a stand-alone GFB would never be a viable business. If the profits of Coallink and Orex were removed, GFB would either have to concentrate on a small number of profitable lines, thus reducing its volumes to an unacceptable extent, or depend on a state subsidy.
Government was shocked by these results. It was clear that the DPE officials had not fully understood the business of Spoornet, and nor had they managed their own consultants effectively. The facts could not be denied, and paved the way for an agreement between Government and Labour. The final agreement was:

The results of the technical working group also demonstrated that for an integrated Spoornet to be self-sustaining, efficiency improvements would have to be implemented at GFB, focusing on operations, technology, customer service, marketing and productivity. These could see the loss of up to 8000 jobs over five years. Efficiency and job losses would have to be negotiated with the trade unions.

Lessons for Labour

Several aspects of the labour engagement with government over the restructuring of Spoornet may be useful for affiliates facing restructuring in other parastatals.

1. In our strategy of engagement we never lost sight of our focus on issues of socio-economic development on the one hand, and the issue of sustainable and logical business operations on the other. These were the key weaknesses in the proposals of government and its advisers, and we avoided the temptation to focus only on the issue of job loss. At one point, government officials offered to find new ways to save jobs if we would accept concessioning Coallink and Orex. We refused.
2. The trade-off for engaging with the issues of restructuring was that we had to accept that efficient operations would be necessary if we were to save Spoornet from privatisation, and this would mean accepting job losses. This was an extremely painful conclusion, but privatisation would have meant much greater and more rapid retrenchments of 20-27,000 workers. It is important to note that the agreement does not mean that labour agrees with the figure of 8000 job losses. Our attention will now turn to engaging with operational and efficiency improvements in order to save as many jobs as possible.
3. The process of engagement was extremely demanding, requiring large amounts of time, focus and technical expertise. We had to attend 2 - 3 meetings per week over six months, and prepare intensively in between. SATAWU committed its policy officer to working at least half-time on the Spoornet issue, and NALEDI provided two advisers working between half and full-time. The intensity and complexity of the engagement process made reporting back to Spoornet shop stewards difficult, and the union was not that successful in doing this.
4. The united front between SATAWU and the two predominantly white unions from Fedusa strengthened the labour position. The latter endorsed NALEDI's appointment as advisers, and their own expertise was a very important factor in our success.
5. Management' s participation in the process was crucial, as neither government nor Labour have access to the kind of information and expertise that they have. Their participation is also crucial to ensure their buy-in to the final agreement.
6. Publicity and mass action were important factors in Labour's engagement with government. It is important to remember that it was a massive strike by railway workers in 1995 that forced government to negotiate the NFA.

COSATU's ongoing campaign against privatisation, and SATAWU's participation in the International Transport Federation campaign to save the railways, both ensured that government took our argument seriously. We also captured public attention by using the newspapers, radio and television, as well as parliamentary meetings, to make our point.

The SATAWU engagement with restructuring revealed government's ideological predisposition towards privatisation. Ironically, it is labour that is generally accused of an ideological attitude to privatisation. In reality, it is government that tends towards an ideological approach.

In Spoornet, as in other cases, the trade union team focused on issues of socio-economic development and sustainability. In contrast, the attitude within DPE was that privatisation would introduce efficiency, competition and cheaper services. It was therefore predisposed to accepting the proposals of its privatisation consultants without rigorously scrutinising their business and economic implications.

Fortunately, government was not monolithic. There were officials in DPE and other departments sufficiently committed to socio-economic development to change their minds on the basis of the evidence. In the end, it took labour to save government from itself.

 


By Tony Ehrenreich, COSATU Western Cape Regional Secretary

 

In different parts of the country rail commuters have been taking action to demand a better train service from Metrorail. In Pretoria, thousands of protesters blocked tracks in protest at the withdrawal of services they needed to get to work. In Cape Town, with the backing of COSATU, commuters have won a significant victory.

 

On 4 January 2002 Cape Metrorail announced that 84 train services out of 641 (15%). were to be cut. For thousands of commuters, already having to put up with poor service and dirty, overcrowded, dangerous and crime-ridden trains and stations, these cuts were an outrage.

 

COSATU's Western Cape Region immediately went into action. They condemned the cuts as "a direct attack on social services on which working families depend". They demanded talks with Metrorail to secure the restoration of the services.

 

Metrorails's excuse was that they had not been complying with the Basic Conditions of Employment Act by asking staff to work longer than the maximum of 12 hours a day. But, said COSATU, "the implementation of the Basic Conditions of Employment Act can never be used as an excuse to justify the inept management of managing the possible impact of the working hours within Metrorail." It was a direct result of poor management at Metrorail and the inability of the company to comply with the laws applicable in South Africa.

 

The federation began talks with Metrorail and wrote to Transport Minister, Dullah Omar, but failed to make any progress. Metrorail refused to reinstate the services, even though the unions had agreed to work the required hours and, together with the company, to request an exception from the Basic Conditions of Employment Act to the Department of Labour.

 

When Metrorail was met with co-operation from the unions they moved the goal posts and refused to move towards reinstating the services in the short term, while a longer-term solution was being discussed
COSATU had no alternative but to apply for a Section 77 Notice to Nedlac. In support of the application COSATU wrote:

1. Its trains are rail worthy;
2. The conditions and maintenance of its stations are improved;

 

Then, on 28 February, Metrorail made this announcement on their Internet site: "Following our recent service cutbacks, the following trains had been re-introduced into our rail service since, Monday 14 January 2002. The latest revision takes effect as of, Thursday 28 February 2002."

 

It then listed a number of reinstated train services. This was a small but important victory for the union movement. It shows that when commuters are quiet, services are cut, but when they take action, the management can be forced to back down. But the fight for better service, clean trains and stations, an end to crime and free services for the unemployed goes on.