The 1998/9 budget released on 11 March fell far short of COSATU's expectations. We highlight its positive (+) and negative (-) aspects, based on COSATU's response to the budget.
+ The budget is not about figures, it is about people.
+ The finance minister has accepted COSATU's assertion that fiscal policy should be about development, addressing social backlogs (the social deficit) and setting our country on the new growth path envisaged in the RDP. In other words, the budget is a tool for transformation.
GEAR
- The 98/99 budget is still a Gear budget and fails the test the Minister set himself.
- The budget's overriding concern is to meet the arbitrary macro-economic targets set out in Gear. The country continues to be held hostage by the rigid adherence to the budget deficit target. With growth down and taxation constrained by Gear targets, spending in critically needed areas is squeezed out. It is not possible to have a developmental budget within an anti-developmental economic framework.
- Gear's ideologically driven approach results in the budget pursuing contradictory objectives. It expands social spending such as health and education, but cuts expenditure on those expected to deliver these services, i.e. teachers and nurses.
- The Minister failed to confront the harsh reality that Gear has failed to meet key employment creation and growth targets as well as other key social targets.
- Gear is on track only in areas which please the captains of industry - deficit reduction, export orientation, public sector reduction and tax concessions for companies. It has failed dismally in areas concerning the poor and the working people.
- The budget largely ignored the Alliance agreement, and the announcement after the recent ANC Lekgotla, that the strategy needs to be adapted in the light of evolving realities and the need to address the social deficit.
Social Spending
+ There is a significant increase in social spending in some areas, such as education and health.
- There are real reductions in areas such as housing.
- The 4% increase in old age pensions does not keep pace with inflation.
Job Creation
- The budget's non-expansionary, low growth orientation is not conducive to attacking unemployment.
+ The introduction of the fund for job creation, although not from the fiscus, is aimed at tackling unemployment.
- However, no clear strategy for job creation was spelt out, in particular, to move business away from its current job-destroying path and its failure to invest in new jobs. Government incentives to business to create jobs have failed, and other measures are needed. Cosatu has made a range of proposals on this, including linking a range of governments instruments such as tax measures, prescribed assets, procurement policies and industrial subsidies to job creation.
- The budget lacks any evidence of the large-scale infrastructure and public works programmes envisaged in the RDP.
- The budget envisages an actual cut back in public sector jobs, after the public sector has shed tens of thousands of jobs in recent months.
- A far more imaginative strategy in needed from government if the Jobs Summit is to have any hope of success.
Public Sector
- The budget takes forward the ideological war cry of cutting back on the public service. Increased social spending will be meaningless without adequate, trained public servants to deliver these services.
- The proposed cut back is a serious problem, not only for unions, but for all communities which rely on the public sector to serve them.
- The R3,375 billion set aside for conditions of service is R3 billion less than the amount agreed to for 1998/9 in the three-year agreement for public service workers. This undermines public service transformation as well as trust in the collective bargaining process. Cosatu will not accept a renegal on the agreement. We will urgently enter into discussions with our allies and government, to finalise a national framework agreement for restructuring of the public service.
+ We welcome the commitment to root out corruption in the public service and pledge our full support for this campaign.
Economic services, infrastructure and capital spending
- The reduction of investment in capital investment, infrastructure in certain areas, and economic services is a worrying trend. Lack of investment in infrastructure and industrial development will impact negatively on job creation.
- The cutback in the national public works programme is extremely disturbing.
Provinces
+ Strong federalism is inappropriate for the situation in our country. To that extent, we support the regulation by government of economic management in the provinces, in order to advance national objectives. However, more clarity is needed on how this system will operate.
Taxation
+ We welcome measures to remove fiscal drag and reduce the personal income tax burden on low and middle income earners.
+ We welcome measures to improve efficiency in tax collection and support the call for a new tax morality.
- We are not satisfied that meaningful steps have been taken to move towards a progressive taxation system. Company tax continues to decline as a portion of the total revenue, while personal and indirect tax, which falls on working people, continues to provide the lions share. The current VAT system is regressive and unjust and needs to be restructured.
- The agreement on a top-up system to compensate low income earners for loss of income arising from taxation of retirement funds has not been implemented. We call on them to do this urgently.
MTEF
+ The MTEF is in principal a good method for planning and Cosatu supports it as a planning tool.
- However, it is cast in rigid macro economic parameters and will constrain all other elements of the budget. We will continue to promote the adoption of a developmental MTEF with appropriate budget parameters.
Growth
- The 1997 growth rate of 1,7% is far below Gear's projected 2,9% growth rate. This is not sufficient to solve unemployment, poverty and delivery of basic needs.
- Current monetary and fiscal policies slow economic development, choke job-creating investment and could prevent future economic growth and compromise the social expenditure goals.
Debt management
- There is no reference to strategies to restructure and reduce our debt, despite proposals, including restructuring the public sector pension fund, which would release urgently needed resources for social development.
Process
- The ministry has failed to produce a Bill which meets constitutional obligations (section 77) to submit the budget to parliamentary scrutiny.
- The ministry has failed to produce a white paper on budget reform. Cosatu nevertheless remains committed to engage in meaningful parliamentary processes, as we are doing on a daily basis, to advance our views on a range of issues.
Conclusion
No one questions the fact that the democratic government cares. The real issue is whether it allows itself to be held hostage by those interests foisting inappropriate economic strategies on our country, or is prepared to embark on bold measures to unleash the energies of our people, on whom the economic potential of the country hinges. Cosatu remains committed to engage in dialogue to deal with the areas outlined above. Failure to address these will make it difficult for us to succeed in eradicating poverty and inequities in incomes and wealth in our country.
The countdown to the much-publicised presidential Jobs Summit has begun, with all major constituencies expected to table policy proposals in Nedlac by 20 March.
Cosatu held a special executive committee meeting on 10 March to discuss the federation's approach to the summit. This will be followed by a Labour Caucus on 16 and 17 March to reach agreement on a framework for an employment strategy which will be presented to Nedlac.
Business, government and the community constituency are scheduled to table documents by 20 March.
No date has yet been set for the Summit, but it now seems unlikely that it will take place before July this year.
Once all parties have submitted their proposals, the Nedlac executive committee will meet on 27 March to discuss the process of engagement leading up to the Summit. This is likely to take place during April and May.
While Cosatu already has a draft document, it wants time to allow for in-depth discussion on the proposals at its central executive committee from 31 March - 2 April and Central Committee (CC) from 23Ð25 June.
The CC is COSATU's new mini-congress, which this year will focus on socio-economic policy and the 1999 elections.
The major constituencies agree on the need to ensure that the Jobs Summit goes beyond public posturing and a mere statement of positions.
"We should be cautious of rushing into the Summit before all parties have had the opportunity to give due consideration to documents presented by everyone," said Cosatu deputy general secretary Zwelinzima Vavi.
It is hoped that the Summit will be the culmination of a process of negotiation between the parties and that it will emerge with concrete agreements for intervention and implementation.
COSATU's proposals to the Jobs Summit will consolidate and build on a range of existing Cosatu policies such as those in the Social Equity document, Cosatu policy conferences and constitutional structures, as well as its numerous submissions to parliament, Nedlac and other fora.
Political approach
While labour has commissioned detailed research to underpin its proposals, the trick will be in working out a strategic political approach to the Summit.
Cosatu is keen to secure an Alliance agreement on a policy framework in the build-up to the Summit. This will require a fast-tracking of Alliance processes aimed at resolving disagreements on macro-economic strategy. Hopes are pinned on the Alliance Summit in April to take this process forward. In the meantime, Cosatu is expected to call a meeting with its Alliance partners to discuss the Jobs Summit.
Vavi said the country's expectations of the Jobs Summit were very high and the event has been highlighted on almost every public platform, including president Nelson Mandela's speech at the opening of parliament and in the budget speech.
There is intense pressure on all parties to ensure that the Summit delivers, particularly given the growing national unemployment crisis and major retrenchment plans in the public and private sector.
Cosatu leaders say labour will have to avoid two extremes. On the one hand, labour will be under pressure to make concessions to the business platform of labour market deregulation, greater flexibility and a two-tier labour market. This is likely to be couched in the political rhetoric of the "labour elite" curtailing its "selfish demands" and "narrow self-interest" in the interests of the youth, women and rural unemployed.
On the other hand, there is a danger that labour's position will be dismissed as a purely ideological one which doesn't bring well thought-out implementable alternatives to the table.
Labour's approach will therefore need to take into account the political balance of forces and implications of the policy positions it chooses as well as the strategies and tactics it employs in achieving these. Cosatu will also need to look at how to involve its members in the process of engagement and negotiation that will precede the Summit, as well as processes likely to flow from the Summit.
Naledi has done extensive work for Cosatu in preparation for the Jobs Summit. Summaries of a bulky Naledi document were presented for discussion at the Cosatu Special Exco on 10 March. Among the issues on the Exco agenda were:
Points emerging from the Exco discussion will be added to the document, which will be further debated at the Nedlac Labour Caucus on 16 and 17 March before being submitted to Nedlac.
Labour's position will then be summarised and distributed to membership. The next edition of The Shopsteward will include more in-depth coverage of labour's position.
Exco also agreed that a major focus of the April mass recruitment campaign should be on the national unemployment crisis, as well as labour's proposals for job security, better jobs and job creation.
The CEC at the end of March will further discuss the job creation framework. COSATU's job creation strategy will be discussed and debated within the federation, along with other documents and resolutions, in preparation for COSATU's Central Committee in June.
The size of the problem
Official figures show that employment fell in all major sectors from June 1996 to September 1997. Job growth in retail/wholesale trade (1,6%) and financial services (0,7%) saw a decline in full-time work.
Towards a job creation framework
A Naledi discussion document argues that an effective employment creation strategy must:
A jobs strategy
The engines of rolling mass action are roaring in TGWU, with strikes in the security and road freight sectors and a narrowly averted strike in the private bus sector.
A two-week strike in the security sector was successfully concluded after the following agreements were reached:
Union leaders said many workers, including unorganised workers as well as workers from other unions participating in the strike, have approached TGWU to join the union, because "it was clear where the political direction for the strike was coming from".
The heightened level of mobilisation in the union bodes well for COSATU's nationwide recruitment offensive in April.
Truckers strike
As the security sector strike came to a close, TGWU started preparing for action in support of workers' demands in the road freight transport sector. The truckers strike, which also involves a number of other unions, began on 16 March, with white collar workers joining in the action on 18 March.
Since 1995, clerks, data capturers, computer operators, supervisors and other office workers have been excluded from collective bargaining in the industry. Many have joined TGWU and the strikers are demanding that these workers be included in the collective bargaining agreements.
TGWU steward William Makasi said it was important to bring white collar workers into the union as they occupied strategic positions in the workplace, particularly in strike situations.
"At the moment they are classified as part of management, so they haven't been part of our collective bargaining unit.
"We are saying, don't divide us. Every worker in the industry, from whatever category, must be part of collective bargaining."
As The Shopsteward went to press, negotiations were continuing on union demands for wage increases for various grades of workers; paternity/compassionate leave; maternity leave; transfer of national provident funds; study leave and increased subsistence and additional allowances.
A planned strike in the private passenger transport sector was suspended pending ratification by workers of a last-minute agreement reached on the eve of strike action.
Cosatu has released a document in response to the Employment Equity Bill, currently under negotiation. This is a summary of Cosatu's document.
The Bill's approach
Affirmative action should not focus narrowly on the promotion of a small number of individuals into management positions, leaving apartheid labour market inequality undisturbed.
We therefore welcome the underlying philosophy in the Employment Equity Bill. The Bill:
We support the Bill's broad strategy, but have some serious reservations. The Bill:
The main problem is that the Bill relies too heavily on employers' goodwill to implement its measures. There is no effective mechanism to compel negotiation with workers. The Bill needs substantial sharpening to ensure that its provisions are not undermined.
Areas of concern
Designated Employer
The bill's core provisions on employment equity plans only apply to employers employing 50 or more people. Other employers may volunteer to comply with the provisions. The definition of "designated employer" in the Bill is problematic:
Creative mechanisms need to be found to include all workers as far as is possible in the Act's provisions. The aim should be to make employment equity universal.
Consultation
The Bill provides for consultation as the channel for analysing the workplace; preparing, implementing and reporting on employment equity plans; and developing training plans. This will involve workplace forums or a registered and representative trade union or employees or their representatives.
The Bill says "a designated employer must take reasonable steps to consult and attempt to reach agreement". However, decision-making remains within the realm of managerial prerogative. Employers will therefore drive and ultimately decide on the employment equity plans and outcomes. This is inconsistent with the predominance of collective bargaining in the South African labour market.
The wage gap
The apartheid wage gap is characterised by a concentration of low wage, low skill employment, particularly amongst African and women workers, at one end of the spectrum. At the other end of the spectrum are high paying managerial and executive positions monopolised by white men. A manager's salary is an estimated 15-20 times higher than that of a worker. When it comes to top executives, the disparity is even greater. The average ratio in South Africa of the managing director to the lowest paid worker is about 100:1, while in Japan it is 7:1.
Even the gradations between unskilled, semi-skilled and artisans; blue and white collar; production and technical/professional reflect huge income disparities.
This hierarchy drains economic resources into the higher occupational layers - often the least productive strata of the economy. Bloated management, administrative, supervisory and other layers take the lion's share of the wage and salary bill. An NPI study showed that about 60% of the national wage and salary bill went to salaried staff, i.e. white collar and above.
The Bill states that there is more to employment equity than affirmative action and that other measures can be used to achieve equity. The Green Paper signaled government's possible intention to compel employers to include these in their employment audit and employment plans. It indicated that "ideally" the audit would have to give information on "employment, pay and benefits in major categories by race, gender and disability".
However, the Bill does not give clear expression to this intention. It only says that an employer must conduct "an analysis of employment policies and practices which adversely affect people from designated groups". The terms of this analysis would be prescribed by ministerial regulation. "Potential areas" include "remuneration, employment benefits, and terms and conditions of employment". However, the inclusion of this critical issue in employment audits and plans is left open. This would largely defeat the spirit of the drive for employment equity.
We welcome the Bill's emphasis on training as part of a strategy for empowerment of "designated groups". However, it does not go far enough. The envisaged Employment Equity Plan should be broadened to include reorganisation of the occupational structures, flattening of hierarchies, a new approach to grading and training and reduction of the wage gap within specific time frames.
