Privatisation is not the answer to restructuring Article prepared for Business Report by General Secretary Zwelinzima Vavi, 23 August 2001

Suppose your household runs into debt every month.

Do you:

• Sell off your furniture, contract out the cleaning and cooking and make your children and partner pay for them? or
• Sit down with your family and discuss how better to manage your income, expenditure and assets?

If you go for option (a), you are fully aligned with the current policies on restructuring the state. If, on the other hand, you would go for option (b), you should agree with COSATU on the need for a fundamental rethink.

The Tripartite Alliance – and COSATU - has long been committed to restructuring the inherited state to meet the needs of the majority. Since the Ready to Govern conference in 1992, it agreed to extend the state sector or shrink it, based on evidence on the impact on development.

Government policy effectively violates this commitment. Government documents set a framework that pushes for privatisation in every case, letting ability to pay determine who gets basic services and infrastructure.

In virtually no case, except where COSATU affiliates insisted, has government either examined the full range of restructuring options or looked carefully at the costs and benefits of its proposals for development.

The result has been a series of mistakes – mistakes for which working people and the poor have paid dearly.

The GEAR strategy typifies the problems with the government’s current approach to restructuring. It defines restructuring only as, “the total sale of the asset, a partial sale to strategic equity partners or the sale of the asset with government retaining a strategic interest.” (Page 17)

The bias toward privatisation is incorporated in government’s “new managerialist” approach to restructuring. This strategy starts with the argument that the private sector is invariably the most efficient option. To restructure the state, then, we must privatise or at least make state agencies mimic the private sector.

Government relies on big consulting firms whose analytical methods inherently limit the role of the state. In particular, they argue that the government should not provide services, but only regulate them. This inherently leads to privatisation of delivery systems.

Yet as we have experienced time and again, government lacks the capacity to make private providers ignore market signals and serve the poor. A related approach is to designate “core” and “non-core” functions, and outsource the latter. Again, the built-in assumption is that government should be minimised.

When the forests were privatised, at the cost of 10 000 jobs and regional downturns, the argument was simply that government should not manage commercial enterprises, even if they were not making losses. The social benefits of keeping the forests in state hands were ignored. Similar arguments have been made in favour of privatising rail lines and airports.

Managerialist restructuring is problematic because:

• It automatically raises privatisation above other options, without adequately exploring the impact on the poor. It assumes that somehow the state will counteract market imperatives.
• Generally, it empowers public-service managers at the cost of the public. Managers define what should be the role of the state, rather than elected leaders working closely with stakeholders. Managers gain power over service delivery (and their own perks), while elected representatives lose influence.
• It defines the end-state for restructuring without looking at how to get there. Since the transition typically involves job losses, higher tariffs and worse services, they often cannot be implemented.

COSATU has called for developmental restructuring.

The first step is to define the main problems facing a government agency, such as high costs, failure to meet basic needs, or high unemployment.

The next phase is to work with stakeholders to define how best to solve the problems. The solutions should arise, as the Alliance demands, from an in-depth analysis of their causes, not from ideological assumptions that the state must be downsized.

Most bureaucrats resist developmental restructuring because it takes time and limits their power. But it is the only type of restructuring that has worked for large government institutions. Examples include the equalisation of teaching staff between schools and the Spoornet restructuring process – where government took this approach only after SATAWU insisted.

COSATU affiliates in the public sector have been at the forefront of restructuring. We have developed proposals based on broad consultation with our membership and communities. But government officials have almost never welcomed labour’s inputs.

We have always had to demand that our voice be heard. And we have always had to fight harebrained privatisation schemes as government’s first option.

Sometimes government officials argue that we should have taken our grievances to the National Framework Agreement for State Owned Enterprises (NFA). But the NFA’s scope is too limited and it is not a policy forum.

The NFA only covers some national parastatals. It does not extend to local government, provincial enterprises or the public service. It does not even function for national enterprises like the IDC. The NFA provides consultative forums for specific restructuring processes, not to discuss the broad policy framework. It has no dispute-settlement provisions.

Workers cannot ask the Labour Courts to enforce NFA agreements – as we found to our cost when Telkom fired 700 workers in violation of written commitments under the NFA. In consultative processes under the NFA, government invariably starts with the commitment to privatise. To have more fruitful discussions, we need to change the policy. We should note that, contrary to claims by the Department of Public Enterprises, COSATU consistently opposed its policy framework on privatising state assets.

True, we were consulted - but our views were almost entirely ignored. For these reasons, COSATU had no choice but to refer its dispute with the policy of privatisation to NEDLAC. We expected serious negotiations, but government has made no real attempt to understand our concerns.

For this reason, we call on all workers to join our national stayaway on August 29 and 30.

We hope our action will encourage government to adopt a more developmental approach to restructuring, one that will meet the needs of our people and our economy.

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