Chapter 6

The Social Plan

  1. South African economic policymakers are currently grappling with the major structural transformations necessitated by enhanced exposure to world markets. It is widely accepted ­ and the Commission aligns itself with this view ­ that continuing restructuring is necessary in order to place the economy on a sound footing and thus ensure sustainable employment.

  2. Major restructuring processes are associated with significant impacts upon the labour market, frequently reflected in the simultaneous destruction of existing jobs and the creation of new job opportunities. However, it is frequently the case that the individuals and the regions that suffer job loss do not benefit from new employment created in the restructuring process. This simple fact underpins the insecurity and the opposition generated by structural change. Many enterprises, particularly those experiencing increased international competition, are shedding workers who will not be able to find similar jobs. The same is true, if for different reasons, for gold mining and the public service, where significant retrenchments are expected. Where such employment losses in declining industries and firms are concentrated geographically, the social costs of such employment losses will be particularly high.

  3. Key South African sectors have long been subject to the process of structural change. This is reflected in long-term employment decline in a number of sectors. Between 1988 and 1992 manufacturing employment declined by 6%, metal products by 12%, and clothing and textiles by 23%. A notable feature of employment decline has been its extent in the mining industry, with gold mining taking the severest knock in employment. Between 1987 and 1995 employment in the mining sector declined overall by 32% or 239 738 workers. In the same period (1987-95) employment in gold mining declined by 35% (174 359 workers) far higher than any other sector. It is worth noting the disturbing fact that job losses in major parastatals over the last ten years have been the single biggest contributor to the decline in formal sector employment.

  4. Further job losses of this type and scale are threatened, particularly in regions where old homeland bureaucracies are being rationalised and integrated into provincial government. Government has recently announced that it will be embarking on the restructuring of the public sector in its efforts to establish a more efficient and less costly public service. This will almost certainly involve the retrenchment of significant numbers of workers. Moreover, it is feared that government's commitment to restructure state assets will lead to significant job loss. As already indicated the relaxation of tariff barriers will undoubtedly threaten employment in several highly protected industries some of which are labour-intensive sectors, as will the withdrawal of the industrial decentralisation subsidies associated with the previous regime. Gold mining appears particularly vulnerable to employment reductions, although the recent depreciation of the rand may forestall these losses.

  5. The Commission is tasked with the examining the feasibility of introducing a "social plan act" as one of the labour market instruments designed to deal with "negative social implications associated with economic restructuring". Such legislation is principally, if not solely, intended to deal with significant threats to existing employment levels. The social plan may encompass a wide range of interventions, some in the traditional areas of "active labour market policy", others in the areas of regional/local economic development and rural development. It is an attempt to ameliorate the significant social disruption generated by structural employment loss and, more ambitiously, to create a formulation for future development both of individuals and of communities and localities. Throughout this chapter, structural employment loss is the term used to describe, irrespective of causes, those large-scale redundancies which occur relatively rapidly and which are concentrated in particular geographical locations or sectors (or even firms), with limited prospects for prompt renewal of employment for the bulk of the workforce affected. The essential challenge posed to policymakers is to identify mechanisms and programmes that will ameliorate the negative labour market implications of structural change without simultaneously arresting the necessary process of restructuring.

  6. Drawing on German experience of the downscaling of the mining industry, the NUM has proposed that a social plan be legislated in South Africa. While the Commission believes that employment loss in the gold mining industry is of a special character, the general proposals in this chapter are intended to apply beyond mining ­ certainly the likely consequences of contemplated employment loss in the public sector are every bit as dramatic and grim as those in mining. Structural employment decline in manufacturing will not be as dramatic as in the mining and public sectors and will be compensated by employment increases elsewhere in the sector. However, particular regions, sub-sectors and workers will be sorely affected and, accordingly, no less eligible for the policy interventions contemplated in this chapter than their counterparts in mining and the public sector. The concluding section of this chapter focuses on some proposals with particular reference to the gold mining sector.

  7. The Commission supports the general proposition that policy be designed specifically to ameliorate the consequences of structural employment decline. Our argument is based upon three broad considerations:

  8. How then should policy attempt to recognise the potentially severe labour market implications of structural reform? What steps can government take to deal with the threat of employment loss and to ease the plight of displaced workers, both those potentially capable of finding employment in growing sectors and those who face the prospect of permanent job loss? There are three levels of policy formulation that are important here:

  9. At the most general level, the negative employment consequences outlined above reinforce our overall emphasis on the creation of jobs for unskilled and semi-skilled workers. Although the extent to which corporate restructuring and the introduction of modern forms of work organisation have destroyed middle management and supervisory jobs is sometimes significant, the burden of these adjustments is disproportionately borne by unskilled workers. Given the role of unskilled wages in supporting those without employment, the knock-on effects of unskilled job loss are dramatic. Structural reform, and the negative employment consequences invariably entailed, is a fundamentally less threatening phenomenon in the context of a dynamic, growing economy where new job opportunities are rapidly emerging. Rapidly expanding markets enable firms to enter into agreements that guarantee employment in the context of structural change.

  10. Our general emphasis on human resource development is also underlined by consideration of this issue. As already noted, the process of restructuring is generally characterised by the simultaneous dismissal of unskilled workers and the recruitment of skilled workers. Those who are in threatened situations are better equiped to retain their employment through access to grading and training systems that accredit acquired skills, that focus on the portability of the skills provided and that enable workers to carry out multiple activities Such systems also obviously better equip those unable to retain their current employment for re-entry to the labour market in the growing and emerging firms and sectors.

  11. A second level of policy intervention is effectively directed at limiting the employment loss associated with structural change. The broad policy proposal here would simply urge careful sequencing of measures to effect structural reform and those aimed at assisting firms and workers (i.e. supply-side measures) to cope with the effect of structural change. For example, submissions received from both unions and employers were sharply critical of what was perceived as a pattern of tariff reductions that exceeded the GATT requirement. While appreciating the overall objective of trade liberalisation, and while acknowledging the multiplicity of micro issues that determine the level of a given tariff, the Commission would, given current labour market considerations, nevertheless support a cautious and pragmatic approach to trade policy reform and recommends that it be carefully sequenced with exchange rate policy. Similar caution should apply with respect to the appropriate pace and scale of public sector employment reform.

  12. Where the negative consequences of structural reform may be countervailed by specific measures designed to support the creation of new jobs in the sectors or regions affected by structural employment decline, government must pay close attention to the sequencing of policy measures. We acknowledge that government is not always able to determine precisely the timing of reform measures; we also recognise that the available countervailing measures frequently seek to build up the underlying capacities that are required to deal with the greater competitive pressure arising from restructuring initiatives. This often presupposes the development of complex and costly programmes. Nevertheless, the importance of timeously introducing supply-side programmes designed to strengthen sectoral responses to structural change cannot be underestimated.

  13. The third level of policy intervention is directed at cushioning the impact of structural employment decline on that inevitable core of workers whose jobs are eliminated and for whom the immediate prospect of re-employment is bleak. Here a variety of legislative and regulatory mechanisms are proposed collectively subsumed under the rubric of the "social plan". The Commission notes that the measures proposed here are, by no means, novel. We are aware of significant attempts, including in the mining industry, to address structural employment decline. Nevertheless it is probably true to say that none of these have had more than a modest impact and as a consequence there remains on the part of labour a deep scepticism about the commitment of employers to address the problem. While these efforts establish the feasibility of the measures, they remain the exception. In the Commission's view legislative and institutional backing, as suggested below, is required to ensure the greater efficacy of these measures as well as their wider diffusion. The measures proposed include:

The Role of Government & Unions in the Process of Structural Change

  1. The Commission fully supports the proposal that employers be required to engage employees and their unions in the restructuring process. In most circumstances we would extend this requirement to the engagement of government as well.

  2. Section 189 paragraph (2) of the 1995 Labour Relations Act imposes a particular obligation on employers with regard to contemplated retrenchment. This section requires that the employer consult with the employee(s) and the union and that "the consulting parties must attempt to reach consensus on appropriate measures to avoid the dismissals, to minimise the number of dismissals, to change the timing of the dismissals, and to mitigate the adverse effects of the dismissals". The Commission proposes that consideration be given to strengthening this requirement. In particular this clause should include specific reference to "structural employment loss" ­ as defined above ­ in the event of which employers and employees should attempt to reach consensus on "social plan measures". These would include all the measures currently encapsulated under Section 189(2) while the broader active labour market measures and employment creation mechanism contemplated by the social plan are fully consistent with the requirement that these consultations examine mechanisms "to mitigate the adverse effects of the dismissals". When the parties anticipate seeking public support and request assistance, assistance in the design of such measures should be available from the staff of the Social Plan Fund.

  3. The strengthened clause in the LRA should also enable employers and/or employees to trigger a Section 189(2) consultation even when an imminent employment loss is not specifically contemplated. This is particularly significant in the case of mining, where despite the wide range of relatively unpredictable events that may impact on the profitability and, hence, longevity, of the operation, the non-renewable character of the resource nevertheless portends the ultimate inevitability of large-scale employment decline.

  4. While we accept the particular concern with the potential employment loss arising from restructuring, the Commission wants to emphasise that it arises through a broader restructuring process and that, accordingly, the first "line of defence" for threatened workers is provided by a requirement that unions, and, where appropriate, government, be engaged in the general process of restructuring and if it is inevitable, downscaling . Government should vigorously promote the establishment and strengthening of those corporate, sectoral and economy-wide institutions designed to facilitate discussion of medium- and long-term strategy and policy, including, where necessary, through legislative intervention. For example, we have earlier proposed that the Department of Labour and the CCMA expedite the establishment of Workplace Forums. In addition we would urge NEDLAC to expedite the process of demarcating sectors and for government and the CCMA to urgently facilitate the formation of sector-wide statutory or bargaining councils. We would also reiterate a proposal made elsewhere in this Report that the LRA be amended so as to place industrial policy among the non-discretionary items for discussion on the agenda of the statutory councils.

  5. In line with similar proposals made elsewhere in this Report, government should underpin the capacity of these institutions to perform their required roles with respect to ameliorating the impact of long-term structural change. Statutory bodies and state owned enterprises such as the NPI, the NTB, and the IDC, are effectively public resources ­ generally with substantial non-governmental participation in their governance processes ­ with considerable experience in diverse areas of industrial restructuring. Mechanisms should be devised that will enable Workplace Forums, statutory/bargaining councils and, at the economy-wide level, NEDLAC to draw on the resources and experience of these institutions. There is little point in establishing elaborate multipartite institutions such as those set up by the LRA and the NEDLAC Act if they ­ and the individual parties active in these institutions ­ do not have the resources for effectively carrying out their designated tasks.

  6. The principal "currency" flowing through these institutions must be information. In the Commission's view the unimpeded disclosure and flow of information will forestall much of the perceived need for highly prescriptive regulation of the restructuring process. The LRA, through the Workplace Forums and statutory councils, as well as through the collective bargaining process, already requires extensive information disclosure from employers and unions. We acknowledge however a potential gulf between the intentions underlying the legislation and its application. Government and, where appropriate, the CCMA, should ensure compliance with the letter and spirit of the law; the unions, who are understandably most concerned at the possible obstruction of information flows, are urged to use the channels provided by the LRA to secure disclosure.

  7. If the LRA mechanisms and prodding by vigilant unions prove insufficient to secure the requisite flows of information, then the legislation should be strengthened. In submissions to the Commission, we were not encouraged by the palpable discomfort of major employer bodies with robust information-disclosure requirements. Reluctance to disclose information can only intensify the view, strongly held by the unions, that structural change, despite the mass redundancies that inevitably accompany it, is pursued in an insensitive and uncaring manner, and, as bad, that the threat of job loss is employed as a bargaining chip in the overall conduct of industrial relations. Such suspicions ­ ultimately threatening to the integrity of the restructuring process itself ­ will only be allayed if a more co-operative stance is adopted towards information disclosure.

  8. Government has a major interest in the process of structural change. It is frequently policy intervention that catalyses structural change and policy intervention that seeks to manage it effectively, including the management of its labour market impacts. Government participates formally with its social partners in the restructuring process through NEDLAC and, in terms of the requirements of the NEDLAC Act, effectively has substantial information disclosure requirements imposed upon it. General constitutional and parliamentary procedures also impose a high degree of transparency on government actions.

  9. The Commission believes that government participation in sectoral, provincial, local and, even, under certain circumstances, corporate processes, should be encouraged and facilitated. Within the limits of its budgetary constraints, the Department of Labour should attempt to develop the capacity in its labour relations and HR directorates to interact with bargaining councils, training boards and other matters relevant to particular sectors and regions. The Department of Labour should make personnel available to advise and support regional social accord processes if requested to do so.

  10. It is more difficult to specify an appropriate role for government in corporate processes. While we do not wish to propose that government be informed of all planned redundancies, we do suggest that, given the potential social consequences of significant job loss, mechanisms be devised to ensure that the Department of Labour is officially notified of significant planned plant closures and redundancies, i.e. where 20% or more of the workforce is involved over a specified time period. One submission to the Commission indicated that, until recently, the Mines and Works Act did require mining employers to obtain the permission of the Department of Minerals and Energy where contemplated redundancies affected 20% or more of the employees in a particular mine. Given that the country is likely to be faced with major job losses in the gold mining industry, the Commission recommends consideration be given to reintroducing this requirement. This could be achieved through an amendment to Section 189 of the new LRA, that is the section dealing with "dismissals based on operational requirements". The purpose here would not be to "freeze" structural change, but rather to provide government and the relevant stakeholders with the opportunity to take action aimed at ameliorating its more painful consequences and devise growth strategies to support sustainable employment growth.

  11. Many of the proposals that follow envisage a major role for government. This is particularly true in the case of the more traditional active labour market programmes. Hence, government will assume a major, although not necessarily sole, responsibility for the provision of training and counselling. Other potential government interventions are:

  12. The proposals outlined above are, in large part, designed to establish the institutional environment that will allow for timeous action to avoid or reduce job loss and to cushion the impact of unavoidable job losses. The action would differ from one particular circumstance to another. They may range from measures that enhance performance, through to work share arrangements, through to subsidies directed at maintaining output and employment levels during a difficult restructuring phase.

  13. These institutional arrangements would also generate, at the earliest possible stage, information regarding unavoidable job loss. Bona fide adherence to these procedures will, in our view, change the climate of the debate around the required period of notice to be provided in the event of plant closures or other significant job-destroying initiatives. In submissions to the Commission, the unions and employers differed widely regarding the appropriate length of notice for impending plant closure or significant job loss. The NUM, for example, demands a notice period of one year in the firm belief that the bases for these decisions are easily established long in advance of the actual retrenchments. The Chamber of Mines, on the other hand, argues that a multiplicity of factors determines a decision to close a shaft and these are not always easily known long in advance of the point at which closure became necessary.

  14. Lengthy prescribed periods of notice may engender a range of negative consequences. Apathy and resentment set in and the environment is not conducive to problem-solving and the search for alternatives to job loss. Prescribed notice periods may also induce the employer to provide notice precipitously, thus impeding the search for viable alternatives. Retrenchment is all too often a fraught process in which workers are sometimes bussed off the premises with unseemly haste, though there are cases too of employers offering free accomodation, training and other services to help retrenchees in their search for new employment. Circumstances vary so widely that there cannot be rigid prescription. Rather, there must exist a process in which the prospects of the enterprise are transparently clear to all parties. This process should be backed by a general requirement to provide as much notice of intended closure or retrenchment as possible with legal sanction designed to penalise wilful disregard of this requirement.

  15. We must underline that notice of possible retrenchment or closure must provide the parties the opportunity to fulfil the requirements under Section 189(2) of the LRA that requires wide-ranging consultation between employers and employees in the event of retrenchment. The Commission has already made proposals designed to strengthen this clause. This requirement lies at the heart of the social plan proposal and should be seriously regarded. Failure to comply with this requirement is actionable in terms of the dispute settling procedures of the LRA and should be strictly interpreted by the CCMA. When, arising from the Section 189(2) process, it becomes apparent that closure or mass retrenchment is inevitable, the affected workforce should immediately be informed.

  16. The Commission does, however, believe that the requirement to provide notice of intended closure or significant retrenchment ­ the requirement that triggers the negotiation of a social plan or social plan measures ­ should be separated from the notice provided to individuals to be retrenched. This latter issue is effectively the province of the retrenchment procedure.

Retrenchment Procedures

  1. The procedures outlined above govern participation in the overall restructuring process, a process that may lead to considerable job loss. It has been argued ­ before the Commission and elsewhere ­ that the negotiation of a Social Plan should be part of any restructuring exercise that leads to significant job loss. The Commission has outlined a view in support of the proposition that unions and government should engage with employers in the process of structural change and that this engagement should include measures aimed at limiting job loss and at ameliorating the impact of unavoidable job loss ­ it should incorporate, in other words, the negotiation of a social plan. As already elaborated, this is required in terms of Section 189(2) of the LRA. "Retrenchment procedures" are more narrowly conceived: these deal with the procedures to be employed and the substantive programmes to be undertaken once the interactions contemplated in Section 189(2) have been completed and the scale and timing of a retrenchment has been decided upon.

  2. Individual notices of retrenchment are handed out only after the process outlined above has failed to identify alternatives to job loss. Procedures and programmes contemplated here are aimed at ameliorating the impact on the individual workers selected for retrenchment.

  3. The length of notice provided to individual retrenchees is important. It appears that many companies prefer to pay retrenched workers in lieu of notice and have them vacate the premises of the firm immediately upon receipt of their notice of retrenchment. This practice is highly undesirable. It limits programmes ­ for example counselling or training programmes ­ specifically directed at retrenched workers. We suspect however, that many workers may also wish to return to their homes or to commence the search for alternative employment immediately on receipt of a retrenchment notice and, accordingly, we do not recommend rigid regulation of this process. However, where the social plan negotiated in the restructuring process agrees on programmes and services to be directed at retrenched workers, then the nature of these programmes and services will dictate the length of individual notice or, at least, the duration of individual access to company premises and facilities. The length of individual notices of retrenchment then becomes a matter for negotiation. However, where workers are housed in company premises, their employer should, under no circumstances, be entitled to immediately evict them from their residential accommodation upon receipt of a retrenchment notice. The image of miners being forcibly bussed back to their rural homes within hours of receiving a retrenchment notice belongs firmly to the past and should remain there. Once again the Commission notes that while these practices still occur, there are sufficient counter-examples to persuade us that a more humane, co-operative approach, even in the context of massive job loss, is highly feasible.

  4. The retrenchment procedure must provide for the financial severance package as specified in the LRA. The Commission received submissions on how severance pay should be determined. The new LRA suggests that severance pay should be calculated as not less than one week's pay for every year worked. This seems to be the situation in most retrenchment agreements that have been negotiated although this standard has been bettered in many circumstances. It appears to be a standard for weekly paid workers. Union submissions to the Commission suggested that severance pay should be "one month's pay per year of service". In deciding what to recommend in this regard, the Commission had to have regard for the relative absence of a social security net and, accordingly, the vital role played by the severance package in cushioning the immediate impact of job loss.

  5. On the other hand the Commission had to consider the impact of substantially enhanced severance packages on hiring behaviour. The unions argued that high disengagement costs make retrenchment costly and by implication less attractive to employers. However, there is a price attached to this disincentive. It may discourage employers from engaging full-time workers in order to avoid the high disengagement costs associated with such employees. This then tends to encourage fixed-time employment contracts, the use of labour-only contractors, and other mechanisms that tend towards the informalisation of working relationships, that tend, in other words, to less secure forms of employment.

  6. Although there was no unanimity on the desirable level of severance pay, the Commission supports the principle that improvements to the statutory minimum be the subject of agreement. Clearly discrimination in the calculation of severance packages ­ for example, as between weekly and monthly paid workers ­ would strengthen the claim for an improved package.

  7. Evidence submitted to the Commission suggested that in instances where the total severance package (for example, the sum of severance pay, leave pay, pay in lieu of notice, provident fund payouts, etc.) is considerable, there is a potential need for financial counselling to guide retrenched workers on the deployment of these resources, especially on possible income-generating and self-employment opportunities. The Commission would strongly support making financial counselling and elementary financial planning part of the severance deal and training package for workers.

Training and Re-training Programmes

  1. Union submissions relied heavily upon training as a mechanism for ameliorating the impact of retrenchment. The unions rely on the eminently reasonable proposition that training and skill enhancement will ease the ability of retrenched workers to re-enter the labour market or, at least, will better enable them to identify and engage in alternative income-earning opportunities. The concern of the unions for training is powerfully underlined by the inadequacy and lack of portability of much of the training that workers currently receive. Hence, as was pointed out to the Commission, an experienced miner may leave the industry with a package of skills that is not recognised elsewhere and that does not equip him for re-entry into the labour market.

  2. The Commission is not confident that training programmes targeted at retrenched, or soon-to-be retrenched, workers will bear significant returns to either the individual participants in these training programmes or to the society as a whole, particularly if unrelated to possible future employment or income-generation opportunities. Furthermore, the environment surrounding mass redundancies is not conducive to training, no matter what the length of the notice period. Evidence submitted to the Commission suggested that the effectiveness of post-retrenchment training schemes is questionable. "The retrenchment context is not ideal for effective delivery of training ­ the atmosphere is one of anger, of denial," the NUM argued in its submission.

  3. In the mining sector where mass lay-offs tend to predominate, the mines usually release the names of retrenched workers 24 hours before they have to leave the mine, often making the assessment of training needs difficult. We have already outlined our opposition to this practice, particularly when this notice effectively includes notice to vacate residential facilities. The Commission supports the NUM's proposal that the mines be required to keep, as part of each employee's personnel record, a record of nationally recognised skills held so that these can be used to identify possible career opportunities (linked to training). These should be measured against available labour market information on possible employment or income-generating opportunities and against the worker's own choices, after a guidance interview. The Commission however notes a concern that the Department of Labour may not at present possess the capacity to generate a comprehensive database on national career opportunities and their associated skills requirements. This underlines the need, cited by the ILO Review and endorsed elsewhere in this Report, for the development of an integrated labour market information system.

  4. The unions' proposals with respect to training reinforces the argument that, especially in the context of significant structural change, nationally recognised skills accreditation and an accreditation system that incorporates skills acquired through work experience, is important ­ as is the substantive portability of the skills and qualifications acquired. Clearly, workers who possess accredited and portable skills are more likely to find alternative sources of income than those who do not.

  5. The Commission believes that a carefully planned training programme for retrenched workers which links to realistic employment or income-generation opportunities identified through a guidance interview should be incorporated into a social plan. We have already suggested that counselling with respect to financial planning should form part of the training package. In the South African context, and particularly given the category of worker most sorely implicated in structural change, there will be occasions where no immediate employment or income-generating opportunity can be identified, in which event the focus of learning should be on adult basic education ­ workers who are neither literate or numerate are significantly disadvantaged in the search for new employment. Without entering into a detailed discussion of the mechanisms for providing adult basic education, we would propose that the Department of Labour in co-operation with the Department of Education and Training give immediate consideration to establishing literacy and numeracy programmes in those sectors and regions where major job loss is threatened. As discussed in other sections of this Report, basic literacy and numeracy is also crucial if the country's drive to improve productivity is to succeed.

  6. The mining industry would be an obvious place to pilot such a project on a significant scale. The project must be designed in a way that it partners the initiatives undertaken over the past few years by the National Union of Mineworkers and the various mining houses. In the last year or so, these two bargaining partners have concluded important agreements on adult basic education and training (ABET) and it would be folly not to partner them in any state initiative. Indeed government may learn much from the mining industry's experience with ABET, lessons that could be valuably diffused to other sectors.

  7. In addition, the design of training programmes should take account of existing skills and attempt to build on these. As already mentioned, the NUM has made much of the non-portability of the sometimes considerable skills acquired underground. A carefully designed training programme would presumably be able to capitalise and enhance already acquired skills.

  8. Training programme design should also take account of labour demand: although it is more difficult than is often assumed to tailor training to the needs of the labour market, prior knowledge of, for example, the region in which retrenched workers will be living and seeking work will assist in the design of training programmes. These considerations should be built into the Social Plan, that is it should incorporate a regional development component. For example, the closure of the Stilfontein Gold Mine generated a community-based effort to promote alternative employment opportunities for the area. An initiative of this type would help to shape training programmes for retrenched workers.

  9. As noted above, retrenched workers may often not be well placed to benefit from participation in training programmes. For example, retrenchees near retirement age are unlikely to benefit from training programmes. But their children ­ and indirectly, therefore, the retrenchees themselves ­ may well be able to take advantage of the programmes on offer. It should always be possible for a retrenched worker to cede his or her right to training to a dependent.

  10. The Department of Labour, in partnership with the restructured industry training boards must play the leading role in the training programmes. Retrenching firms ­ many of whom will have given scant attention to the training needs of their employees in prosperous times ­ will possess neither the incentive nor the skill to undertake training in the final months of their existence. This reinforces the need for government ­ and in this instance the Department of Labour and the ITBs ­ to be closely involved in the discussions in terms of Section 189 of the LRA, the Social Plan discussions.

A Social Plan Fund

  1. How are these activities to be funded? The items referred to here ­ government supplementary support for stakeholder-driven local and regional job creation initiatives, severance pay, training, counselling ­ are costly and have to be funded. While severance pay is clearly a company responsibility and must be provided for entirely out of company funds, this is less clear in the case of training and other aspects of the social plan package.

  2. The Commission recommends that a Social Plan Fund be established to support strategies and programmes negotiated between employers and workers facing structural employment decline. The Social Plan Fund should only be deployed to augment social funds established at plant, sector, regional or local level for the purpose of finding alternative employment or income-earning opportunities for those rendered redundant and their associated communities. For social plan measures negotiated at company or sectoral level to qualify for support from the Social Plan Fund they should be consistent with established local or provincial development strategies. Where such plans do not exist, the "stick" of mass retrenchment, combined with the "carrot" of potential access to the Social Plan Fund, should encourage the development of these plans. In that event the agency responsible for managing the Social Plan Fund should provide guidance in the development of regional and local economic planning. By providing top-up funding for job creation programmes initiated through multi-stakeholder initiatives, the Social Plan Fund should act as an incentive for the creation of social accords of the kind described in Chapter 10.

  3. The Commission suggests that the Social Plan Fund could be funded from the following sources:

  4. The fund should be allocated through the fiscus and managed by a government department. Given the centrality that our social plan proposals accord to regional development planning, the Department of Trade and Industry, which already manages the substantial fund attached to the Regional Industrial Development Programme, would appear to be well placed to manage the Social Plan Fund. Consideration should be given to linking the Regional Industrial Development Programme and the Social Plan Fund.

  5. Given the multi-faceted nature of the contemplated social plan measures, it is recommended that once a Social Plan has been approved, funds should be disbursed through a variety of government and statutory agencies. It is worth stressing, however, that social plans must be stakeholder driven, and firmly rooted in collective agreements and social accords. Successful regional development and sustained job creation requires commitment of time and resources by the workers, employers and other stakeholders involved. Government must support, rather than drive, local and regional development initiatives through institutions like the Social Plan Fund.

  6. The Social Plan Task Team established under NEDLAC should be tasked with developing criteria for access to the Social Plan Fund. It should also be tasked with determining the financial contribution required from the applicants for funding. We stress however, that under no circumstances should access to the Social Plan Fund be contemplated in the absence of a significant contribution from the applicants.

  7. The LRA makes provision for the establishment of a fund out of agency fees paid as a result of an agency shop agreement. Submissions to the Commission argued that funds from the agency fees should be available for social plan measures. The Commission concurs with this proposal and recommends accordingly. Such funds should be available to leverage contributions from the Social Plan Fund.

  8. Amongst the kinds of things the retrenching firms could do within the framework of the social plan would be to make available their premises and other facilities, in working time, for such activities as counselling and training.

A Social Plan Act

  1. In summary the Commission strongly endorses the proposal that Social Plans, capable of both limiting the extent of structural job loss and cushioning its impact, be drawn up. We have emphasised the necessary interface between, on the one hand, social plans negotiated at firm or sector level, and, on the other, regional and local economic development. Urgent action towards drawing up social plans is required in those sectors and geographical areas where large scale restructuring is underway or imminent. The Commission also accepts the proposal that legislative and institutional support for the drawing up of social plans is required. Assistance in drawing up social plans should be provided by the Labour Relations and Human Resource Development Divisions of the Department of Labour with the Department of Trade and Industry responsible for assisting in developing local and regional economic development plans. While central government and its agencies may themselves be able directly to help in this process, it may be more realistic to think in terms of their contributing to the financing of outside consultants to play this specialist role. Provincial and local government must necessarily be involved too, and a benefit of using consultants would be to get their guidance in designing implementation of the plan, specifically including a specification of the different roles to be played by the different interested parties.

  2. It is the considered opinion of the Commission that the core of legislation requiring the drawing up of social plans is already in place in the shape of the new LRA and the NEDLAC Act. These two pieces of legislation effectively provide for tri- and bipartite engagement at national, sectoral and workplace levels that effectively require consultation and negotiation of all significant instances of restructuring. They provide for processes ­ of which Section 189 of the LRA is arguably the most significant ­ specifically intended to deal with the labour market implications of restructuring. We have proposed that Section 189(2) be strengthened by the inclusion of specific reference to the requirement to negotiate social plans, and by a provision that would enable employers and employees to trigger a Section 189(2) consultation even when imminent employment loss is not contemplated. The Commission recommends further institutional and regulatory support for the negotiation of social plans ­ for example, we propose the establishment of sections within the Labour Relations and Human Resource Development Divisions of the Department of Labour and the introduction of the requirement that the Department of Labour be informed of significant planned retrenchments or closure. The precise mechanisms for giving affect to the latter proposal requires further investigation and legislation may be necessary. In the case of gold mining we recommend the re-introduction of the provision that requires mining companies to seek government permission in the case of retrenchments that exceed 20% of the workforce in any twelve month period. Provided that these institutions and processes operate effectively ­ and we emphasise that this in turn relies upon bona fide information sharing ­ then the Commission does not believe that the necessary negotiation of social plans requires further legislative support. We propose the establishment of a Social Plan Fund. If current legislation ­ strengthened in line with our proposals ­ fail to meet these expectations, then the proposal for a Social Plan Act should be revisited.

  3. There are, without doubt, grey areas and further experience will help to establish whether additional legislative intervention is necessary, desirable and feasible. The most difficult area concerns the question of notice. The Commission's view is that Section 189(2) of the LRA effectively requires lengthy notice of an intention to close a workplace or to reduce substantially its labour force. To restate, it requires a period of notice sufficient to permit the parties to reach consensus on, inter alia, alternatives to dismissal as well as mechanisms to "mitigate the adverse effects of dismissals". This may require considerable notice. Once this process ­ in which the workers will be engaged through their unions ­ is concluded the workers to be retrenched will be informed. The length of the notice given to individual workers will then depend on a number of factors - the programmes agreed in terms of the Section 189 consultation, the requirements of the workers, and operational requirements are three important considerations. We are however loathe to prescribe minimum periods for individual notice ­ this will be agreed in, and, to a significant extent, will depend upon, the substantive discussions under Section 189(2).

  4. Most of the substantive social plan-type programmes are already in existence ­ training programmes, counselling services and the like, but are poorly linked to future employment opportunities. The Commission has made recommendations aimed at sharpening the focus of these programmes. These recommendations effectively ask the Department of Labour and other relevant departments to recognise that the restructuring process will give rise to significant retrenchments and to reflect this recognition in their various programmes.

  5. Finally, the Commission makes recommendations regarding the funding of these programmes. In significant part these will be funded out of departmental budgets, suitably refocused to reflect current realities. We have also made recommendations regarding employer contributions and have suggested that agency fees accumulated through agency shop agreements be deployed for this purpose. Finally, we have made recommendations for the establishment of a Social Plan Fund, effectively a fund that will provide matching grants, under specified criteria, for the funding of social plan programmes.

Job Losses in the Gold Mining Industry

  1. It has been suggested that the mining industry, and gold mining in particular, represents a special case and should be subject to particular social plan interventions. In the Commission's view this argument is well founded and is based upon the sheer scale of restructuring and job loss that faces gold mining, the extent of workplace change that is needed to improve productivity and thus extend the life of the mine (which might reduce the extent of and not eliminate job losses), the particularly powerful regional impact of these job losses, and the impact on an already fragile labour relations system in

    the industry. Although the proposals outlined above are of general validity, it is not coincidental that many of the examples and lessons are drawn from the mining industry ­ there are few sectors that experience employment loss on the same scale and with such devastating consequences. Where employment is regionally concentrated, the Commission urges the government to provide support for multi-stakeholder regional development accord processes in order to ensure sustainable growth in the affected regions.

  2. We have already recommended that the Department of Labour sectoralise its labour relations division. The Commission noted that there are differing views on the question of how fast labour relations are changing on the mines. We recommend that the situation in this critical industry be monitored, and that if appropriate the Department of Labour should establish a Section for Mining within the Chief Directorate: Labour Relations. This directorate would be responsible for facilitating smooth industrial relations in this industry and, in particular, for facilitating the establishment of Workplace Forums and statutory councils and putting in place the necessary training and guidance infrastructure. This would include monitoring compliance with Section 189 of the LRA, the requirement surrounding the consultations around retrenchment.

  3. The NUM has been at the forefront of demands for the introduction of a Social Plan Act as one way to respond to the restructuring of the mining industry. Such legislation, it is argued will have two aspects to it. 'The first is to ensure that when an employer plans to restructure a business, he negotiates with the workforce, with appropriate union involvement. The second aspect provides for the negotiation of a "social plan" which aims to reduce the negative effects of the restructuring. The social plan would specify the notice period for retrenchment, monetary compensation in the form of severance package and, most importantly, provisions for training or re-training, to allow each worker to find another job. The NUM further proposed that the act should provide for the establishment of a Social Plan Fund to pay for the training and re-training costs. The Commission's view on these proposals is outlined above.

  4. Instead of imposing a tax to pay for retrenchment-related costs, the Commission would prefer a policy that aims to keep gold mining workers on the mines for as long as is possible. The sheer scale of direct employment aside, the employment and output multipliers of mining are considerable and are often localised in regions that would not easily replace this economic base. And even if a particular gold mining operation was unprofitable, it nevertheless produces a product ensured of an international market. Moreover, the nature of the product ensures that mines do not compete with each other in the same way that producers of other goods and services do ­ hence, a subsidy to one gold mine does not affect the profitability of other, unsubsidised, gold mines. Accordingly, many members of the Commission believe that there is a prima facie case for, as one possible policy option, subsidising employment on the marginal mines. We propose that this proposition be examined in greater depth. The Commission would however urge considerable caution. There are myriad reasons that may account for a gold mine's decline in profitability ­ depleted ore bodies is one; but inefficient technologies, outmoded work organisation, poor training, inadequate management and conflictual industrial relations are some other reasons. It is important that subsidies do not effectively compensate for these shortcomings rather than providing the opportunity to rectify them, potentially in a context of continuing employment. Compensating for shortcomings would have a significantly detrimental impact upon the diffusion of apparently serious efforts to raise levels of productivity in the mining industry, and on recent corporate innovations specifically directed at the profitable exploitation of marginal ore bodies.

  5. We have already observed that the impact of significant employment decline in mining is distinguished by its unusually powerful impact on the rural areas, including South Africa's regional neighbours. This reality certainly widens the scope of the social plan. For example, it draws the social plan into rural development and land reform initiatives that may impact significantly on the re-employment prospects of those retrenched and that will guide many of the other social plan programmes. It also necessitates the engagement of rurally based institutions, including the governments of our regional neighbours. The Commission was singularly impressed by the NUM's development programme which is directed at job creation in the rural areas. This approach, partly supported by some of the mining houses as an outcome of collectively bargained agreements at company level, appears to be innovatively directed. However, its concrete impact is inevitably limited by the poverty of its resource base and by the modest number of businesses and hence employment-generating opportunities in the affected rural areas.

  6. Another organisation with considerable rural infrastructure is TEBA, the institution responsible for the recruitment and "processing" of migrant mineworkers. TEBA has the potential to command reasonably significant resources with respect to rural development, notably by way of its physical assets, cash handling capacity, and its networks in the local communities. It has to date made only modest forays into the rural development arena though not without success, and it is increasingly involved in discussions with NUM's Development Agency with respect to collaborating in planning and executing new development initiatives. We are encouraged by these trends. We urge TEBA and NUM to build on the processes that they have started, and to explore how they and the appropriate public authorities can co-operate more fully in the future with respect to rural development ­ especially, but not only, in retrenchment situations.

Concluding Remarks

  1. There is extensive international experience, notably but not only in the countries of the European Union (EU), with respect to social plan initiatives to deal with large scale and localised retrenchment. As implied earlier, it would be helpful to be able to draw on such expertise, perhaps through the vehicle of the EU or through bilateral aid being channeled into social plan programmes. We suggest that one or two pilot projects be initiated in order to establish rules for operation of the national Fund that are disciplined and constructive and that would ensure prudent use of scarce public funds.

  2. The preceding paragraphs have sketched out the concept of a social plan programme as a national framework within which focused local initiatives are taken. Further work is needed to design the approach in detail, covering such matters as where the national fund is located and how it is staffed, what rules should govern the application for and awarding of public monies to local initiatives, and the roles of the different levels of government and their respective agencies.

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