"JOBS FOR ALL":
A FRAMEWORK FOR AN EQUITABLE JOB CREATION STRATEGY
COMMUNITY CONSTITUENCY POSITION
REGARDING THE JOB SUMMIT
July 1998

Table of Contents
Acknowledgements *
Towards a framework for an equitable job creation strategy *

Appendix *

Acknowledgements

C A S E wishes to acknowledge the invaluable contributions of the following individuals without whose assistance, the impossible timeframe would not have been met, successfully. They are: Stephen Gelb, Debbie Budlender, Pat Horn, Godfrey Jack, Fadiela Lagerdien and Chemist Khumalo.

1. The Community Constituency and the job summit: The Community Constituency of NEDLAC represents the marginal sectors of South African society, including rural people, youth, women, and people with disabilities. These groups suffer disproportionately high levels of unemployment. Our constituents must all be strongly represented in the Job Summit, and be primary beneficiaries of policies agreed at the Summit. We see the Job Summit as the first step in a longer process, a process which must include open discussion amongst all four social partners of economic policies, including macroeconomic policies, to manage the South African economy.

2. Marginalised people: There are differences between the 3.5 million people within the informal, survivalist, sector, and the 800 000 in the SMME sector. Opportunities must be created to allow survivalists to move into the mainstream of economic activity where they can engage in sustainable economic activities. The Small Business Enabling Act should be amended to include "survivalist enterprises" as an additional category. Legislation to recognise and protect workers in the casual and informal sectors, as well as those involved in home-based work, must be promulgated urgently. The SMME and informal sectors should not be a ghetto for women, youth and poor black people; instead, policies must enable easy mobility from the SMME/informal sector into the mainstream economy. To provide skills for labour market mobility, an Informal Business Training Board must be established. Blockages in the provision of credit to micro-enterprises, especially in rural areas, need to be addressed urgently.

3. Labour market transformation: Labour market transformation must protect workers’ rights in the informal and SMME sectors. Minimum labour standards should be defined. Decentralised tripartite boards in the informal sector could help to regulate working conditions and resolve disputes. The social security system must be redesigned to incorporate workers in the informal and SMME sectors, by registering casual, seasonal, piece-rate, home-based or self-employed workers.

4. Skills training: Appropriate skills training programmes for marginalised groups are essential for sustainable, rather than short-term, jobs. A quota system and strict targeting measures are needed to incorporate these groups into training programmes. To better prepare youth for the school-to-work transition, skills training curricula must be vocationalised and diversified, and coupled with motivational programmes and opportunities to obtain practical work experience. For disabled people, school-to-work transition programmes can strengthen linkages between inclusive schools and the economy.

5. Employment incentives: Economic incentives, such as better access to credit and subsidies, must be used to encourage employers to comply with job creation strategies for specific groups, which should include disabled people. An employment subsidy, in the form of a tax credit, must be introduced, to lower the cost of hiring labour, while avoiding lower wages and living standards. The subsidy must be paid for by specific taxes to encourage more use of low-skilled, unemployed labour relative to high-skilled workers and fixed capital.

6. Rural people: Tackling rural poverty requires improved wages and working conditions for the employed, as well as policies designed to widen access to rural wage employment opportunities, including the diversification of agricultural-related jobs. There is considerable scope for intervention to increase agricultural employment, independently of land reform.

7. better implementation: Short-term programmes and projects emanating from the Summit must be carefully planned but quickly implemented. Spending must be targeted, by clustering complementary projects in specific areas, to better achieve sustainable economic activity. Targeting must be geographic and social in nature. Public works and Special Employment Programmes can achieve sustainability when labour-intensive processes are used, and local economic development is the objective. Community participation in project design, implementation, and maintenance is essential in all projects and programmes initiated by the Job Summit.

8. Social Accord: The Job Summit must deliver a wider consensus over macroeconomic policy, which is essential to providing greater long-run certainty for investors in fixed assets and productive capacity. The Job Summit should explore the prospects for a Social Accord, as outlined in the ‘Report of the Presidential Commission to investigate Labour Market Policy’ and the GEAR document. The Accord must address macroeconomic policy, together with issues of productivity growth and the distribution of its benefits between wages and profits, in ways that ensure employment is increased.

9. Macroeconomic policy: The Community Constituency believes that macroeconomic policy (fiscal, monetary and exchange rate policy) cannot be the main driving force behind job creation in South Africa. Nonetheless, it is essential that macroeconomic policy complements job creation processes, by being moderately expansionary rather than restrictive.

10. Fiscal policy: The Community Constituency recognises the narrow limits to fiscal expansion in current South African circumstances. Nonetheless, there is a need to explore, in the context of the Job Summit, approaches to the fiscal deficit which could underpin broader consensus amongst government and the social partners on this issue. We believe that a fiscal stance openly supported by all social partners would significantly reduce risk premia and volatility in our financial markets. Room for more government spending would increase the scope for Special Employment Programmes as short-term job creation measures, and also for increased public investment in economic and social infrastructure.

11. Monetary & exchange rate policy: The Community Constituency argues that monetary and exchange rate policy must become significantly more accommodating, to enable job-creating growth. Lower interest rates and a depreciated exchange rate will help growth by encouraging investment, durable goods consumption and exports. We accept that this would produce a small rise in the inflation rate, but argue that monetary policy should focus not just on achieving a very low rate of inflation, but also be concerned with the rate of economic growth and the level of employment.

12. The job summit is the first step: The success of the Job Summit depends upon it becoming the first step in an on-going process. Job creation strategies adopted at the Summit must incorporate a system of independent monitoring and evaluation to assess their effectiveness and sustainability, and to enable adjustments as necessary to maximise employment impact. As with macroeconomic policy, there needs to be further systematic, careful and open examination of sectoral policies. These must cover the survivalist sector, as well as the different productive sectors, where the needs of owners and workers in both SMMEs and large enterprises must be carefully distinguished. The Social Partners – labour, business and community – must participate fully in these processes of policy analysis, and where necessary must be empowered to do so.

Our Challenge to government

• To begin to implement, immediately after the Job Summit, the job-creation proposals agreed upon at the Job Summit;
• To increase the level of funding for the Special Employment Programmes in the short-term;
• Extend the regulations of the LRA and other relevant provisions to the most marginal sectors in our society;
• To implement speedily the intended formulation of a more comprehensive social security and welfare safety net for our constituents (the poorest of the poor);
• To be willing to enter into discussion and debate around the macro-economic framework as a starting point to move in tandem with the notion of "a shared vision" as outlined in government’s ESF document;
• To ensure jobs are retained and that government’s economic policies direct the economy towards a long-term labour absorbing growth path, instead of the present jobless growth path in which we find ourselves;
• To speed up the release of the 1996 Census results that include valuable statistics on the informal sector;
• To complete urgently the various CSS surveys looking at upgrading the provision of labour statistics by releasing two quarterly economy-wide surveys of formal concerns; a quarterly household labour force survey to measure formal and informal employment and unemployment; and an annual survey of occupations at the establishment level to monitor changes in the occupational structure.

Our challenge to Business

• To invest more resources into the Special Employment programmes;
• To ensure that the regulated flexibility of the labour market is extended to our constituents;
• To support the various skills-training proposals of the Community Constituency to ensure that the poorest of the poor can move out of the lower end of the economic spectrum into the mainstream of the economy;
• To minimise retrenchments which swell the ranks of the unemployed and of the informal sector;
• To support a labour-absorbing growth path for the South African economy.
• To urge business to increase investment in productive infrastructure which will result in long-term job creation, in a growing economy, rather than focusing narrowly on short-term financial gain.

Our Challenge to Labour

• To ensure that the largest possible number of jobs are created, as well as retained;
• To work assiduously towards creating the necessary conditions and climate for the upward mobility of those in the survivalist sector into the mainstream of the economy;
• To focus on the interests of workers, both within the formal and informal sectors of the economy, in order to create a long-term job creation strategy, rather than focusing on short-term sectoral interests.

Introduction

1. The Community Constituency of NEDLAC, unlike business and labour, does not represent an economic sector or groupings of sectors. Rather, we represent more or less marginal sectors of the broader South African community. These include people living in rural areas, youth, women, and people with disabilities. Through the participation of organisations like the South African National Civic Organisation (SANCO), Disabled People of South Africa (DPSA), the South African Youth Council (SAYC), the Women’s National Coalition (WNC) and the Rural Sector at NEDLAC, we provide a mouthpiece for disadvantaged communities in South Africa.
2. The reason the Job Summit has been proposed is the high and growing level of unemployment in South Africa. Unemployment does not affect all South Africans equally. The people we represent suffer disproportionately high levels of unemployment. Significantly more women are unemployed than men; unemployment is far higher among youth than among adults; rural areas are among the most economically depressed in South Africa; and people with disabilities still struggle to overcome barriers of perception and provision to find employment.
3. Moreover, many of the people who are counted in the unemployment statistics are actually working in unrecognised survivalist economic activities, earning a pittance which has to support large numbers of dependants. They are neither housewives nor part of the "idle unemployed". Their problem is economic inactivity: it is the problem of not earning enough income from the work they do to sustain an acceptable standard of living.
4. Our constituents should not be tagged onto whatever emerges from the Summit as deserving a handout. They must be central beneficiaries of whatever policies or strategies the Summit agrees on. Their voice must also be loudly heard in NEDLAC which is dominated by business, labour and government. They must be heard equally loudly in the Job Summit.
5. We welcome NEDLAC’s invitation for us to attend all its four Chambers. However, NEDLAC needs to recognise that, compared to other Social Partners, the Community Constituency has limited resources and capacity that hinder our ability to make inputs into the different chambers.
6. We believe the Job Summit should be the first step in a longer process. We need an honest examination of GEAR, and how best to manage the South African economy in the 1990s. We believe that an approach that insists GEAR is not up for discussion or debate will ensure the failure, not the success, of the Summit. The Job Summit must kick-start a longer-term, frank appraisal of the policies, strategies and programmes that can best resolve the crisis.

 

Short-term proposals

7. Creating more jobs and wealth for the ‘haves’, and ignoring the needs of the ‘have-nots’, will signal the failure of the Job Summit. Our concern is to ensure that the proposals emanating from business, labour and government, as well as the final communiqué of the Job Summit itself, clearly demonstrate a commitment to employment creation that is sensitive to the needs and contexts in which the more marginal members of society find themselves. We have made 25 very specific points to facilitate job creation, which appear at the end of this document.

 

Representation at the Job Summit

8. We strongly believe that women, youth, and people with disabilities should all be strongly represented in the Job Summit itself, rather than treated as politically correct small-scale additions to policy that emanates from the Summit. We have already demonstrated that our constituents are the prime sufferers of unemployment; they need a direct say in policies and strategies aimed at improving their situation. They should be able to directly voice their own demands.

 

The informal and ‘invisible’ sectors

9. In our submission we would like to address the gaps that exist in the submissions to the Job Summit of business, labour and government with regard to their policy positions on the informal sector. Our concern is that these three submissions tend to reinforce the dominant notion that has relegated the informal sector to the margins of economic activity. Rather, it should be situated in the mainstream of the economy.
10. The White Paper of the Department of Trade and Industry on the National Strategy for the Development and Promotion of Small Business in South Africa estimates the survivalist sector to number 3,5 million, in comparison to the rest of the SMME sector which it estimates at 800 000. We regard it as imperative to distinguish between the informal (survivalist) sector on the one hand, and the rest of the SMME sector (small, medium and micro-enterprises), on the other hand. Additionally, we ask that government release the 1996 Census results which contain questions addressing the informal sector. We cannot accept the recurring delays by government to publish these results. We also urge government to complete the various CSS household labour force surveys to measure formal and informal employment and unemployment.
11. To illustrate this, in the work done subsequent to the adoption of the White Paper on the National Strategy for the Development and Promotion of Small Business in South Africa, the distinct category of survivalists seems to have been dropped. Survivalists are now officially included in the "micro enterprise" category because there is no lower limit to how small a micro enterprise can be. In principle, there may be no problem with this. But in practice, the same factors that cause survivalists to be marginalised and excluded in society operate to marginalise and exclude them in the context of more viable micro enterprises.
12. The draft Bill of the National Small Business Enabling Act (Notice 1304 of 1995) defines micro-enterprises as being any enterprise with a total annual turnover of up to R0,5 million, total asset value of up to R0,1 million and up to 4 full-time employees for Group A. The upper limits for Group B micro-enterprises are even higher. The entrepreneurs at the upper end of this scale are likely to have more viable businesses and easier access to the support activities and programmes implemented by the Centre for Small Business promotion. For this reason, specific measures must be put in place to remove the obstacles that could exclude survivalists benefiting from the activities designed to assist in the development of Small Business Undertakings.
13. The Community Constituency, through the Self-Employed Women’s Union, has already proposed that the Small Business Enabling Act Schedule, which contains the above-mentioned definitions, be amended to include "survivalist enterprises" as an additional category. Survivalist enterprises would be defined as having a total annual turnover of up to R50 000, a total asset value of up to R10 000 and up to 3 employees (not necessarily full-time) in both Group A and Group B categories. Thus, the applicability of the proposed support programmes can be specifically evaluated in terms of how many people in this sector are actually reached.
14. We need to ensure that opportunities are created that allow women, youth, the disabled, rural people and the poor generally to be elevated to the mainstream of the economy where they can engage in sustainable economic activities, instead of remaining mired in survivalist activities. The necessary gateways need to be created to ensure the marginalised sectors in society can escape their daily poverty grind.
15. The social sectors represented by the Community Constituency, when they are economically active, tend to be found in the informal and most exploited sectors of the economy. This includes the work undertaken by women and men in their own homes. We strongly recommend that legislation for the recognition and protection of workers in the casual and informal sectors, as well as those involved in home-based work, be promulgated urgently.
16. Caution needs to be exercised in regarding the SMME and informal sector as a panacea of job creation. The capacity of this sector to create jobs for people other than enterprise owners, is often over-estimated by those who hope that the informal sector can succeed where the formal sector has failed to provide jobs. One recent study noted that rural self-employment, particularly in crop and livestock production, might not be a viable option if these activities do not provide significant sources of income.
17. For the SMME and informal sector to contribute significantly to job creation, it should be a gateway into the mainstream economy for those people, who wish to go that route and who are not yet able to compete in the primary labour market. The sector itself needs to grow in order to create more sustainable jobs in the economy. This will also ensure that the economy as a whole grows. It should not be a ghetto for women, youth and black people from which they can never graduate. This needs policies to ensure easy mobility from the SMME/informal sector into the mainstream economy.
18. The national government has emphasised the importance of promoting SMMEs as a vehicle for job creation and income generation. Key elements of the national support strategy for SMMEs are outlined in the White Paper on the Development and Promotion of Small Business in South Africa (March 1995). However, the development of SMMEs around the country faces a number of challenges which need policy attention. Among these are: access to finance, marketing of products and services, access to adequate and appropriate infrastructure, access to title deeds, insufficient skills in manufacturing, and access to technological support and advice.
19. As a means to encourage regulation, an important aim of policy for the SMME sector should be to reduce the time required for owner-managers to spend dealing with government agencies, especially where this time is associated with higher costs, but even where these agencies are intended to provide support, such as easier access to finance, marketing assistance or employment subsidies.

 

Transformation of the labour market

20. A proactive transformation of the labour market for the purposes of job creation must emphasise the protection of workers’ rights and stimulate the formation of labour unions in historically unorganised sectors, such as the informal and rural sectors, that tend to fall between the cracks of existing labour legislation. Moreover, transformation must target investment in human resource development; introduce economic incentives to encourage employers to adopt job creation strategies and those aimed at reducing poverty; and improve agricultural opportunities, as well as wages and conditions of employment in the rural sector.
21. Socio-economic inequalities have become further entrenched as a result of the growth of unemployment, the tendency towards deregulation, informalisation and casualisation of work. With the abandonment of apartheid restrictions, the new-found faith in the SMME sector and the informal sector as the latest panacea of job-creation and economic growth creates an illusion which is blind to the deepening structural inequality which exists in the labour market of the "dual" economy.
22. Attempts to solve the unemployment problem through a substantial growth of the SMME and informal sectors could have the effect of merely exacerbating the wider problem of the working poor in these sectors and further marginalising them from the mainstream economy and recognised labour market. In particular, the segmentation of the labour market (i.e. primary: formal sector; secondary: formal/informal/"a-typical"; and non-market: informal/unpaid) into distinct sets of people, is a major contributing factor to labour market inequality and discrimination. For example, ghettoising women and black people into the informal and lower levels of the SMME sector because of the low entry requirements exacerbates the sexual and racial occupational division of labour and labour market discrimination in the economy as a whole. While increasing the actual number of jobs and the turnover in the number of jobs, it decreases the number of sustainable jobs.
23. In the South African labour market today there is continued labour market discrimination arising from this situation. In both the formal and informal sectors, we see mainly women and black people in lower income-earning, lower-valued work. The informal sector as a whole is in the main a black sector. With the exception of more profitable sectors as the male-dominated taxi industry, it is also a largely female sector. The disadvantages that apply at the lower end of the informal sector are therefore also a major part of structural discrimination against black women in the labour market.
24. The increased labour market mobility for individuals from the formal to the informal sector than vice-versa, restricts historically disadvantaged people, such as black women in the informal sector, and compounds the difficulty for them to participate in other levels - not to mention decision-making levels - in the mainstream economy.
25. The fact that there is no social security for workers in casual and informal work exacerbates the growing feminisation of the working poor as a result of the preponderance of women in these sectors of work. The restriction of on-the-job skills training largely to big businesses in the formal sector means that the unequal access to skills training for women is even more discriminatory, by virtue of the large number of women in the informal sector who have no access to income security while undertaking training.

 

Protection of workers’ rights

26. While it is difficult to enforce laws in the secondary and non-market segments of the labour market due to the largely unorganised nature of workers and employers, legislation is necessary to regulate conditions of work within the informal and rural sectors. A decentralised enforcement machinery that has central-level co-ordination, where workers are involved in the enforcement of the laws concerned, can aid in making laws for the unorganised sector both effective and enforceable, and in ensuring grassroots participation in the implementation of provisions affecting workers in the informal sector.
27. We furthermore propose that the rights enshrined in the Labour Relations Act, which only extend by and large to the formal sector, be extended to the informal sector.
28. Employment equity legislation and/or amendments to current and proposed legislation will be implemented by government which will assure that disability employment discrimination remedies reward victims, are economically sound and implementable, and are consistent with other equity measures and all disability employment including protected and sheltered workshops.
29. Additionally, the Department of Labour should promulgate a code of minimum labour standards for those involved in the SMME sector more broadly. It is important that if the Job Summit calls for greater economic activity within the informal sector, as seems likely, that protection of workers within that sector be an integral part of such recommendations.
30. In the same vein, sections 8.1 and 8.2 of GEAR note that while the South African labour market is fragmented, government policy is actually one of ‘regulated flexibility’ instead of a completely unregulated labour market (with which GEAR is so often confused). In addition to the proposed flexible bargaining structures, variable application of employment standards and regulation, informal sector tripartite boards should be added to ensure there is a measure of regulation in the labour market.
31. The formation of decentralised tripartite boards could provide a workable means of regulating working conditions in informal sector work, as well as a collective bargaining framework for employers and workers in the sector; create mechanisms for the resolution of disputes; and provide the means to avoid relying on government bureaucrats to enforce laws. Such boards could be either independent or integrated as distinct sub-structures into the Bargaining Councils of the Labour Relations Act.
32. The social security system needs to be redesigned so as to provide benefits for workers in both the formal and informal sectors of the economy. One way of involving workers who are not in permanent contracts of employment would be to introduce a system of registration for workers in hitherto unrecognised sectors, such as casual, seasonal, piece-rate, home-based, and self-employed workers. Registered workers would need to satisfy criteria to distinguish them from intermediaries, sub-contractors or labour brokers who would not be considered as workers, but rather as employers. Workers would receive ID cards after registration to facilitate enforcement of an effective social security system for those who are not in permanent employment.

 

Skills training and economic mobility

33. Appropriate skills training programmes for the sectors represented by the Community Constituency are important. They will be an important means of ensuring sustainable rather than short-term jobs. The skills should be appropriate to economic mobility in the area. Training should be national in scope but should have as an explicit goal the need to reach people in the more marginal areas of the country, including rural and informal areas; as well as more marginal sectors of society, including people with disabilities, women and others. A quota system, coupled with strict targeting measures, is needed.
34. Skills training should be transformed, particularly at secondary and tertiary education levels, in order to prepare youth to enter the labour market. Curriculum 2005 has not yet been introduced at the secondary or tertiary levels. There is thus still a gap at the school-leaving levels, which is likely to remain for some time. For this reason, we propose that curricula be vocationalised and diversified, as well as coupled with motivational programmes and opportunities to obtain practical work experience, as short-term strategies to better prepare youth for the school-to-work transition.
35. Cultivating the abilities and capacities of disabled people will be supported through school-to-work transition programmes that strengthen linkages between inclusive schools and the informal and formal sectors.
36. A proposed institution mentioned in the White Paper, but not featured again in the subsequent work by the Centre for Small Business Promotion, is an Informal Business Training Board. This would give particular attention to training issues related to micro and survivalist enterprises that are unlikely to be addressed by the levy-funded Industry Training Boards. This Informal Business Training Board should be established, with one of its terms of reference being to develop the specific training programmes geared to assisting people to move upwards out of the survivalist sector. Training courses and materials should cater for the following:

    - all materials to be available in the languages spoken by survivalists in the regions in which training will take place;
    - child-care facilities to be available for those attending training;
    - studies to be undertaken prior to commencement of training as to the frequency with which survivalists in that area are able to attend without preventing the continuation of their income-earning activities;
    - a system of monitoring to pick up problems of accessibility which may not have been anticipated in advance, with the power to propose changes to the way in which training is being offered;
    - a focus on training women in skills which are not traditionally regarded as "women’s work", with the necessary follow-up.

 

Relying on economic incentives

37. Economic incentives, such as better access to credit and subsidies, represent a promising method that can be used to encourage employers to comply with job creation strategies. For instance, the DPSA proposes the "Resources for Disability Economic Empowerment" mechanism as a public-private sector organisation that would provide business-focused services.
38. These services would include: SMME support to publicly-funded resources so that disability-owned organisations and businesses are included; technical assistance and facilitation among tender boards and businesses; private sector information and technical assistance in the implementation of cost-effective human resource strategies; and pilot projects to demonstrate new potential for business and disabled people, especially disabled women and the rural disabled. Equity partnerships would be provided incentives to promote disabled people’s businesses and organisations, as well as those employers relying on significant numbers of disabled people as partners.

 

Employment Subsidy

39. The Community Constituency supports the introduction of an employment subsidy (which the Labour Constituency has also suggested). This would have the effect of reducing the cost to employers of hiring labour, while limiting the effect of lowered real wages on workers purchasing power and living standards. The basic idea of the employment subsidy is very simple: all employers could claim a tax credit for a given share of their wage bill for workers below a given grade. (Supervisory and professional employees are not subsidised.) This would encourage employers to hire labour, especially at the low wage, low skill end of the labour market. Because the subsidy would take the form of a tax credit, rather than a cash handout, it would encourage informal sector employers to come into the ‘tax net’, thereby also enabling other sorts of regulation to impact on them. Various specific features can be included to discourage fraudulent claims, such as ‘phantom’ workers, or ‘subsidy farms’ (which produce nothing but payouts to the owners), and to discourage firms from holding back workers’ progress up job ladders so as to continue claiming subsidies.
40. The subsidy would have to be paid for by new taxes, so that a massive fiscal expansion would not be necessary. (Labour has also proposed a job creation tax levy.) Two possible sources for this tax can be considered, to be used separately or together. The first is to tax the employment of higher skilled workers, to encourage firms to hire more lower skilled people, to shift the proportion of employed labour to that end of the labour force. The other is to tax fixed capital assets, to encourage firms to use more labour and less capital in their production. It can be shown that this would raise profitability significantly in labour intensive sectors like clothing or furniture, while lowering it only marginally in capital-intensive sectors like chemicals or paper. As a result, investment would be likely to shift away from the latter towards the former, with a net increase in jobs.

 

Improving conditions in the rural sector

41. Sustainable economic development necessitates the strengthening of employment rights of temporary, seasonal, and part-time rural workers. Moreover, tackling rural poverty requires interventions to improve the wages and working conditions of the employed, as well as policies designed to increase, and widen access to rural wage employment opportunities, including the diversification of agricultural-related jobs. At the same time, it is important to remind ourselves that rural self-employment is less likely to produce significant sources of income for the poorest rural households than for other rural households. Land reallocation also has to be carefully monitored in order to ensure that it benefits the very poorest, and does not lower the already low rural living standards. There is considerable scope for government intervention to increase agricultural employment, independently of land reform.

 

Targeting and clustering

42. Any strategies emanating from the Summit must be carefully planned but quickly implemented. This difficult balance must be carefully monitored and maintained. Careful planning is vital, but must not be allowed to delay the process. This may require government taking a long, hard look at the bureaucratic problems likely to attend spending government money – and the red-tape must be sliced through if it threatens to hinder the process.
43. Careful planning will require teams to tackle issues of targeting – geographically as well as by social sector (women, youth, and so on). We believe that spending without careful targeting is a waste of resources. We further endorse the view of the Department of Public Works, that resources are not necessarily best spent by casting the net as widely as possible, and trying to give as many impoverished areas or communities a tiny slice of the available cake. Rather, by spending slightly more, and clustering complementary projects in specific areas, sustainable economic activity is often better served.

 

State procurement and quota systems

44. The state procurement system must be amended in order to directly benefit people with disabilities and/or organisations owned by people with disabilities. This is in line with the commitment already outlined in the White Paper on Disability and the Presidential Review Commission Report on the Public Service. Our recommendations (below) set out a timetable within which to achieve that quota. We hope that the quota is seen as a guideline, and one that should be exceeded where possible. This should occur within the broader framework of public sector procurement reform to help various sectors of society.
45. In this regard, we propose that 5% of all economic development investments by public sector SMME promotion, training, micro- and industrial credit resources be targeted to people with disabilities. We also propose that 5% of all public sector procurement will go to businesses owned or controlled by people with disabilities, or to private sector enterprises which employ people with disabilities at a level of at least 5% of their workforce. Flexible structures should also be used to facilitate linkages which support the above mentioned objectives.
46. We also believe that procurement and spending should explicitly favour women. In this regard, a number of government departments have made significant strides, including the Departments of Water Affairs and Forestry and Public Works. Both have adopted quota systems to ensure the jobs they create through their different community-based programmes benefit women directly as well as indirectly.
47. This principle – a quota system to guarantee that women are represented at all levels and in all phases of activities undertaken under the rubric of the Job Summit, whether by government, labour or business - should be enshrined in the policies and strategies of the Summit, and also in procurement policy. It must be enshrined and reflected in all job creation strategies that emanate from the Job Summit itself. But it must not stop here: affirmative procurement should be a basic principle of South African economic life generally, if the inequalities of the past are to be countered.
48. Quota systems can also be used to benefit youth and people living in rural areas. These are less easy to put into practice in terms of government procurement policy, but easily implemented within projects.

 

Sustainable economic activity

49. The principle of sustainable economic activity must be central to all activities that emanate from the Job Summit. Experience has shown that activities such as public works, which are normally associated with short-term relief, can be – and in South Africa since 1994 have been – directly related to sustainable economic activity in the beneficiary communities. In particular, this is the case where labour-intensive, rather than capital-intensive, production is encouraged and where these activities allow for expanded local economic development. Our support for an enlarged public works programme is based on the assumption that it will be carefully targeted, produce useful assets, and enshrine the principle of economic sustainability.
50. However, the same principle must inform all activities – whether carried out by government, business or labour. We cannot accept a situation where government is left to care for marginal social sectors, while business and/or labour worry about the existing labour force or formal economic sectors.

 

Participative development

51. Appropriate planning must take place to ensure that any intervention planned by the Job Summit matches the needs in the area, both short- and long-term; that specifically-targeted community members are part of project selection for their area, are trained on the job, that local suppliers are given contracts, and that local communities are given contracts for maintenance work.
52. In this way the community can choose, design, implement and maintain economically viable and sustainable assets, based on a start-up grant from government. This should be central to all public works and similar interventions suggested by government and hopefully endorsed by the Job Summit itself.
53. The principle of labour-intensive methods should be applied to all Job Summit proposals, where possible. Government experience since 1994 has shown this to be economically viable.
54. We are in agreement with government’s recent announcement to support the Clean City/Town campaign to create employment opportunities at a community level. We are confident that this initiative will allow involvement of people at the local level, further SMME economic development, and enhance sustainable economic development at the local level, within the policy guidelines outlined above. However, caution must be exercised to ensure that this campaign does not become a privatised undertaking which jeopardises the jobs of municipal workers.
55. By the same token, and echoing the various calls of South African National Civic Organisation for participative development, particularly at a local level, we strongly urge that principles of community participation in design, implementation and maintenance be a integral part of all recommendations coming out of the Job Summit. This has been shown in evaluations of the Community-Based Public Works Programme, the Community Employment Programme and many others, to be a powerful component of and in many cases a precondition for a successful and sustainable intervention in any community.

 

Accountability, monitoring and evaluation

56. All the recommendations we have made are based on the assumption that rigorous monitoring and evaluation will be applied. We do not call for quotas for the sake of them, and only believe that beneficiaries that can deliver quality product in time and within budget should be awarded contracts. The basic principle of monitoring all spending, and evaluating the success or failure of projects, must be applied to the Job Summit itself, as well as whatever flows from it.
57. In the same way that government, in its interventions, should follow principles of community participation, the community should also be accountable. Government interventions should not simply comprise money for different initiatives. Instead, government support for different programmes should be conditional on the delivery of quality services by the community.
58. For this reason, it is of utmost importance that all Job Summit initiatives incorporate as a component, a system for independent monitoring and evaluation to assess the effectiveness and sustainability of the different job creation strategies over time. In more practical terms, it would be useful to devise specific sets of Key Performance Indicators (KPI’s) relevant to the targeted sector and level of the economy, against which the success of particular interventions can be evaluated. Critical Success Factors (CSF’s) should also be developed for the Job Summit as a whole, as well as sectorally. Reliance on an independent monitoring and evaluation system would allow not only for the reformulation of ineffective job creation strategies, but also for the safeguarding of sustainable development initiatives.
59. With regard to disabled people, social security disability grants need to include work incentives, a pilot to evaluate the potential for using Welfare funds as an employment investment to reduce dependency, and implementation of this as part of welfare and disability grant reform. Investments by the Departments of Labour and Welfare into disability services need to be evaluated in terms of costs and benefits for generating employment outcomes through programme innovations and alternative financing mechanisms. (Refer to paragraphs 80-82 of this document)
60. Implementation and evaluation of this programme should be accomplished through an implementing authority, led by the Department of Finance, and Trade and Industry, with the collaboration of all stakeholders in the business, labour and disability sectors and the economic and social impact of the programme on people with disabilities, business and the public budget to be evaluated accordingly.

 

Long-term proposals

61. The Community Constituency believes that a tripartite discussion between the self-styled ‘big three’ is unlikely to get us out of the current unemployment crisis, which results from their past and present interplay. Rather, should ensure that each side at the Job Summit should be prepared to make the necessary concessions, instead of turning the Job Summit into a mini bargaining chamber, where each side sticks to its policy positions, and refuses any but the smallest concessions, and exacts concessions from the other sides in return. The objective of each side at the Job Summit should be to ensure that we put the issue of creating jobs at the top of our respective agendas, instead of individual sectarian interests.

 

Restructuring of NEDLAC and Community Constituency participation

62. Our belief is that NEDLAC itself needs to be restructured, so that ‘the community’ – difficult though it is to define – has equal status and bargaining power with business, labour and government. The voice of ordinary citizens must be heard and taken seriously. The longer that economic policy is mythologised as an area for experts only, the longer the crisis will remain. Ordinary people start micro or medium sized businesses, learn to trade and make profits, learn the lessons of failure, try again, do better – not the ‘experts’, be they in business, academe, government or elsewhere. The experiences of those ‘at the coalface’ must inform the Summit.

 

Macroeconomic Policy

63. The Community Constituency believes that macroeconomic policy (fiscal, monetary and exchange rate policy) cannot be the main driving force behind job creation in South Africa. Jobs will be created in sufficient numbers only if, as we spell out elsewhere in this document, new policies are adopted to transform the labour market by improved training and working conditions for low-skilled people; to improve access to the capital and product markets, especially for SMMEs and informal sector entrepreneurs; and to increase public investment expenditure on social and economic infrastructure, as a means of increasing productivity and encouraging private investment in productive sectors.
64. There are no analytical reasons why the government should restrain from actively investing in the economy. There is ample need for government investment in public works programmes (e.g., housing, electrification, etc.), education and training programmes and other social investments as an agreed approach to the elimination of social backlogs, job creation and economic growth. It is also imperative that efforts like these must be co-ordinated between the relevant departments in order to ensure that maximum effectiveness is obtained.
65. While macroeconomic policy cannot substitute for these interventions on the ‘supply-side’ of our economy to bring about sustainable job-creating growth, it is essential that the macroeconomic policy stance is complementary, rather than antagonistic, to the other parts of the strategy. In other words, macroeconomic policy must be moderately expansionary, rather than restrictive, to make ‘room’ for other reforms to take effect.
66. The Community Constituency is aware of the narrow limits to fiscal expansion in current South African circumstances. On one hand, with a real interest rate of 17-18% and a GDP growth rate of 1.5-2%, the level of government debt (as a percentage of GDP) is likely to increase rapidly, so that there are severe limits on an increase in non-interest government spending if a debt trap is to be avoided. We also recognise that the risk perceptions of prospective lenders to government (whether foreign or domestic) need to be taken into account, since if they believe the government’s fiscal stance to be unsustainable, the risk premium on government borrowing will rise, pushing up all interest rates, and choking off growth and job creation in other parts of the economy.
67. Nonetheless, we believe that there is a need to explore, in the context of the Jobs Summit, the possibility of an agreement between government and the Social Partners on the issue of the broad fiscal stance. At present, government is insisting on sticking to its current deficit reduction programme, apparently in the belief that lenders’ risk perceptions will deteriorate very quickly if there is any movement away from the announced targets, and interest rates will then shoot up. We believe that a fiscal stance openly supported by all the social partners would significantly reduce lenders’ risk perceptions, since their main concern appears to be the threat of government abandoning its fiscal policy as a result of overwhelming political pressures.
68. One way to achieve wider support for fiscal policy would be to stretch out the deficit reduction programme over a longer time period than currently envisaged. This would allow fiscal policy to be somewhat more expansionary than current deficit targets allow. But as long as steady progress towards a lower deficit are maintained, risk perceptions of prospective lenders (both domestic and foreign) should not be unduly affected. The Labour Constituency has proposed a different mechanism with a similar objective – announcing a ‘band’ within which the deficit would be maintained – and this proposal is also worth examination.
69. Room for more government spending would increase the scope for Special Employment Programmes as short-term job creation measures, and also for increased public investment in economic and social infrastructure. Government expenditure in these areas is important in correcting problems of underdevelopment, particularly in black communities.
70. Moreover, public productive expenditures in infrastructure and social services play an important role in promoting productivity, growth, and private investment. Such expenditures promote social equity which, in turn, increases social and political stability in the country. Unfortunately, expenditure on social and economic infrastructure appears to be falling behind, under the pressure of meeting current deficit targets. The Community Constituency sees the decrease in public investment as a major obstacle to growth and job creation.
71. The Community Constituency believes that the proposals to transform the public sector pension system from a fully-funded one to a pay-as-you-go approach are worthy of serious attention. This shift could reduce the debt levels of government by up to 40%, significantly reducing any threat of debt trap. More important, this would free up about R10 billion per annum in interest payments (in current terms) for other forms of spending, in particular, job creation and poverty alleviation.
72. However, even if an easier fiscal stance were agreed to, it is the other ‘leg’ of macroeconomic policy – monetary and exchange rate policy – which must contribute most of the accommodation necessary for job-creating growth. In principle what is required to support such growth is a significant loosening of monetary policy, which would be accompanied by (caused by) a lowering of nominal interest rates together with a depreciation of the rand’s exchange rate. The Rand has depreciated significantly against major currencies since early June, but it is being accompanied by a tightening of monetary policy and higher interest rates. The Reserve Bank argued that this policy is necessary to discourage financial speculators from ‘attacking’ the Rand, and will also limit the rise in the inflation rate which would otherwise follow the depreciation.
73. The Community Constituency opposes this approach since it prevents the depreciation of the Rand being used as an opportunity for growth and job creation. We support the alternative approach: to lower interest rates and let the Rand drop further. Lower interest rates and a depreciated exchange rate will help growth by encouraging investment and exports, thus supporting job creation. While this would produce a small rise in the inflation rate, we do not accept that any rise in the rate of inflation would inevitably accelerate into runaway inflation, in the hundreds or even thousands of percent per year, as claimed by the Reserve Bank. We also do not accept that a very low rate of inflation should be the sole objective of monetary policy. The rate of economic growth and the level of employment should also be essential concerns for monetary policy.
74. We argue that a much more accommodating monetary policy stance, as reflected in a sizable lowering of nominal, and real, interest rates would diminish the risks of a public debt trap, and would thus contribute to greater harmony between monetary and fiscal policies. At the same time, the current approach to macroeconomic policy emphasises the concerns and risk calculations of financial and portfolio investors, at the expense of potential investors in fixed assets and productive capacity, who need greater certainty about the long-term stability of policy than we have had in South Africa. Their decisions to wait rather than invest are reflected in the inability of Gross Domestic Fixed Investment to sustain its post-election improvement after 1995.
75. The policy stance proposed here would lead to higher levels of consumption (especially of housing and other consumer durables), exports, and especially of fixed investment. We have no doubt that the confidence levels of potential investors in the SMME sector would be greatly increased by the shifts proposed here in the macroeconomic policy stance. And we would also argue that even amongst large enterprises in the formal sector, fixed investment is more likely to respond positively, not simply to lowered interest rates, a more competitive exchange rate and growth in other components of demand, but also to the greater long-run certainty which a wider consensus over macroeconomic policy would reflect. If the Jobs Summit cannot deliver this consensus, it will not have succeeded.
76. The Community Constituency recognises that, through lower interest rates and a depreciated exchange rate, macroeconomic policy can provide only a short-term and temporary boost to investment and to consumption, and to exports. More fundamental changes are necessary at the firm and sectoral levels, to increase productivity, enhance competitiveness and create jobs. The relationships between productivity growth, money wage increases, inflation, and employment growth are not only complex and contested, but also critical determinants of the success or failure of any strategy for job-creating growth in South Africa.
77. The Jobs Summit should explore the prospects for a Social Accord, as outlined in the ‘Report of the Presidential Commission to investigate Labour Market Policy’ and the GEAR document. An agreement between the different Social Partners is clearly required at this juncture in order to ensure that the central challenge of charting a rapid employment-creating growth path is urgently addressed. This is necessary to absorb the large masses of unemployed in our country, particularly in the marginal sectors like women, the disabled, youth, rural people and those designated the ‘poorest of the poor’ are absorbed into the mainstream economy. This Accord would address the issues of how to raise productivity, and the distribution of the benefits of productivity growth, between wages and profits, in ways which can ensure that employment increases as rapidly as possible. Any such agreements need also to apply to higher-skilled, salaried employees amongst the professional, technical and managerial (and largely non-unionised) layers of the workforce.

 

Job Summit as an on-going process

78. We need a careful examination of the informal sector, and the protection that workers in that sector require – otherwise, it will remain a ghetto for women, people in rural areas and blacks. We need a frank examination of what ‘labour market flexibility’ can mean in South Africa; and how we can extend employment without jeopardising the gains made by organised labour. We need to able to dispassionately examine all cornerstones of economic policy.
79. That assessment must be informed by a detailed, empirically sound evaluation of job creation in South Africa. We need a detailed assessment of which sectors, and which strategies within sectors, have succeeded in creating jobs. We need to learn more about the survivalist strategies of the very poorest, to understand what enabling legislation is required for these to be replicated. This may need to be stratified by province; and by urban/rural/informal. In short: calling for some government spending on public works, and the expansion of the informal sector, is not going to solve our current economic predicament in the short-, medium- or long-term. As with macroeconomic policy, there needs to be further systematic, careful and open examination of sectoral policies. These must cover the survivalist sector, as well as the different productive sectors, where the needs of owners and workers in both SMME’s and large enterprises must be carefully distinguished. A flexible approach towards policy, which is informed by an empirically sound evaluation of the relative success or failure of job creation, is needed.
80. Once we know what works and what doesn’t, as well as what incentives, partnerships or other assistance is needed, concrete sectoral proposals can be made. This is a slower process than a high-profile Summit – but, we believe, one more likely to succeed than a one-off meeting between the three players already involved in economic policy, but without hearing the voice of the citizens of South Africa who work within the constraints of that policy environment. The Social Partners – labour, business and community – must participate fully in these processes of policy analysis, and where necessary must be empowered to do so.

appropriate Measures to Facilitate Job Creation

1. Micro-credit needs to be made available generally, but more specifically in rural areas. Khula is presently failing, because of their dependence on intermediary service organisations to deliver, to reach the most marginalised sectors in society, which constitute the Community Constituency;
2. Informal Sector Training Board to be established to provide training for survivalists to compete in the labour market and transform their enterprises to provide sustainable livelihoods, and for unemployed youth without experience to compete in the labour market;
3. 2% of the public sector workforce will be disabled as a public sector quota and model of employment equity leadership;
4. 2% of the private sector workforce will be disabled as a target, encouraged by incentives of an employment and accommodation tax credit;
5. Social security disability grants will include work incentives, a pilot to evaluate the potential for using Welfare funds as an employment investment to reduce dependency, and implementation of this as part of welfare and disability grant reform;
6. Adequate representation in NEDLAC’s Labour Market Chamber of women who are knowledgeable about the informal sector and the dynamics of gender discrimination in the labour market;
7. Legislation for the recognition and protection of workers in the casual, informal, and socially invisible sectors of work such as home-based work;
8. Code of Minimum Standards for the SMME sector that incorporates so-called "family labour" so as to reduce the exploitation of women and children as cheap or free labour;
9. Establish Tripartite Boards to regulate informal sector working conditions and enable participation by both employers and workers in the informal sector in the formulation of appropriate regulation of the sector;
10. Revamping of social security system so as to provide benefits for workers in both the formal and informal sectors of the economy;
11. Targeted skills training programme to impart skills in non-traditional occupations for women to assist them to move into new occupations with higher income earning potential;
12. National system of workplace child-care provision geared to the needs of working parents in all sectors of the economy;
13. Widening the tax base to include the informal sector on an equal basis of progressive taxation.
14. Including youth in the existing government employment programmes at national, provincial and local level, like the Public Works Programme, Small Business Development and Empowerment programmes and the Spatial Development Initiatives (SDI’s);
15. Disaggregating the youth percentage from the overall government budgets allocated to youth programmes to determine what percentage is spent on the youth. The possibility of establishing a Youth Unemployment Fund should be explored;
16. Government-devised mechanisms that will assist the youth in overcoming entry barriers into the labour market;
17. Ensuring that the existing Placement Centres which facilitate and co-ordinate employment placement are utilised properly by the youth, instead of on an ad-hoc basis as is presently the case;
18. Devising strategies to encourage the youth to participate in both the formal and informal sector. Couple this with entrepreneurship development training.
19. The national youth service initiative should serve as a definitive administrative vehicle responsible for co-ordinating youth employment programmes and activities.
20. Alleviating and reducing rural poverty requires interventions to improve the wages and working conditions of the employed, as well as policies designed to increase and widen access to rural wage employment opportunities, including the diversification of agricultural related jobs.
21. Extending and improving the employment rights of temporary, seasonal and part-time rural workers. Develop and promote initiatives that will make rural workers and people cognisant of their rights and confident to assert them.
22. Providing special assistance and mechanisms for the poorest households with problems and difficulties around pension, social welfare and grants pay-outs.
23. Government to develop and promote policies that will improve the low rural living standards through the provision of more and improved local job-creating opportunities.
24. Linking poverty alleviation and reduction to sustainable job creation activities. Devising mechanisms that will ensure the relative easy mobility of survivalist enterprises from the SMME/informal sector into the mainstream of the economy.
25. Developing Critical Success Factors (CSF’s) should also be developed for the Job Summit as a whole, as well as sectorally, against which the success of particular interventions can be evaluated.

The following points outline the difficulties that organisations working within the SMME and informal sectors, face when trying to reach this constituency. Although the survivalist sector consists of a large number of people, it is difficult to have access to them for the following reasons:

1. very few of the people in this sector operate effectively in English;
2. there is a lower level of literacy than in other business sectors;
3. there is a much lower level of formal business skills’ education;
4. the majority of people in this sector are women, who are subject to the usual patriarchal pressures to confine themselves to the private domain and keep out of the public domain as much as possible, despite the fact that they are forced into the economy for subsistence;
5. most of the women in the sector have very little time to participate in any programmes, even those geared to their own assistance, because of their domestic, child-care and nurturing responsibilities which are taken on in addition to their income-earning activities;
6. many of the people in this sector have traditionally been seen as (real or intended) welfare beneficiaries, and do not necessarily initially distinguish between authorities involved in welfare activities and authorities involved in development activities; as such, there is a great potential for misunderstanding what is on offer and why;
7. many of the obstacles which have the practical effect of blocking access by and to people in this sector are not created with the specific intention of excluding survivalists and are consequently not well understood by those working in government or NGO service organisations;
8. organisation in this sector is not very well co-ordinated, which makes consultation cumbersome;
9. organisations in the survivalist sector tend to be male-dominated at leadership and decision-making levels, which means that the concerns and interests of the majority – women - are not generally well-represented;
10. the work of people in the survivalist sector is still largely invisible and unrecognised (including part-time, casual, home-based, subsistence, unpaid family labour, even street vending which is visible, but not properly recognised and consequently has a very low social and economic value);
11. women are more trapped into these forms of work by custom and tradition, domestic responsibilities, discrimination and a range of other factors, than men;
12. these types of work expose men and women in this sector to super-exploitation in a number of different ways, thus reducing their income-earning capacity.