Managing Labour Activism: Should South Africa be Concerned?

19th August 2009 By: Adam Habib

Should Business be worried by the political activism and prominence of Zwelinzima Vavi? Should citizens be concerned about unionized workers marching on the Reserve Bank? Does labour activism herald economic doom? What should be the response of Business and government?

These questions and the diverse answers they inspire have increasingly been the subject of the pages of this newspaper and others in the last couple of weeks. Most if not all of these articles parrot conservative business and public opinions on the subject berating the union leadership, accusing it of populism and worrying about the consequences of a struggle within the Tripartite Alliance on economic policy. The ANC's and government's responses have not been all that imaginative either. Gwede Mantashe responded by chastising COSATU workers for compromising the image of the Zuma administration. Trevor Manuel accused Business of cowardice and asked it to stand up to the might of the unions. President Zuma has remained silent on the issue characteristically promising everything to everyone in his State of the Nation address? Is there not a need to understand this upsurge in labour activism? And could there not be a more imaginative response from the leadership of the ANC and government in this regard?

The upsurge in labour activism must be understood in context. Between 1985 and 2002, the wage share of output as a percentage of GDP has declined significantly from 57.1 percent in 1985 to 51.4 percent in 2002. In the same time period, profit share increased from 42.9 percent to 51.4 percent. This trend has almost certainly consolidated in the boom years between 2003 and 2007. There can be no doubt that workers have benefitted far less than business from the growth of the South African economy in the last fifteen years.

In the public sector, the situation is even more serious. Public sector salary increases have lagged inflation for a number of years with the result that that it has become impossible to attract adequately qualified and trained staff to crucial professions in the public sector including among others, teachers, nurses and doctors. This has long been recognized and government promised to address this in the last negotiations cycle through the implementation of the Occupation-Specific Dispensation (OSD.) Yet one year later nothing has happened. Is there not legitimacy, then, to the mobilization by public sector workers?

Labour activism by public and private sector workers is also part of a global backlash against crude enrichment by CEOs and company executives over the last couple of years. Industry economists have been quick to accuse labour of populism in its wage demands. But how come these very voices were not heard when CEOs and company executives were awarding themselves multi-million rand bonuses and remuneration packages. Is there not a profound hypocrisy in the public debate in this regard?

Labour activism on economic policy must also be understood as part of its own response to previous failures at influencing government's agenda. This is not the first time that COSATU has had its people in cabinet. Alec Erwin, Sam Shilowa, Sydney Mafumadi, and many others, came from the unions. Yet not only did this not stop them from implementing a conservative macro-economic agenda, but they also willingly marginalized labour from policy decisions. Labour's past failures have led it to understand the powerful effects of institutional constraints. In Zwelinzima Vavi's graphic description, ‘you can never win in the negotiating table, what you have never won on the streets'. COSATU has recognized that its only leverage is the mobilization of its members, and it now has to keep them actively mobilized so as to ensure that a Patel does not turn into a Shilowa, or an Nzimande and Cronin into an Erwin and Mafumadi respectively.

Is this disastrous? Of course not. Business regularly attempts to influence government ministers and officials. It just does it differently because it has an alternative leverage in the form of investment. As Pat Davies from Sasol indicated in his response to Trevor Manuel at the World Economic Forum, he regularly discreetly engaged government officials to influence their decisions. Trevor Manuel should know this since he was often the target (very successfully I might add) of such influences. It needs to be noted that Business was the greatest beneficiary of post-1996 economic policy, and yet it did not have, at least for the first couple of years, a single figure on the national executive of the ANC. Discreet engagement can often be a powerful tool of persuasion.

In any case, none of this is meant to imply that we are not confronted with a dilemma. Obviously we do have one. As a result of the failures of past and current ANC leaders, workers salaries, especially in crucial professions in the public sector, are lagging inflation. This has begun to hurt them even more both in this economic recession. The global and national recession also means that South Africa does not immediately have the resources to address public sector salaries as comprehensively as it should, especially if it is to deliver on the many other promises made by the ANC in the recent elections.

This dilemma needs to be addressed and the only way this can be done is by astute political management. This does not mean berating workers for populism or compromising Zuma's image. Rather it would have required the President to use his State of the Nation address to inspire a nation. President Zuma could have begun by identifying the dilemma and recording that he was not the architect of it. He should have also recognized the hypocrisy of the public debate where workers are berated for asking for small increases in real terms, while the CEOs and company executives have not been chastised for their overly extravagant remuneration packages. And then he should have explained that while he recognizes the need for the increases and sympathizes with the economic plight of the workers, he does not have the resources to immediately address their salary demands. Zuma could have then legitimately asked for time, provided what is immediately possible and established a process with representatives from all sides to find a solution to the dilemma over the next three to five years.

To legitimize his request, President Zuma should have also berated executives for their own lavish packages and should have requested of them to forego their bonuses this year, and to take lower than inflationary increases in their packages. The President should have said that sacrifices in this recession should not only be made by workers, the poor and marginalized and ordinary citizens, but also by the rich and the upper middle classes. After all, every stakeholder must be required to make sacrifices in the national interest in this recessionary environment.

Industry economists and Minister Manuel will of course warn us of disillusioning Business and investment fleeing our shores. But is this really true or is it scaremongering? As long as a climate exists to make profit, Business is mature enough to remain. Remember, President Obama has berated American business executives for their lavish million dollar bonuses, remuneration packages and expense accounts. Prime Minister Brown, President Sarkozy and Chancellor Merkel have done the same. Yet none of them have a single communist in their ranks. How is it that this government which has at least half a dozen openly committed communists and socialists in the cabinet cannot do the same?

Written by: Adam Habib