Government and labour clash over economic policy

Labour federations and the state have different ideas on how to recover the country’s economy, which was already taking a beating when the Covid-19 pandemic hit.

The government and major labour federations are headed for a showdown over South Africa’s desperate need for economic recovery. An established lack of trust between the state, labour, business and societal organisations has resulted in a deadlock aggravated by widespread reports of corruption linked to Covid-19 procurement.

The drama is now playing out in the National Economic Development and Labour Council (Nedlac), through which these roleplayers negotiate on economic, labour and development issues in the country. There are threats of mass action over job losses and demands for better protection of frontline workers. 

President Cyril Ramaphosa chaired a special session of Nedlac on 13 August 2020. But earlier this month, three of the four labour federations that form part of Nedlac – the Congress of South African Trade Unions (Cosatu), the Federation of Unions of South Africa and the National Council of Trade Unions – presented a document to Ramaphosa outlining what they say should be the priority areas for the country’s economic recovery strategy.

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The document makes several bold calls for economic reform, many of which the federations say the government is likely to reject, especially the National Treasury, which they say has continued along its path of austerity. One of the main demands from labour is a R1 trillion stimulus package.

“The president had spoken forcefully about a bold economic stimulus at Nedlac and the Alliance Political Council. He was emphatic that anything less than a R1 trillion stimulus plan would be a pittance that will simply not do,” says the document. 

“Yet what we saw in the supplementary budget tabled in Parliament in June was anything but a stimulus plan. It merely restated the social and economic relief measures that had been announced two months earlier,” it concludes.

20 July 2017: Security guards outside the National Treasury in Pretoria, which labour federations say is on a path of austerity that is proving to be a stumbling block in the bid for a massive stimulus package.
20 July 2017: Security guards outside the National Treasury in Pretoria, which labour federations say is on a path of austerity that is proving to be a stumbling block in the bid for a massive stimulus package.

Labour is pushing for talks to start at Nedlac about this R1 trillion stimulus plan, which includes a R200 billion Covid-19 Loan Guarantee Scheme to assist eligible businesses with operational expenses such as salaries and help them stay afloat during the coronavirus lockdown. The federations want the R1 trillion plan to be tabled at Parliament in October with the medium-term budget policy statement. “It must include both public and private funding,” the document says.

Cosatu parliamentary co-ordinator Matthew Parks says that while the president has been adamant on the need for a stimulus package, the treasury “balked and refused”.

“They believe we can save and grow the economy by spending less. Treasury prevailed. We will continue pushing, otherwise we fear an economic depression. Hence we are intervening now to unblock the R200 billion [loan guarantee scheme] as every little bit is so critical,” he says.

Unfulfilled promises 

Another sticking point and a particular bugbear for labour is the Jobs Summit. In 2018, Ramaphosa said initiatives and agreements coming out of the summit would lead to 275 000 jobs a year. But few of the commitments made by business or the government had been implemented two years later, before the coronavirus pandemic brought the economy to a halt. 

The state and business constituencies have tabled proposals at Nedlac, putting forward some of the actions and commitments agreed at the 2018 summit that have fallen by the wayside. While the state has until recently been focused on controlling the coronavirus pandemic, labour says many of the commitments from the Presidential Jobs Summit Agreement could have and should have been implemented in the intervening two years, before Covid-19 struck.

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“Government and business have failed to honour the majority of their Jobs Summit Agreement obligations. Examples are the government on rolling out digital spectrum [for television], on implementing a tax on scrap metal exports to support local beneficiation, or establishing a Presidential Climate Change Coordinating Council,” says Parks.

“Business [has failed] on releasing R100 billion for establishing new businesses, engaging 500 companies on buying local and linking to Proudly SA. It’s simply a lack of political will, discipline and capacity on government’s side. A lack of patriotism and willingness to sacrifice on the side of business and just expecting government to do everything.”

For the past two months, Nedlac has been working on reprioritising the jobs pact so that some areas are pushed up in response to Covid-19 and the economic crisis it has fuelled. 

They include: 

  • A need for the stimulus plan and financial relief, such as the R200 billion loan guarantee scheme
  • Extending support from the Unemployment Insurance Fund (UIF) for workers affected by Covid-19 beyond 15 September 
  • Ramping up local procurement by public and private sectors
  • Signing the Eskom Social Compact and fast-tracking its implementation
  • Road maps for other state-owned enterprises (SOEs)
  • Rolling out digital economy and other network and structural challenges to business
  • The presidential infrastructure programme, which the government embarked on hoping to create tens of thousands of jobs
  • Dealing with corruption and wasteful expenditure
  • Insourcing government contracts
  • Mass public employment programmes

The labour document also demands that the Presidential State-Owned Enterprises Council set up in June start its work. “It hasn’t met yet. We’ve been asked to provide labour representatives, too. It needs to start moving so it can ensure there are turnaround plans for each SOE and alternatives to retrenchments,” says Parks.

7 October 2016: Workers affiliated to the Congress of South African Trade Unions embark on a national strike demanding better working conditions. Nedlac has been reprioritising the 2018 jobs pact to boost certain areas in response to Covid-19.
7 October 2016: Workers affiliated to the Congress of South African Trade Unions embark on a national strike demanding better working conditions. Nedlac has been reprioritising the 2018 jobs pact to boost certain areas in response to Covid-19.

Records and accountability

Labour says the government needs to move faster on its construction programme and prioritise key infrastructure investments that will have an immediate and positive impact on economic growth. These include port, freight, passenger rail, energy and water projects.

It wants an infrastructure programme sub-committee established under the Presidential Working Committee (PWC). This sub-committee must receive monthly reports on the implementation of the infrastructure programme.

The federations are also demanding that a second, impact investments sub-committee for infrastructure be set up under the PWC to develop proposals on the modalities for impact investments, which areas must be prioritised for investments and to monitor their implementation.

On social relief measures, the three federations have called for the UIF, South African Social Security Agency and South African Post Office to be “reinforced”, according to the document, so they can disperse funds more efficiently to those who need them. 

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They also want a clear road map for a basic income grant, which was already called for under former president Thabo Mbeki’s administration and is now being entertained by the governing party as part of its economic recovery plan. The basic income grant also has support from the country’s second-biggest labour federation, the South African Federation of Trade Unions (Saftu). 

Saftu was founded in 2017, but is yet to be given a seat at Nedlac. According to Saftu general secretary Zwelinzima Vavi, the state has not held talks with the federation about the country’s economic recovery programme. “We have not been consulted. We will force the consultation in the streets. We are locked out of Nedlac still and we will open the door through mass action,” he says. 

Saftu is meeting this week and plans on announcing a “programme of life or death at the end of it”, says Vavi.

Saftu’s exclusion – along with that of many other non-governmental and community-based organisations, think-tanks and potential sites of mass participation, and thus popular legitimacy – points to one of the enduring weaknesses of the Nedlac process. 

This weakness is amplified now, at a time of crisis and turmoil, and begs the question: Should the future of South Africa and its viability as a modern, thriving country be under formal discussion only within the narrow confines of Nedlac?

28 June 2017: Residents who live near huge mining operations in North West province travel to Joburg to protest against the mining conglomerates’ unfair labour practices. The exclusion of community organisations is one of the enduring weaknesses of the Nedlac process.
28 June 2017: Residents who live near huge mining operations in North West province travel to Joburg to protest against the mining conglomerates’ unfair labour practices. The exclusion of community organisations is one of the enduring weaknesses of the Nedlac process.
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