Opinionista Ivo Vegter 13 March 2019

Curb the destructive power of unions

Many of South Africa’s most intractable problems, from the civil service wage bill to sub-standard teaching to unemployment, can firmly be laid at the door of trade unions. They enjoy too much power in South Africa. Something must be done.

The massive size of the public sector wage bill, which at R587-billion gobbles up more than a third of South Africa’s entire Budget, is a key concern of international credit rating agencies. When Finance Minister Tito Mboweni came to address this in his 2019 Budget speech, all he could do was offer early retirement for a few employees, which he hoped would save a meagre R20-billion over three years. In the first year, this would amount to 0.8% of the total, rising to 1.4% by year three.

In time,” he said, these savings would be complemented by limits on overtime, bonuses and pay progression. In time.

This is fiddling at the margins. The growth of the public sector wage bill has exceeded nominal GDP growth in seven out of the eight financial years up to 2016/17, according to research by the Institute for Race Relations. South Africa’s government employee remuneration, at just over 14% of GDP, massively exceeds the OECD average of a little over 10%.

Meanwhile, wrote John Kane-Berman on PoliticsWeb, “we have some of the worst education, some of the worst public hospitals, some of the highest crime rates, some of the worst public transport, and some of the least reliable electricity”.

Of course, the primary reason why Mboweni was powerless to make a more dramatic gesture is that the unions would scream blue murder. Ultimately, the unions call the shots.

The unions also have a big hand in unemployment. They represent their members, who are employed workers. They do not represent the unemployed. When unions campaign for minimum wages, or wage increases, they don’t care about the people they price out of the labour market. They don’t care about the profitability of employers. All that matters is that their own members are better remunerated.

This is unsustainable. Mineworkers, for example, are the highest paid industrial workers in the country, alongside workers at Eskom. Average annual mineworker remuneration rose from R101,000 per year in 2007 to R262,500 per year in 2016, representing an astonishing year-on-year increase of 10.8%. This is far higher than the industry’s nominal revenue growth of 7.2% per year. In real terms, industry growth has been negative, at -4.7% per year. Employment, too, has been shrinking by an average of -4.5% per year. Yet minimum entry-level wages in mining are about twice as high as in the petroleum sector, three to four times higher than in the hospitality sector, and five times higher than in the security industry. Union members are smiling all the way to the bank, while employers and the unemployed bear the brunt of union power.

Technically insolvent Eskom’s staff numbers ballooned from 32,000 in 2007 to 48,000 in 2018, and its wage bill increased accordingly, from R20-billion to R29.5-billion. During the same period, Eskom’s output did not increase; contrary to the purpose of business, which is to produce more with less, Eskom produces less with more. Plans to turn the teetering enterprise around by retrenching some of its bloated staff roster will meet the formidable opposition of the unions.

Researchers led by Moeketsi Letseka of the College of Education at Unisa argue that the South African Democratic Teachers’ Union (SADTU), which represents 70% of all teachers, “organises teachers at the expense of teaching and learning”.

According to Letseka and his colleagues, international benchmark tests, “all point to the predicament of extremely low average primary education achievement levels”. Matric pass rates are buoyed only by high dropout rates in earlier grades. Fewer than half of the children that complete primary school go on to complete matric. Schools are staffed by teachers that wouldn’t pass the tests they set for their own pupils.

Felicity Duncan, writing for BizNews, argues that South Africa’s education has a single cause, namely SADTU. She reported that in 2017, the World Economic Forum ranked South Africa’s primary education 116th out of 137 countries and its maths and science education as 128th. The overall education system was ranked 114th.

Letseka et al. agree, writing:

We noted that SADTU, which has powerful political links with government, routinely mobilises its members to go on strike, often at the expense of teaching and learning. We showed that due to SADTU’s strike actions and the national Department of Education’s indecisiveness the country’s education system is a crisis and a national disaster. It is in tatters, inefficient and makes ineffective use of resources; it is generally performing poorly and lags far behind poorer countries such as Botswana, Kenya, Lesotho, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe, which spend much less on education than South Africa.”

Trade unions have always been an extremely powerful force in South African politics and society. Even before they were legalised by PW Botha’s government in 1979, they began to play a crucial role in the struggle against apartheid. Union officials were arrested less often than high-ranking members of banned political parties like the ANC and SA Communist Party (SACP). It was easier to hold clandestine meetings under the guise of discussing workers’ rights. There was also safety in numbers: mass community protests without obvious leaders were far more difficult to quell than the activities of a political party.

The legalisation of unions established the right to strike, but also required unions to register and hand over the names of their members to the government. Yet despite the increased control, the apartheid government was able to exercise, a global economic crisis in the early 1980s led union membership to flourish.

Seven unions, collectively known as the “Magnificent Seven”, were instrumental in the foundation of the United Democratic Front (UDF) in 1983, which protested apartheid by means of rent boycotts, mass protests, and school and work stayaways.

The UDF came under pressure by the apartheid regime, and would ultimately be banned on the grounds that it was a front for the ANC, that it was a revolutionary organisation that incited violence, and that its activists were guilty of treason by trying to make South Africa ungovernable.

However, the union movement thrived. The country’s largest union federation, the Congress of South African Trade Unions (Cosatu), was founded at a meeting chaired by the then-president of the National Union of Mineworkers, one Cyril Ramaphosa.

Among its founding resolutions were overtly political goals, such as to call for the lifting of the state of emergency, withdrawal of troops from the townships and release of all political prisoners, and to continue the call for international pressure against apartheid South Africa, including disinvestment.

In the late 1980s, Cosatu worked together with the banned UDF under the Mass Democratic Movement banner, and also formed closer relations with the still-banned ANC. When the ANC and SACP were finally unbanned in 1990, Cosatu joined them in the Tripartite Alliance, which endures still. With the ANC as the government-in-waiting, the alliance agreement committed the three groups to co-ordinate policy programmes and adopt a common socialist economic policy developed by the SACP.

It is hard to understate the impact of the unions in the liberation of South Africa, and their contribution to the establishment of the new democratic government of South Africa in 1994. When the time came to negotiate a new constitution for the country, the unions were not ignored. The Bill of Rights grants workers the right to form and join a trade union, the right to strike, and the right to collective bargaining, and these rights were to be recognised in national legislation.

Unions have a voice in the National Economic Development and Labour Council (NEDLAC), which was formed in 1995 as a statutory body that brings government, business and labour unions together to find consensus on economic, labour and development policies and legislation.

To this day, unions direct their millions of members to vote as a bloc, giving them a commanding voice in the country’s politics.

As Letseka et al. write about education:

The country’s dysfunctional education is an indictment of the ANC-led tripartite alliance which commands over 70% majority in the country’s parliament. Over 80% of the dysfunctional schools are predominantly in the black townships and rural areas, which are key political constituencies of the ruling tripartite alliance. It is ironic that the schools are under constant threat of strike action by [ Cosatu member] SADTU, a critical political partner in the ruling tripartite alliance.”

Clearly, for all the good they did helping to liberate South Africa, unions are now doing harm to the country. This is especially problematic in an economy with anaemic growth, high unemployment and a massive public debt problem.

However, in a society based on individual liberty and free markets, people have a natural right to freedom of association. That means they can form organisations to pursue a common purpose, whether they be companies, public pressure groups, charities or indeed workers’ unions. Workers have an absolute right to form unions and to bargain collectively for higher wages and better working conditions. That much, the Constitution rightly assures them.

How, then, can the excessive power of the unions be reined in?

Unions are heavily protected by the Labour Relations Act of 1995, as amended. The law gives unions the right to call strikes, during which workers are protected from being dismissed. This protection is what enables unions to extort ever-rising wages from employers, even when economic or business circumstances make pay increases unaffordable. It enables unions to effectively oppose measures employers might take against non-performing workers, such as teachers who don’t turn up for work or lack basic competencies. It enables unions to prevent necessary retrenchments, such as cutting Eskom’s staff numbers or the civil service wage bill.

This is where reform should start. The protection of strikes ought to be significantly curtailed, or even abolished. Any worker has a right to strike, of course, but employers should have the power to call their bluff by dismissing them and hiring new staff.

This is not a power employers would exercise lightly. Dismissing striking workers is a last resort, and would be expensive and disruptive. It would require expenditure not only on finding and hiring new employees, but also on their induction and training. Losing skilled, experienced staff for untested, inexperienced replacements is a move no company will relish. This ought to be sufficient protection for striking workers, ensuring that on the one hand, strikes are not lightly embarked upon, and on the other, employers can resist the extortionate nature of protracted strikes.

Unions ought to have no power over non-members, and it ought to be safe for workers to choose not to join a union. At present, only agency shop agreements and closed shop agreements are permitted under law. The former requires non-members to pay membership dues simply by virtue of benefiting from agreements the union makes with employers, while the latter forces non-members to become members in a shop in which two thirds or more of the employees are members. This makes it impossible for employees to dissociate from a union which they do not believe acts in their interests, and artificially inflates the representative power of unions.

The Labour Relations Act does not only provide for collective bargaining, but also for bargaining councils, which apply to entire industry sectors. While this appears to protect workers by requiring all employers to pay the same wages and benefits and offer the same working conditions, in reality, it reduces employment by employers that cannot meet the minimum requirements, and reduces competition for workers among employers that can.

There are other ways in which the Labour Relations Act could be amended to curtail the excessive power of unions, in order to prevent situations like we see in education, mining and the civil service, in which employers are held over a barrel and prevented from turning around their own failing departments or companies.

A further reform that might be considered is to get the unions out of politics altogether. In return for the special protections they enjoy, they should be limited to representing workers in the workplace, and not be permitted to engage in political activities, including directing how members ought to vote.

It is high time that unions get out of the way of the reforms that are needed to restore the government’s ability to provide basic services like education, and companies’ ability to generate prosperity and create jobs. This requires an overhaul of the Labour Relations Act.

Government and business, as partners in NEDLAC, should make it clear to labour that they will no longer be held hostage to the narrow interests of workers’ unions at the expense of South Africa’s other citizens, and least of all, at the expense of its children. Of course, with an old-school union leader in charge of the government, what hope is there of that? DM

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