South Africa is nearing the end of its annual strike season, with many workers once again receiving double digit increases, twice the level of the 5% inflation rate. Most countries have strikes, of course, but South Africa's are something else. Standard labour market theory would suggest that in a country which suffers perhaps the world's highest unemployment rates of 40% or more, strikes should be virtually impossible. But South Africa also has the highest strike rate in the world.
Over the past five years the country has suffered an average 322 days lost per thousand employees which compares to 35 days lost in Italy or 24 days in the UK, for example. In 2010 South Africa lost over 1,000 days per 1,000 employees, making it by far the most strike-prone country in the world - the next worst was Denmark with 159 days lost per thousand.
Moreover, the trade unions have successfully rammed through some of the most protectionist labour laws known anywhere so that it is virtually impossible to fire workers who do not perform or who fail to turn up for work. It's been such a happy hunting-ground that frequently strikers even manage to get paid for the time they were on strike, sometimes even with back-paid increases. One result is a steadily falling rate of labour productivity, now only 82% of what it was in 2000.
South Africa's strikes are also exceedingly violent. Workers who fail to join in strikes are quite routinely beaten up, stabbed or otherwise intimidated. During the strike of private security workers in 2006 there was large-scale damage to property, vandalism, looting and over 60 non-strikers were killed. Similarly, a tactic favoured by the municipal workers - now on strike again - is littering, that is the systematic overturning of garbage bins throughout city streets.
During the anti-apartheid struggle the trade unions formed an alliance with the now-ruling African National Congress, which was then waging a guerrilla war against the apartheid regime. The ANC doctrine that violent means were entirely legitimate in this cause was adopted by the unions and such practices quickly became a normal part of strike action - as they have continued to be.
The problem is exactly like that of a police force that gets used to using torture to compel confessions. Pretty soon no one does any proper detective work at all: they just grab a few suspects and put the electrodes onto them. It's so much easier and since people who are getting electrocuted will always give you some name, you always end up "solving" the case. It's the same with trade unions and violence. Pretty soon you use it as a substitute for proper trade unionism. Many trade unionists in South Africa no longer even know what proper trade unionism entails.
The nub of the problem lies with the public sector. For the past eight years determined and successful strike action has seen the ANC government give in every time so that public sector pay has risen every year at an average of 10.4%. Thus year in and year out public service pay has increased 6.3% faster than inflation, so its total wage bill has gone from $20.7bn to $41.5bn in just seven years.
This means that the wage bill of the public service is now 12% of GDP and over 40% of the entire national budget. Last year when the public service strike forced yet another above-inflation increase the government simply borrowed abroad to pay for it, pushing the budget deficit up to 7.3% of GDP. This year, with inflation running at 5%, the municipal workers are already on strike demanding an 18% increase and others are expected to follow. South Africa, a middle income developing country, already has the seventh highest paid public service in the world.
Moreover, the government is under intense pressure to create more jobs and it has increased the size of the public service by 15% over the past four years - a period which has seen private sector employment shrink by 2.6% as employers compensate for the ever higher wage bill by economising on labour. What this means, of course, is not only that the government's objective of creating an extra five million jobs is impossible, but the public sector's growth, both in size and in salaries, is clearly unsustainable.
But there's little point in telling the unions that. Pravin Gordhan, the Finance Minister, has repeatedly said that there is just no money for further large pay increases: "We are still recovering from the recession. Our tax revenue hasn't gone back to where it was in 2008." But Sizwe Pamla, spokesman for the powerful National Education, Health and Allied Workers Union simpoly dismissed Gordhan's statement as "nothing new".
Nehawu demanded a 9% rise as against a government offer of 5.2% - and even that was above inflation. The government insisted the coffers were bare. None of this made any impact on Pamla. "For just about everything in this country, the government always finds money. They pulled off the soccer World Cup, after all." In the end, all the same, Nehawu settled for 5.2%.
At a time when almost everyone is having to pull their belts in, even such a settlement is questionable. Neither pensioners nor the unemployed expect to get as much.
Ivan Israelstam, a labour expert, comments that "I'm worried that government will just borrow money for something they cannot afford, like they did last year." The two fastest rising items in the national budget are salaries and debt. Meanwhile it is quite clear that the unions, both by their sky-high demands and by the utterly inflexible labour laws they have pushed through, are notably contributing to ever-higher unemployment.
What explains the suicidal aggression of South Africa's unions? Their leaders are invariably Communist Party members and they declaim the usual Marxist-Leninist rhetoric of working class solidarity against exploitation - but this is highly misleading. In effect they lead a small (1.8 million) labour aristocracy and the bulk of their members are now white collar members with clearly middle class aspirations- and, in many cases, already with middle class incomes. Which is very much to the point.
Since the ANC took power in 1994 South Africa has seen the rapid ascent of a new black middle class, with many rags-to-riches stories of humble trade unionists or schoolteachers who have managed to use their careers in the ANC to acquire political power together with the patronage, nepotism and corruption which is omnipresent at every level of government.
The unions know this, know that people just like themselves have often been catapulted into extraordinary wealth and that there is a sort of feeding frenzy going on as more and more upwardly mobile people find ever-more ingenious ways of pillaging the state's coffers.
All of which breeds not only a cynical mood of enrichissez-vous but a frantic determination not to be left out in the general race towards the feeding trough. These are elemental feelings of emulation which are simply not susceptible to a cooler economic analysis which says that workers are simply pricing themselves out of jobs and that the current Gadarene rush cannot possibly be sustained. But unfortunately for Gordhan, he is a lonely figure.
The unions are too powerful within the ruling ANC alliance for most politicians to want to tangle with them. This is truest of all in the case of President Jacob Zuma, who in large part owes his presidency to the support of the unions and who desperately needs their support again in his pursuit of a second presidential term. So if Gordhan decides to oppose yet another huge wage settlement he is unlikely to get any backing from Zuma.
The problem is that the press is full of stories of the super-opulent lifestyles of cabinet ministers, their immense cars, their stays in five star hotels, their almost ceaseless foreign trips accompanied by large retinues of family, friends and staff and, very often, the corrupt deals through which they are becoming rich men. The white collar unions, conscious that these ministers emerged from their own ranks not long ago, naturally still see them as their peers and this stirs a frantic wish not to be left behind in this anything-goes race for riches.
It is entirely typical of Zuma's leaderless style that rather than taking on the task of making his ministers behave better or attempting to get the unions to be more realistic, his solution is to bring in legislation to stop the press from printing such provocative stories.
So where does that lead us ? Recently Exxaro announced the closure of its Zincor zinc refinery at Springs - the only one in South Africa - because rising costs, especially of electricity, had made it uneconomic. This greatly upset the government: one minister even accused the company of having a hidden agenda - as if one were needed when one is making a loss.
Market gossip had it that this was because Exxaro had had the temerity to challenge the Imperial Crown Trading mining rights scandal, in which the Mandelas and Zumas stand to make a packet. There was similar dismay when Sappi then announced the closure of a paper mill in Port Elizabeth. And a steady leakage of other jobs at smaller employers continued unabated.
Official statistics showed the economy slowing to a 1.3% growth rate in 2nd quarter 2011, down from 4.5% in the first quarter. Manufacturing was down a whole 7%. Indeed, manufacturing is still well below its level of 2008 and it is becoming clear that South Africa, long before it has ever properly industrialised, is suffering de-industrialisation. Moreover, employment in agriculture and mining is shrinking too.
Naturally, this drives to distraction Cosatu, the SACP and all those who believed - seventeen long years ago - that they were bringing the workers' party to power. Bliss was it for such souls to be alive in that hour. One continually met people who were working hard on yet further re-drafts of some section of the RDP which was going to see development shoot ahead. Others were working on a new industrial policy - something which, many promises later, has never really been born.
There was the sheer self-confidence of that happy boast in the ANC's 1994 elections slogan: "Jobs, jobs, jobs". I well remember Alec Erwin telling me how soon there would be a whole series of state-owned steel plants around the country and Frene Ginwala telling me how the country would soon emancipate itself from dependence on the mines. Even then it was not hard to see that this was all naïve and ignorant but I confess that I never imagined the full scale of the catastrophe which was to follow.
For here we are in 2011 with an employment ratio (those employed as a percentage of those available to work) of just 40.8% - the world's lowest. Comparable developing countries average 56%. Moreover, even though the economy is now growing, it continues to shed jobs at a huge rate. There are now than 13% less formal sector jobs than there were in 2005 and overall, since 2000 - an era of rapid growth - the economy has shed two million jobs.
Currently there is a shortage of 829,000 highly skilled workers in key sectors. These, if filled by immigration (the only way), would immediately lead to a dramatic growth in other jobs - but the government has deliberately made this impossible by the 2002 Immigration Act which does all it can to discourage such immigration. And without doubt the latest round of inflation-plus wage settlements will see further economising on labour.
Year by year South African workers are pricing themselves out of the market, turning the economy into a labour-extruding machine. The only real additions are in the form of new public sector jobs, adding a fresh layer of bureaucracy which nobody needs.
This remarkable situation is the result of several forces. The trade unions have opted for legislation to protect those in work at the expense of the unemployed and they have seen it their job to campaign for ever-more unrealistic wage increases. And because Cosatu is a key component of the ANC alliance, ANC politicians have quietly looked the other way as this stored up trouble.
The government has also adopted a whole series of policies which have the effect of driving investment away and making employment more difficult for employers. The small African bourgeoisie has insisted not only on all manner of affirmative action and BEE in order to help itself but is also utterly determined not to allow the immigration of highly skilled outsiders against whom it would have to compete.
Just imagine an inflow of 829,000 highly skilled foreigners (of whatever colour) - people who would quickly assume commanding positions in many spheres of South African life and who would probably regard many of the local restrictions on meritocracy as merely quaint.
Perhaps the key insight was that of Marx, who compared the French bourgeoisie unfavourably with its British counterpart. The problem, he argued, was that in France selfish capitalists tended to push for what suited them individually, while in Britain the bourgeoisie ruled in the interests of the bourgeoisie as a whole.
In one country one could end up with a railway system which simply served the interests of a few big capitalists and landowners while in the latter case one ended up with a transport grid that served the interests of British capitalism as a whole. Something rather similar has been going on in South Africa where a variety of selfish sectional interests have been rewarding themselves and the ANC has wholly failed to perform its job of ensuring that government is carried out in the interests of the workers and poor in general, let alone the national interest overall.
Thus, for example, Sadtu has been allowed to get away with all manner of abusive nonsense, causing the country's schools to go to hell, and the ANC has been too weak to stop it.
At present we have the incredible spectacle of Cosatu organising a one day general strike on October 5 in order to demand an end to labour brokers, more job creation, to stop privatisation, against corruption and high electricity prices - and a whole further list of demands.
Moreover the municipal workers (SAMWU) are, we are told, seething with bitterness because their three week strike came to nothing. Their leaders demanded 18%, then 10% and finally accepted the 6.08% the employers had been offering all the time. SAMWU's leaders were indignant that the employers hadn't "at least met us halfway", though the employers pointed out that they were merely observing their previously negotiated three year wage deal with SAMWU which, they felt, the union ought to have respected, especially since even 6.08% is higher than inflation. Needless to say, this attitude is characterised as "racist", "reactionary", "arrogant" and so on.
This is the politics of the playground. Nobody could run a coconut-shy on these lines, let alone a national economy. The one thing that one can say with some certainty is that this state of affairs cannot go on much longer. The government cannot go on promising ever more ambitious job targets while presiding over policies that cause further job losses - and nor can they go much further with the creation of pointless and unproductive public sector jobs.
It is common cause that the ever-growing number of unemployed constitute a possible explosion in the making - and they are now almost equal in number to the employed. One way or another the dam has to burst. The most painless outcome would be a collapse of the Rand - which is what the trade unions fervently hope for, to price their members back into the market. But a collapse in union power is also possible: the situation now rather resembles that in Britain on the eve of Thatcher.
Perhaps the least likely outcome is that the ANC government would take the necessary enlightened steps to free up the situation - making skilled immigration easier, holding back wage inflation, liberalising the labour laws and so on. This is, indeed, the great lesson of the last seventeen years. In 1994 it was possible to see the ANC as the means by which South Africa would free itself of many of its problems. Gradually it became clear that this was not so. Now, however, it appears as merely a great incubus, lying across the path and blocking the road to change.
This article was published with the assistance of the Friedrich-Naumann-Stiftung für die Freiheit (FNF). The views presented in the article are those of the author and do not necessarily represent the views of FNF.
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