The real measure of inequality is between those who have jobs and those who do not

Note to editors: This is an extract of the speech that was delivered by DA Parliamentary Leader, Lindiwe Mazibuko MP, today while addressing Business Leadership South Africa (BLSA) on the DA's Plan for Growth and Jobs.

I am delighted to be here with you today to share with you some thoughts on the Democratic Alliance's (DA) Plan for Growth and Jobs. South Africa at the present time is being held back by a scarcity of ambition and leadership. Our plan is designed to place South Africa on a pathway to 8% growth and cut through the widespread poverty that blights our communities.  

Our Plan has been in the public domain for nearly two months, and it has been widely discussed. The DA welcomes this debate. As a responsible opposition which aspires to serve in government, we welcome the widespread interest from all parts of South African society. Any great idea must be able to withstand the stress tests of public opinion and evidence-based criticism.   

I would like to address head on a criticism about our plan: the notion that the DA promotes economic growth over reducing income inequality.  

The inequality debate largely focuses on the fact that South Africa has one of the widest levels of income inequality in the world.  The launch of our plan happened to coincide with the Marikana tragedy. These violent events exposed the "insider" and "outsider" divides which scar South Africa. 

Overnight Marikana intensified the urgency to transform South Africa's lopsided economy, and for the DA's plan to be implemented. There is a well-founded fear that the country is coming apart at the seams.

But while income inequality poses an alarming threat to social stability and mocks the dream of a better life for all, it masks an ever bigger problem. The full measurement of inequality in South Africa is actually between those who have jobs and those who do not. So the DA is, in fact, asserting that the inequality problem is far bigger than commonly recognized. 

With this reality in mind, we boldly state that inequality of any kind will only be addressed through a growing economy. 

There are many barriers to rapid growth in South Africa. Underpinning them all is the fact that too many South Africans are simply locked out of the economy. They cannot contribute to growth because they are unable to find work, acquire skills, start businesses, and lack access to capital assets. The opportunity cost is almost impossible to calculate.  

Unlike the developed world where income inequality is defined by the gap between high and low wage earners, South Africa's high levels of inequality is a function of the gap between the 6.7 million people who have no income at all, and the 13.7 million people who earn incomes. 

Creating many more jobs in the context of a growing economy is the only way to reduce income inequality in the long run.

Many populist "insiders" who have jobs, like COSATU's cosseted leadership, will eagerly drive the income inequality narrative without taking note of the real fault lines of inequality in South Africa today. It is a way of diverting attention away from the multiple roadblocks that they have thrown up to block job creation initiatives, like the Youth Wage Subsidy. This is a prime example of the "insiders" blockading the city walls against the "outsiders" - those without jobs.

The DA is concerned with helping the "outsiders" to scale the city walls, and to enter the opportunity society. Because South Africa's millions of jobless citizens needs are not prioritized by the government of the day, the "insiders" get to almost entirely shape the public policy agenda. 

This further sidelines "outsiders" in a giant feedback loop. This weakens our democracy and sense of national togetherness.

Themes of togetherness and social solidarity are often expressed in public service mandates. The Western Cape provincial government's ‘better together' is one example. The DA wants to see this theme of togetherness integrated into an authentic ownership economy where people feel they have a meaningful stake.  

Our objective must be to transform our economy into an "ownership economy". What do we mean by this? We know that if employees do not have a meaningful stake in the businesses in which they are employed, they do not feel that they share the same interests of their company's management and shareholders.

Our Plan proposes broadening the scope of ownership by distributing shares in State Owned Enterprises (SOEs). 

We propose distributing shares in the country's SOEs in order to activate ‘dead capital' to put financial assets in the hands of poor South Africans. Development Financial Institutions (DFIs) such as the Industrial Development Corporation (IDC) and the National Empowerment Fund (NEF) will facilitate the centralised warehousing and sale of equity shares to employee share ownership schemes (ESOPs), stokvels, burial schemes, community groups and individual South Africans. 

Leveraging DFIs will unleash capital that is currently lying dormant in state institutions. This would extend broad ownership to hundreds of thousands of South Africans, who, on a collective or individual basis, will be able to place financially sound bids for equity stakes in SOEs. This is how the DA believes you create a genuine stakeholder economy.  

We especially support promoting employee share-ownership programmes in the private sector.

Our Plan proposes that 50% of the value of shares awarded to qualifying employees to be tax deductible to the employers, and exempt the full value, and any eventual gain from income tax.

We also propose to introduce an employee bonus scheme for unlisted firms that replicates existing share incentive regime for listed entities.  

At the Kumba mining company, for example, every miner has share options worth R300, 000. The miners who work for Lonmin, on the other hand, do not have direct shares in their company.

If other companies do not emulate Kumba's example of providing stakeholder incentives through share ownership schemes, the income inequality gap will continue to widen. Radicals and populists, like Julius Malema, will, as they already have begun, manipulate many South African's frustration at the pace of change.

COSATU, at their recent elective congress, have already indicated their intention to call a Section 77 strike to force the government to change its current economic policies. They want, amongst other things, to have the Reserve Bank nationalized. 

Similarly, siren nationalization calls of the mining industry and other sectors continue to undermine policy certainty, and further deter foreign investment in a globalized world where footloose capital seeks predictability.

The 22% wage settlement reached last week marked, we fear, only the end of the first chapter of this story. Such a wage hike for any company cannot be sustainable without a proportional increase in productivity and profit. This is unlikely. And already a shaft has been forced to close down at the cost of over 1000 jobs. Mining houses are likely to look at alternative automation techniques or go elsewhere. We also have witnessed copycat strikes since, such as the one at Goldfields. 

This puts thousands of jobs at risk, which if lost, will only exacerbate inequality in South Africa.

On the human level, we will never forget the 46 people who lost their lives in this tragedy. Many more lives, and livelihoods, will be lost in the future if we do not grasp the thorny issue of trade union relations now. 

As well as exposing the raw sinews of South Africa's divided society, the Marikana tragedy crystalized the need to amend labour relations legislation around collective bargaining. 

The prevention of the smaller unions from being allowed to negotiate was one of the main causes of the Marikana tragedy. 

As things stand, Section 26 of the Labour Relations Act (LRA) allows closed-shop agreements between employers and "representative trade unions". 

All employees covered by the agreement are required to be members of the trade union. A union is considered a "representative union" when its members are the majority of employees. 

This gives disproportionate power to large unions. It is a winner-takes-all system, and protects the entrenched interests of large unions affiliated to the COSATU.

COSATU's drive for centralised, collective bargaining in the platinum sector will simply replicate this structure on a larger scale. It marginalises small unions, and denies the flexibility allowed by mine-level representation. 

The quality of a worker's life is, at the present time, determined by if they are aligned to the correct trade union. The regulatory framework governing labour relations in our mines is clearly alienating non-unionised workers, and those belonging to minority unions.

Two weeks ago, I asked President Jacob Zuma in Parliament if he agreed that the trade union AMCU should have been given an opportunity to participate in the negotiations with Lonmin from the outset.

I pointed out that the current LRA provides that the union representativeness thresholds must be set at 51%. This meant that AMCU was not a recognised union at the Marikana mine. As a result, AMCU was excluded from wage negotiations. The ANC's affiliated NUM enjoyed de facto monopoly status.

The President replied by stating: We have more rights here because we are in a majority. You have fewer rights because you are in a minority. That's how democracy works.

The government's refusal to negotiate with AMCU was reiterated by the Minister of Labour in September, and the Minister of Minerals and Energy contemptuously claimed that she had never heard of AMCU.

Most economic problems have political fuses. The elevation of COSATU above the other unions has been motivated by the ANC's deference to their tripartite alliance partner. The President has consistently failed to exercise leadership by holding COSATU accountable for its affiliated union's role, NUM, in the Marikana tragedy.

Mr Zuma cannot play the role of honest broker because he needs their votes at the ANC elective conference in December. We have every reason to believe that he, or his successor's hands, will be tied after December. 

A number of things will have to change if we are not to repeat another tragedy like Marikana. And let us not forget that South Africa has not attracted investment in the mining sector since 2009. Our mining industry really has the proverbial dice loaded against it. 

The DA believes closed shop agreements should be replaced with a mine-level proportional representation model for labour bargaining. This would have minimum membership thresholds for participation.

Non-NUM or non-COSATU unions with a minimum threshold of membership should be included in mine-level labour bargaining and ministerial talks so that all workers may have a voice. The average age of a COSATU member is 40, and the union is failing to attract younger members whose views must also be expressed. 

We need to introduce a culture of democracy in union activity by adopting the proposed amendments to section 64 of the LRA. This would require unionised workers to vote - by secret ballot - to approve a strike before the union can go ahead with the strike.

The section of the LRA which protects unions from court action should be repealed if they fail to adhere to the requirement for unions to ballot before striking.

We support amending the LRA so that only union members can be allowed to join a supporting picket. This would mean that all strikers would be assumed under law to be union members. This would make it possible to give effect to the Constitutional Court's recent decision to hold unions liable for damage during strikes, pickets or other gatherings. 

The third aspect of creating an "ownership economy", which I would like to touch upon, is the need to amend the implementation of Broad-Based Black Empowerment (B-BBEE). It has long been clear that a more innovative approach is needed to cut through the conditions produced by apartheid's taxonomy of "asset stripping" and restrictions.  

We are well aware that B-BBEE has been tarnished by a ‘get rich quick mentality' among some B-BBEE tenderers; the emergence of "fronting"; the rise of ‘tenderpreneurs'; and the fact that some B-BBEE beneficiaries do not create opportunities for others.

There has been an overemphasis on the "ownership" aspect of B-BBEE; one which has tilted towards rewarding well-connected insiders over innovative outsiders. 

The DA believes the answer is to sharpen the definitions and alter the weightings of the B-BBEE scorecard. A streamlined scorecard would line up B-BBEE with the goals of the National Development Plan (NDP). 

The lesson is clear: empowerment of any kind will only work within a growing and well-educated economy. And this is precisely what our Growth and Jobs Plan in its entirety is designed to achieve. Our destination is a high skilled, high wage economy in our lifetime. To get there, we will have to take some tough decisions now. The solutions are within our grasp if we have the courage to reach for them.

Issued by the DA, September 25 2012

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