PETER ATTARD MONTALTO: Labour problems and opportunities everywhere

Posted in: Economics, i-Blog, Politics, South Africa on December 21, 2020


A lot of misdirected conclusions have been drawn from the court judgment on the public sector wage bill.

This column was first published in Business Day.

I have been reminded recently by a sage of the aphorism from the Reagan administration in the US that “personnel is policy”. The tragic ANC fallacy that somehow individuals are seconded to do nothing but implement the general will of the glorious revolutionary movement needs to be killed off in 2021 with a decent reshuffle that takes out the deadwood.

The people in government can shift the narrative, boost or suppress sentiment, convene experts and process competing expert advice while balancing vested interests (of both the normal and the corrupt variety).

But are these people fighting fit to move at speed during an energy crisis, a climate crisis, a water crisis, an unemployment crisis, an inequality crisis, a just energy transition opportunity, a fourth industrial revolution opportunity? The answer is clearly a very mixed bag when you cast your eyes over the cabinet or the levels of senior civil servants that drive government strategy.

Another personnel issue that will dominate 2021 is the public sector wage bill. A lot of misdirected conclusions have been drawn from the court judgment last week. The Treasury has not magically gained any new powers — nor have existing powers been strengthened de jure. Solid provisions have existed in the Public Service Regulations Act since 2001 (and now regulation 79 in the latest act) which allow the Treasury to put a complete block on unaffordable pay increases.

The problem is that historically and for political reasons the Treasury has chosen not to use those powers. Yet the Treasury’s position has been strengthened as these powers are being aired more openly. Its ability to withstand the political winds ahead of local elections and the 2022 ANC elective conference, which are blowing for compromise and an easy way out for the president, will be a defining test of the year.

What is fundable is after all an elastic concept — SAA was fundable so why not some wage increases?

The discussion on public sector wages needs to change after the court case to one about productivity. Public sector unions are in no position to talk about collective bargaining. What are they offering in return?

Unions have no leg to stand on arguing for increases when there is no increase in productivity. Productivity reviews need to be entrenched into the budgeting process to highlight this and then only to allow positive improvements to yield pay upside.

The new year may also be the year of a major strike by public sector unions — bar the inconvenience to be encountered when trying to renew licences or something similar will anyone actually notice? That is the question.

But broader discussions are needed about labour in the private sector too. Are SA labour markets flexible enough to reabsorb 2020 lost labour in 2021 — to weather third and fourth Covid-19 waves in 2021?

Some brave souls in the government tried to raise this issue through the president’s recovery programme but to no avail and it never really gained traction at Nedlac. This is partly about the ability of existing industries to cope, but also new industries to cope.

The idea of labour in SA needs to be rethought in 2021 to cope with the recovery but even more importantly with future opportunities such as the just energy transition (JET) and the Fourth Industrial Revolution (4IR). Unions and business will need to change their relationship with labour as well.

The current stuck-in-the-mud view of each unit of labour being secure in each individual job will need to be abandoned in favour of a view of maximising the probability that overall employment grows as fast as possible and so each individual has a maximal probability of being hired at any one time.

Business will need to think more about the wider labour ecosystem and unions will need to concentrate on a cycle of full career training and retraining and the mobility of skills and labour and their role in providing support.

Traditional social compacting has kept a view that “all must be accounted for” and that each individual in each job must be secured with a plan. This cannot work for disruptive forces such as JET and 4IR. Doing this risks even worse outcomes as opportunities (domestically and in the competitive global landscape) are missed.

All these public and private sector labour forces of change are much bigger than Covid-19 but it provides an appropriate kicker for a change in mindset. 2021, with further waves and likely late vaccine arrival, makes these issues even more pressing but the government needs to lift its gaze as much as possible to see the next set of opportunities and crises coming down the track after 2021. ​

Attard Montalto is head of capital markets research at Intellidex. 

 

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