-presented by- Capes Delegation

1. Labour Law Review 2012 – Position Paper -presented by- Capes Delegation

2. The Confederation of Associations in the Private Employment Sector (CAPES) is an umbrella body, formed in 2002, when the need for a unified voice for the South African staffing industry became apparent. CAPES, a federation, was created specifically to act as the lobbying organisation for the four primary staffing associations, who represent thousands of SME staffing businesses, and several of South Africa’s largest corporate staffing companies. CAPES, as a member of Business Unity South Africa (BUSA), has been at the forefront of the NEDLAC negotiations in respect to the staffing industry (since 2006) and extensively during the current broad labour law review. Executive Summary

3. Represents more than 1 200 independent staffing businesses across all major sectors through the 4 major staffing industry associations • Represents in excess of 15 000 employees • Through its largest member association, APSO, is affiliated to the International Confederation of Private Employment Agencies (CIETT) CAPES in a Nutshell

4. The current proposed labour law review, rather than driving the national job creation plans, is likely to achieve the opposite. Countless research and expert opinions, including that of Professor Paul Benjamin, Government’s legal drafter, as expressed in the Regulatory Impact Assessment (RIA) commissioned in mid 2010, conclude that the proposed amendments will lead to massive job losses and stymie any attempt at creating large volumes of new jobs. Introduction

5. Recent research, conducted by the Boston Consulting Group (BCG), commissioned by the International Confederation of Private Employment Agencies (CIETT) proves that countries with well-regulated temporary employment services (TES) sector, have fared better during the economic downturn and these research findings have been included throughout this paper. Introduction

6. ILO concurs that job creation, not legislation amendment, is more critical for SA In an article “ The International Labour Organisation has lauded South Africa’s decision to set job creation targets but is concerned that the country remains internationally uncompetitive, particularly against the Asian countries against which it competes with in terms of labour” written by Alistair Anderson and published on 24 January 2011, Vic Van Vuuren, the ILO’s South African director, said the organisation wanted companies to make a social pact with the government and labour to implement methods with measurable job targets and not to focus on energy-sapping legislation. Critical for South Africa

7. South Africa is recognised to have some of the most rigid labour legislation in the world • 2011 World Employment Forum ranks South Africa 138th (out of 139 countries) in both Flexibility of Wage Determination and Cooperation in labour-employer relations • We also rank worst, 139th, in respect to Hiring and Firing Practices • This clearly points to the condition that enforcement is essential and that our existing regulations are already more than adequate in this economic climate. Enforcement is the Real Issue

8. The real issue however is in relation to compliance and enforcement. Currently, those companies who operate outside of the legislation, are not being investigated and punished and there is no real effective deterrent for non-compliance. The RIA report clearly indicated that lack of enforcement is a key problem in the current labour market. It further explains that increasing legislative compliance will only serve to exacerbate the problem unless significant resources are employed within the Government departments responsible for implementation and enforcement. Enforcement is the Real Issue

9. Extensive research, conducted by the Boston Consulting Group, proves that over-regulation of any labour market – established or emerging – leads to a direct increase in the number of non-compliant “unregulated market” operators and a decrease in employment in the formal sector where the highest levels of compliance exist. Enforcement is the Real Issue

10. Introduced 5.4 million people to the world of work since 2000 • Gateway to the world of work: Profile of work seekers/candidates: • Never previously employed: 57% • Youth aged 18-35: 83% • Previously disadvantaged: 93% • 1 million people deployed (via TES) on a daily basis • National geographic spread (job opportunities in all provinces) A Snapshot of the South African PrEA Sector

11. Of those initially employed as a temp, each year significant numbers gain permanent employment: • 30% within 1 year • One of the largest contributors to skills development – R415 million paid over in skills levies • 17, 400 registered learnerships facilitated (30% of SETA total) A Snapshot of the South African PrEA Sector

12. Snapshot of South African Statistics • 41% below the age of 19 • Illegal immigrants estimated to be 6m but could be as high as 8m Population of 50.5m • However, 60% of working age South Africans are unemployed. Unemployment rate of 23.9% • Quality of education system: 10thworst globally • Math/Science education: 5th worst • Grade 6: literacy 28%, numeracy 30% Poor quality of primary education Rankings based on Global Competitiveness Index (GCI) 2011/2012, in which 142 countries were surveyed and ranked.

13. South Africa continues to undergo significant changes in its political and economic outlook • Regulatory and policy uncertainty in key sectors of the economy • Continued high turnover of executives and/or board members at key public sector and regulatory bodies • Vulnerability of macroeconomic environment to shocks Overview

14. “The rate of job creation will need to increase by nearly ten times if it is to meet the Government’s job creation targets… Over the last decade total employment increased by only 624 000. The Government has set a target of creating 5 million new jobs between 2010 and 2020” Source: South African Institute of Race Relations, 23 Jan 2012 Unemployment & Regulatory Constraints

15. Manufacturing activity fell to its lowest level in 10 months during June 2012, a key survey showed yesterday, suggesting that the economy’s second-biggest sector may be contracting. Manufacturing accounts for about 15% of overall output and formal jobs in the economy, and was the main driver of growth during the first quarter. SA Factories in Trouble Again:PMI Drops Below 50

16. Over and above the International Labour Organisation’s Convention 181 on the TES sector, a recent directive 2008/104/EC on Temporary Agency Work calls upon Member States to review national restrictions imposed on temporary agency work and lift the unjustified restrictions. Conditions & Restrictions Faced by Temporary Work Agencies Source: Eurociett 2011 Edition

17. Temping trends around the world Source: Eurociett 2011 Edition

18. List of conditions and restrictions faced by temporary work agencies Source: Eurociett 2011 Edition

19. List of conditions and restrictions faced by temporary work agencies Source: Eurociett 2011 Edition

20. The legal terminology used in “deemed” in section 198 is legally confusing. Section 198 in the main text clarifies the meaning to joint and several liability in terms of the Labour Relations Act. This committee resolved that the current regulation would be joint and several liability on dismissal after a period. Prof Benjamin’s 2009 proposal on atypical and the Government 2010 Regulatory Impact Assessment do so too. Equal treatment for atypical is very problematic and will lead to a race to the bottom. Phase in periods are needed if equal treatment is proceeded with. That period should be at least 12 months as is evidenced by the comparative of countries around the world. Burning Issues

21. Presentation to the Portfolio Committee on Labour by Mr Johannes Mangoejane– HR Director and Shareholder of Automotive Leather Company. (ALC).

22. Lack of a structured regulatory impact assessment of the proposed changes to the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA) has left a number of claims and statements made by organised labour unchallenged and in certain quarters accepted as facts. I would like to address some of these claims. • Banning labour brokers and restricting flexible employment relationships will not have a negative impact on job creation. • ALC is a South African automotive component manufacturer based in Rosslyn we supply leading German car manufacturers in Germany. The company has been in existence for 22 years and has created 900 employment opportunities at our two plants in Pretoria. Presentation to the Portfolio Committee

23. In January we opened a third plant in Bulgaria where an additional 500 workers are employed. While we are proud of our latest achievement, the shareholders and directors of ALC are at the same time sad and disappointed that the 500 jobs were not created in South Africa, and that the additional export earnings are also lost to our country. To replace these jobs, requires substantial direct foreign investment. Currently BMW South Africa is spending R2.3 billion on the expansion of production at its Rosslyn plant, which will bring 600 new jobs. This is an example of how expensive it is to create decent manufacturing jobs. Presentation to the Portfolio Committee

24. We compete with two other multinational companies in RSA for export business to Germany. They are able to move production to any of more than a dozen countries were they have existing plants, including Morocco, should they wish to keep it in Africa. We are aware that high levels of workplace conflict, which is likely to be aggravated by the proposed deeming stipulations, could result in the loss of an additional 800 employment opportunities to Morocco. • Labour Brokers do not create jobs. • Job creation is a team effort. In our case the use of contracted labour through brokers is part of our business model. Other members of the team are Bargaining Councils, organised labour and government. Without a flexible workforce South Africa as a country cannot compete in the international automotive industry. Presentation to the Portfolio Committee

25. On this team Bargaining Councils and organised labour need to ensure that the minimum wages, conditions of employment and benefits applicable in Councils are adhered to. In addition should employers make use of brokers they are already jointly liable and it is in their own interest to ensure compliance of the brokers. In May this year Minister Rob Davies announced a R5.75 billion plan to boost the manufacturing sector, because the contribution of manufacturing to GDP had declined from 21% in 1977 to 14.6% today. Mr Davies said that over the same period comparable countries like Korea and Malaysia had grown their manufacturing contribution as a percentage of GDP respectively by 29.7% and 37% of GDP. We submit that the different levels of flexibility in the labour markets of the countries contributed to the vastly different achievements. Presentation to the Portfolio Committee

26. Labour Brokers exploit workers and provide no benefits. • Should this happen within Bargaining Council regulated sectors, it is the result of a lack of enforcement of current regulations or corruption. Since the use of labour brokers is part of our business model we check that they comply with the minimum wages and benefits prescribed by the Bargaining Councils. The brokers we use and many of their competitors, comply fully and in fact provide additional benefits not required by BC regulations. • Labour brokers are also active in skills development. In conjunction with our broker we have recently completed a learnership programme with 40 employees. Presentation to the Portfolio Committee

27. Organised labour is in fact disingenuous by propagating this myth on an unqualified basis. Trade unions actively monitor compliance in respect of both permanent and contract labour in workplaces. I would also like the address the deeming proposal, which kicks in after 6 months, against the backdrop of job creation in manufacturing for the export market. The South African market is too small to sustain a meaningful manufacturing base, which supplies purely to the domestic market. SA manufacturers therefor need to compete internationally and that means being able to adjust rapidly to changes in the international markets. Presentation to the Portfolio Committee

28. This is especially true of the automotive industry which the RSA government has identified as a key growth sector. The target is for RSA to produce 1.2 million vehicles by 2020. If we are serious about creating decent work in this sector we need more flexibility not less. In the case of France for example they allow temporary employment relationships to remain in place for 18 to 24 months in businesses engaged in exports.  Sadly our legislation encourages South African manufacturers to invest in other economies in an effort to compete internationally. Presentation to the Portfolio Committee

29. THANK YOU