Cablegate: South Africa: Labor Minister Mdladlana's Budget Speech

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1. Job creation was the centerpiece of Labor Minister
Membathisi Mdladlana's May 15 address to Parliament on May 15,
in which he noted that all social partners had participated in
discussions and had emerged with a common understanding,
including the need to improve implementation of the legislative
framework. Mdladlana praised the improved speed of work of the
Commission on Conciliation, Mediation and Arbitration (CCMA) but
noted that "lawyers were milking the labor market regime to
death," requiring a reexamination of the function of legal
representation within the CCMA. Mdladlana provided a variety
of statistics on training conducted under the auspices of the
Department of Labor and the Sectoral Education and Training
Authorities (SETAs). He also introduced a "sectoral
determination" for the hospitality workers, which entitles them
to a minimum wage of R 1680 (USD 240) per month. End Summary.

Praise for the CCMA

2. Minister Mdladlana praised the Commission on Conciliation
Mediation and Arbitration (CCMA), currently under the leadership
of Nerrine Kahn. He noted that the CCMA received about 120,000
referrals a year and managed to resolve its cases in an average
of 66 days per case, with 26 days the average for cases
conciliated and 48 days the average for cases arbitrated. The
CCMA managed to settle approximately 70 percent of cases
referred to it. The minister noted that the number of workdays
lost annually due to industrial action had decreased by 68
percent since the CCMA's creation. He also noted that the CCMA
required additional resources to quickly deal with the
increasing demands made on it. However, Minister Mdladlana
also noted that a study on the overall efficiency and efficacy
of dispute resolution provided "objective data" that lawyers
were "milking our labor market regime to death" by unnecessarily
complicating and prolonging cases. The minister proposed to
examine the role and functions of legal representation within
the dispute resolution process.

Improved Services at SADOL, Unemployment Fund
--------------------------------------------- ------------------

3. Minister Mdladlana noted that the Department of Labor had
decentralized a large number of critical functions to provincial
offices and labor centers. He noted that unemployed workers
could file and have their unemployment claims processed in the
same office, and that many functions could now be performed
without approval from Pretoria. The Unemployment Insurance
Fund (UIF) had also undergone structural changes and had
undergone and improved benefit administration system that
allowed it to process 96 percent of claims filed since April
2006. Benefits were paid electronically into the bank accounts
of employees. The U-Filing system introduced in 2006 also
permitted employers to submit declarations and payments via the
internet. Mdladlana noted that the UIF currently had a surplus
of R19.8 billion (USD 2.8 billion), which was invested via the
Public Investment Corporation. He also noted that the
Compensation Fund (which pays out disability and other payments)
continued to experience problems but had reduced its backlog of
claims and had increased the settlement of claims from 48 to 58

Concerns about Collective Bargaining

4. The Labor minister voiced his concern about the
representivity of bargaining councils. He said that the
increasing casualisation of workers (i.e. temporary workers
hired outside formal employment structures) reduced the capacity
of the labor movement to organize workers and limited the extent
to which collective bargaining could be extended to non-parties.
Mdladlana said that less organized sectors tended to be more
prone to strikes, which "easily became uncontrollable and
violent." He also said that investors were less willing to
invest in countries in which the "rules of the game" where not
agreed upon by the players. He described the weakening of the
bargaining councils as a "worrying and negative development."

Job Creation

5. Job creation was the centerpiece of the minister's speech,
though he proposed few remedies to South Africa's 25.5 percent
unemployment rate. He noted that all social partners had been
brought to agree on the broader context of the legislative
framework including the "redistributive role" of government
policies; and that the issues of job creation and small business
development had to be viewed within a broader macro-economic,
social and trade policy context rather than just limited to
labor market policies. He noted that weaknesses in the

JOHANNESBU 00000158 002.2 OF 002

implementation and operational side of the legislative framework
impacted on labor market systems. Mdladlana added that the
International Labor Organization (ILO) had been asked to review
South Africa's labor market. Employers will be required to
register all placement opportunities and job vacancies with the
Labor Department.

Training and Employment Related Education
--------------------------------------------- ----------

6. (Note: Sectoral Training and Education Authorities (SETAs),
which provide job-related training, fall under the purview of
the Minister of Labor. Employers are required to contribute one
percent of payroll towards these funds but can reclaim
expenditures from their SETA for job-related training. End
Note.) Minister Mdladlana said that all SETAs had aligned
their interventions with the National Scare Skills list, which
identified approximately 250 job skills in short supply in South
Africa. The minister noted that he was developing an
employment services system to link the unemployed to vacancies
and training and highlighted a variety of training undertaken
during the past year. The Department of Labor will spend an
addition R300 million (USD 43 million) over the next 18 months
to provide 60,000 unemployed adults with basic education and
training programs.

Minimum Wage for Hospitality Workers
--------------------------------------------- -----

7. The Minister also announced a minimum wage for workers in
the hospitality industries - i.e., waiters, waitresses,
receptionists, bartenders, etc. Their monthly minimum wage
will be R1,680 (or roughly $ 240) and they will be entitled to
overtime and annual leave. The "sectoral determination" will
remain in effect until 2010, with workers covered under this
measure receiving annual wage increases of two percent over


8. The CCMA has turned itself around under Nerrine Kahn
leadership to provide faster and more user-friendly mediation
and related services. Much of the business criticism of the
CCMA has muted in the past year. The Minister's speech, apart
from the welcome minimum wage determination for hospitality
workers, did not break much new ground. His assertion that all
social partners accepted the macro-economic framework may have
been over optimistic. End Comment.

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