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Cablegate: South Africa: Trade Union Views On Black Economic

VZCZCXRO7960
RR RUEHBZ RUEHDU RUEHMR RUEHRN
DE RUEHJO #0474/01 3281612
ZNR UUUUU ZZH
R 241612Z NOV 06
FM AMCONSUL JOHANNESBURG
TO RUEHC/SECSTATE WASHDC 5475
INFO RUCNSAD/SADC COLLECTIVE
RUEHJO/AMCONSUL JOHANNESBURG 2157

UNCLAS SECTION 01 OF 02 JOHANNESBURG 000474

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ELAB ECON SF
SUBJECT: SOUTH AFRICA: TRADE UNION VIEWS ON BLACK ECONOMIC
EMPOWERMENT

JOHANNESBU 00000474 001.2 OF 002


Summary
-----------

1. Major trade union federations in South Africa actively
support the goals of Black Economic Empowerment (BEE), but have
specific criticisms relating to its implementation. The
Congress of South African Trade Unions (COSATU) argues that BEE
is insufficiently broad-based and fails to emphasize job
creation and assistance to communities. COSATU specifically
criticizes the focus on assisting black entrepreneurs rather
than the working class, though it also has misgivings about
employee stock option or profit sharing plans that include
enterprise workers among BEE beneficiaries. The Federation of
Trade Unions of South Africa (FEDUSA) similarly supports the
goals of BEE but its General Secretary noted the complexity of
restructuring the economic base while maintaining productivity.
FEDUSA, which claims to be closer to President Mbeki than
COSATU, also noted the urgent need for access to finance for
disadvantaged small businesses and entrepreneurs, as well as a
need to ease regulations for business start-ups. End Summary.

COSATU argues for Broader-based BEE
--------------------------------------------- ----

2. In a meeting in late October, COSATU spokesman Patrick
Craven emphasized that the trade union federation fully
supported the goals of black economic empowerment but that the
implementation was lacking. Craven also noted COSATU's
heartburn about the issue of trade union pension and investment
companies, employee stock option or profit sharing plans.
While COSATU did not oppose such arrangements, Craven argued
that the fiduciary responsibilities of the administrators, who
were bound to seek profits, could conflict with the trade union
principles of promoting worker interests and social justice.
COSATU had publicly opposed a union pension investment in a
casino, which might be justifiable in terms of its profits, but
did not accord with trade union opposition to gambling.
Nevertheless, COSATU did not oppose employee share ownership
plans, and was actively promoting training of trade union
pension fund representatives on fiduciary responsibilities.

3. COSATU's Secretariat Report of September 2006 outlines the
history of trade union involvement, through NEDLAC (the National
Economic Development and Labor Advisory Council), in drafting
Codes of Good Practice that would define the scorecard received
by an enterprise under BEE. The report also notes that
stakeholders in a sector, explicitly including labor, may agree
on a sector charter that can diverge from the scorecard under
the Codes of Good Practice.

The Secretariat Report references COSATU's arguments that :

a) the BEE process fails to emphasize job creation, especially
through support for local procurement and strong ties to sector
strategies;

b) equity ownership requirements should emphasize collective
ownership, i.e. through community trusts, pension funds or
worker holding. COSATU had pushed for such definitions in
NEDLAC but notes that it is currently unclear if company stock
ownership through an employee pension plan would meet equity
requirements;

c) skills development and employment equity targets emphasize
managers and professionals rather than lower-level workers.
COSATU notes that the original acts of Parliament were intended
to ensure of advancement of lower-level workers; and.

d) more emphasis should be given to services and products that
empower the poor and their communities. Such sectoral
re-weighting would be particularly beneficial in the financial
and health sectors.

4. COSATU's official secretariat statement also noted the
extent to which "class differentiation" among the black
population impacted on the BBBEE debate. Black entrepreneurs
fought to maximize the returns to share owners at the expense of
company actions that would benefit workers and the poor. In its
policy resolutions adopted at its 8 th /2005 Congress, COSATU
also noted that the tendency within BEE was to emphasize racial
representation in ownership, promoting black elite enterprises,
at the expense of broadening ownership and focusing on
inequalities in terms of race. This underemphasized gender and
class-based inequalities.

COSATU Affiliate Unions' Positions More Radical than Federation
--------------------------------------------- --------------
-----------------------

5. Both the National Union of Metalworkers of South Africa
(NUMSA) and the South African Clothing and Textile Workers Union
(SACTWU) have argued that the current narrow interpretation of

JOHANNESBU 00000474 002.2 OF 002


BEE fails to include skills development, employment equity,
broad-based ownership, employment creation and support for
co-ops as key elements in effective empowerment. The two unions
also called for payment of a living wage, comprehensive trade
union rights, and advanced health and safety practices as part
of BEE. Both also noted that the BEE must not be centered on
the "enrichment of a few" but serve to redistribute wealth among
all disadvantaged communities and reduce racial, class and
gender inequalities.

6. The National Education Health and Allied Workers Union
(NEHAWU) meanwhile has stated that BEE is not consistent with
the Freedom Charter, which called for the transfer of ownership
to the people as a whole, "not to some Blacks." NEHAWU has
called for nationalization or re-nationalization of key
industries, including petro-chemical producer SASOL, and of
highly concentrated industries such as banking and mining rather
than allowing the "exploitation of the worker in order to secure
maximum profits."

FEDUSA wants more finance, less regulation
--------------------------------------------- ----------

7. The Federation of Unions of South Africa is the
second-largest union federation in South Africa after COSATU,
and most of its affiliates have a predominantly white or colored
membership. General Secretary Dennis George noted that BEE
issues were very difficult, though FEDUSA fully supported its
aims. George, who served on the tourism board, said that
establishing black-owned businesses in the tourism sector was
hampered by lack of land reform, lack of access to finance and
over-regulation by government. He noted that it sometimes took
two years to get financing arranged, but that government
inspectors showed up a day after a small entrepreneur opened a
bed and breakfast. George also said that FEDUSA generally had a
better relationship with President Mbeki than COSATU, and that
FEDUSA was often more supportive of the government's policy.

Comment:
------------

8. COSATU's stance on BEE reflects its duality in seeking to
represent both the interests of its trade union membership and
its self-appointed political role in speaking for the poor and
unemployed. Assistance to entrepreneurs and small business is
more likely to fuel job creation than BEE restructuring but
start-up firms generally have minimal union membership - and
thus are of little bread-and-butter benefit to COSATU. Many of
COSATU affiliates' criticisms of BEE are also being addressed,
especially as regards skills development, although the training
offered by many of the Sector Education and Training Authorities
(SETAs) remain uneven. COSATU's interest in reducing the
importance of equity transfers in a BEE scorecard parallels the
interests of U.S. and other multinationals who seek to comply
with BEE standards but prefer not to give up equity in their
South African subsidiaries. End Comment.
COFFMAN##

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