The role of labour unions in post-apartheid SA

Former International Monetary Fund chief economist Kenneth Rogoff recently suggested that the political resurgence of labour unions and the potential effects on the global economy could be a major determining factor in how the global economy unfolds in the year ahead.

In the South African context labour unions have played an important economic, political and social role in the transition from apartheid to democracy. When black South Africans were barred from political participation during the apartheid years and the apartheid government explicitly and forcefully denied them one, labour unions effectively became their voice. In post-apartheid SA, labour unions continue to play an intricate role in the political make-up and it will be interesting to see what kind of political influence the labour unions in SA will exert in the year ahead.

According to the latest labour force survey (LFS), approximately 4.336 million working aged adults were officially unemployed. This equates to an official unemployment rate of 25.5%. However, a further 3.503 million did not actively search for work in the month prior to the survey but indicated they would work if there were jobs available. If we include these discouraged work seekers the total number of unemployed increases to 7.839 million and the unemployment rate shoots to the more realistic rate of 38.3%.

Approximately three-quarters of the unemployed are younger than 34 years old and if we focus exclusively on the 15-24 age group we notice that over half of all youth are unemployed (50.2%). More specifically, in March 2007 the unemployment rate amongst black South Africans was 30.2% and roughly two-thirds of all unemployed individuals are young (between 15-34 years) black South Africans.

Not surprisingly, a common sight on street corners and construction sites in SA is the number of young unemployed black people looking for work. The fact that these people are able to travel around the country, enjoy voting rights, use public amenities, and are not subjected to the cruelty and abuse of race laws enacted under apartheid is thanks in part to labour unions and one specifically – the Congress of South African Trade Unions (COSATU). But the fact that these individuals are out of work and are unable to really enjoy the freedoms that SA's constitution guarantees is also in large part thanks to labour unions. In this respect labour unions have turned into a double-edged sword for millions of poor South Africans.

COSATU, an umbrella organisation formed in 1985, was particularly effective in mobilising support in factories and towns across SA during the apartheid era through a range of wage strikes and general strikes. Thus the movement played a very valuable role in the dismantling of the apartheid regime in concert with other parallel activist initiatives. It was thus a natural development that COSATU became a crucial component of what is now commonly referred to as the tripartite alliance, which is an agreement between the ruling African National Congress (ANC), the South African Communist Party (SACP) and COSATU.

COSATU is by far the largest representative trade union body in SA, representing roughly half of all unionised workers and through its affiliation with 21 trade unions has a combined membership of over 1.8 million workers. With labour unions forming such an integral part of our society one can easily lose sight of their primary role – to raise the wages and improve the working conditions of their members relative to equally productive workers in an identical, competitive, non-unionised sector.

For instance, if there is a high demand for a particular job performed by a few people, these people will have a relatively large amount of market power and they will be in a position to determine their own pay and working conditions. In this instance there will be little need for the workers to be unionised.

However, if many people become engaged in this activity then the individual’s bargaining power will be somewhat diluted and each worker could be substituted for another relatively easily and thus their market strength is lost. In this scenario there is scope for a union to enter the market, sign up the individuals as members, bargain collectively on their behalf, and protect them by blocking the entry of anyone wishing to compete for their jobs.

Trade unions thus block potential competition – usually low-skilled individuals that are willing to accept lower wages rather than face the bleak option of being unemployed with the consequence of starvation for themselves and their dependants. For workers within the unionised sector, wages are secure and inequality increases due to the fact that some individuals are earning money whilst others are effectively prevented from entering the market at the lower end.

In order to achieve the government’s stated objective of reducing unemployment and stimulating growth we must carefully weigh how labour market policies affect unemployment and hence SA’s prospects for growth and reducing poverty. Considering the role of labour unions (partly to bargain collectively and partly to block the entry of potential competition) it should be clear that unions have an interest in ensuring that their members are protected, whatever the implications of that protection may be.

This immediately begs the question why, in post-apartheid South Africa, does the ruling party continue its relationship with a trade union when there is a clear conflict of interests? The ANC needed labour unions in the 1980s and early 1990s but now it has created an economic monster. The unions are not fighting for the rights of ordinary South Africans – they are acting like a protectionist racket.

The current and the post-election government must start to think once again about ordinary poor South Africans – black and white. It will need to weigh up the risks of taking on vested interests with the risks of increasing unrest and disquiet among poor unemployed South Africans. The latter group is more volatile and unpredictable - the right and smart political thing to do is maximise the opportunities for poor unemployed people before civil unrest breaks out.

The ruling political allies face some unenviable but necessary choices; if they do nothing they risk violent revolt; if they attempt to buy peace over a lengthy period with taxpayers’ money, they risk harming the economy and destroying unionised jobs; and if they want to open the doors for the unemployed to enter the economy the unions do their job – they object. A separation of powers is the only feasible solution to this complex problem.

Authors: Temba A. Nolutshungu is a director and Jasson Urbach an economist with the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the authors. The views expressed in the article are the authors’ and are not necessarily shared by the members of the Foundation.

FMF Feature Article/ 04 March 2008