Nedlac Annual Report

Meeting report

LABOUR PORTFOLIO COMMITTEE
28 August 2001
NEDLAC ANNUAL REPORT

Chairperson: Mr M Manie

Documents handed out
Nedlac Presentation to Parliament on Annual Report 2000/2001
Submission by Professor Raymond Parsons (see Appendix)
Dialogue – the Nedlac Newsletter
Nedlac Annual Report

Nedlac website: www.nedlac.org.za

SUMMARY
Nedlac gave an overview of its Annual Report. The Convenor of the Business constituency laid emphasis on the importance of social dialogue and why Business was in support of it. Labour said that Nedlac has entrenched itself substantially over the last couple of years and that there was no possibility of Labour backing off from the social dialogue process. It was pointed out that the best performing economies were those that have a strong tradition for social dialogue.
The Community constituency thought that Nedlac served "as a nerve centre for understanding the situation facing us in the country" and also expressed their confidence in its future.

MINUTES
Mr P Dexter – Executive Director: Nedlac was accompanied by Prof R Parsons – Overall Business Convenor, Mr E Patel – Overall Labour Convenor, Mr K Mbongo – Overall Community Convenor and Ms J Wilson: Communications Coordinator. Mr Dexter apologised on behalf of Government Constituency for their absence saying that they were committed to other engagements.

Mr Dexter said the Annual Report starts with an overview of the activities of the organisation and highlights of the report show a series of high-level meetings to discuss issues of national priorities as adopted in the Declaration of the Summit held in September last year.

At that meeting, constituencies re-committed themselves to social dialogue and to a work programme that is aimed at reaching agreement on issues that face the country.

One of the characteristics of the past year, has been what he described "as an expanding social dialogue which took place in a number of places."

Socio-Economic Report
This section highlights the socio-economic trends in the country and covers areas such as economic growth, trade, inflation, exchange rates, government expenditure, the labour market, productivity, key economic indicators, education, medical services and HIV/AIDS.

The general picture presented here is that despite high levels of economic growth in the country, severe social backlogs remain, especially unemployment and poverty, which continue to be the most pressing issues facing the country. That characterization forms the basis for much of the discussion that takes place at Nedlac.

Activities Report
Four Executive Council meetings were held this past year. Their purpose was to deal with strategic issues and to help define the work programmes of the Chambers of Nedlac. At Management meetings, constituencies are encouraged to be part of the process and the "4-a-side" meeting and the annual summit were also held. Mr Dexter said in terms of the constitution, all requirements have been carried out.

Summit Declaration
The Declaration laid out the challenge to the constituencies which they had made themselves and which commits them to make South Africa a leading emerging market and a first choice destination for investors whilst maintaining social equity and fair labour standards.

They have also committed themselves to make the economy a productive economy with high levels of services and a highly skilled work force. Other commitments include creating economic opportunities for all in which poverty is eradicated and "our people are given the opportunity and support to develop to their fullest potential." Ultimately, he said, the aim is to promote social equity values and human dignity in the global economy.

The Chambers
Mr Dexter said Chambers work along themes rather than dealing with issues as they pop up.
In the Labour Market Chamber, they have been dealing with the labour legislation, productivity and the National Skills Development Strategy (NSDS) and these matters need to be dealt with in an integrated fashion.

In the Development Chamber, research has been done on HIV/AIDS, which Nedlac has adopted as the HIV/AIDS Code. Here they looked at best practices in various firms to find out which firms were successful in dealing with this issue in the work place.

He said Taxi Recapitalisation has been dealt with under this Chamber but gave no specific details. This Chamber also dealt with the Restructuring of Public Education, which was an on-going matter.

In the Public Finance and Monetary Policy Chamber Nedlac has dealt with the Pension Funds Second Amendment Bill which Mr Dexter said was a highly contested issue which Nedlac could not resolve. The Bill is currently with Parliament to see whether they can resolve the matter.

Nedlac also tried to engage the constituencies in budgetary process but here again this topic became highly vexed and "very difficult" to resolve. However, through various workshops they are beginning to make some inputs into that.

In this Chamber, they have also dealt with policy framework on the restructuring of state assets "but as we all know what is happening at the moment, there has not been a great deal of consensus," he said.

Mr Dexter noted that the busiest and most successful Chamber in recent years has been the Trade and Industry Chamber. Here the Chamber dealt with the SADC Trade Agreement, the overall trade strategy that Government had brought to the Chamber, the Industrial Strategy Policy Document, the Draft Mineral Development Bill, Sector Summits including the Gold Sector, and the implementation of the Proudly South African Campaign – which is an agreement that rose out of the Presidential Job Summit. A Section 21 Company has been launched to promote the Campaign and a CEO been appointed. The chairperson of the company is Mr Tim Modise of the Safm. He said by the time they come back to report to the committee next year they hope it would be one of the most successful stories.

This Chamber conducts research, through Fridge which is an IDC fund, and a number of studies have been completed such as on non-tariff barriers and the Proudly South African Campaign itself.

Joint Processes
These cut across chambers such as social security issues and preferential procurement policy and civil society participation in the Cotonou Agreement that is part of the EU-SA Agreement.

Mr Dexter said they have received a number of visitors and have assisted with the Public Service Job Summit and the monitoring of the Presidential Job Summit Agreement.

Section 77 Notices
The Labour Relations Act has created facilities for trade unions to apply to take protective industrial action around socio-economic issues. He said there have been extensive activities in relation to Section 77 Notices and most of the issues have not been dealt with successfully. They have been unable to persuade the parties concerned not to take industrial action particularly in relation to the general strike of last year around the LRA issue.

Communications
Nedlac has produced a number of publications and has a wide distribution of the journal Dialogue. They also send a number of papers to MPs and various constituencies and contribute to the Labour Bulletin and the Indicator.

They maintain a fairly extensive website that has the latest information. They have had regular engagements with the media and briefing sessions to a number of institutions such as Parliament.

Mr Dexter noted an upcoming important event, the Annual Meeting of the International Associations of Socio-economic Councils. South Africa’s role in that institution was very important because Nedlac, whatever its faults, was highly regarded internationally and there was a great deal of interest in the Nedlac model. They receive regular visits from countries that want to set up their own version of Nedlac.

Research
Research has been conducted around Nedlac’s intervention to create an environment where parties can come together and discuss controversial issues without having to negotiate. These are called Roundtable sessions where topics like globalisation, HIV/AIDS and Black Economic Empowerment are discussed.

Capacity Building
One of Nedlac’s function is capacity building work and support for constituencies such as community and business particularly Nafcoc. Nedlac has also conducted workshops to promote social dialogue in the Western Cape and has assisted various municipality councils.

Future Choices and Prospects for the Year
Expanding social dialogue has been identified as a priority with a focus on promoting social dialogue at provincial and local level. "If we are to make success of development in South Africa," Mr Dexter told the committee, "the importance of social dialogue going on at various levels can’t be overstated."

Nedlac is also trying to create a stronger relationship with Parliament and wants to create greater awareness of what is going on at Nedlac. They also want to pursue agreements reached around the Declaration. This year’s annual summit will held on October 27.

Planned Activities
Apart from conducting labour law negotiations and the Proudly South African Campaign, there is discussion around the transformation of the financial sector. Nedlac will be having an important Civil Society Summit, which will be funded by the EU-SA and Cotonou Agreements and Nedlac has been asked to play a role in the promotion of civil society participation in the region.

They are preparing for the World Summit on Sustainable Development. Nedlac hopes to complete the Report on the Mineral Development Bill and the implementation of the National Skills Development Strategy (NSDS). Another task they will be tackling would be to finalise the Occupational Health and Safety Accord.

Finances
Nedlac received a grant of about R6.7 million from the Department of Labour and its expenditure was around R6.4 million.

Input by the Convenor of the Business constituency
Prof Parsons said after six years of Nedlac and social dialogue it was good to understand why they were engaged in this process. He said when they committed themselves to institutionalized social dialogue in 1995, they had accepted the reality of a long haul for the task of re-building the "social capital" of the country.

He said Nedlac, as the apex of social dialogue, was essential to the building of trust and consensus among various stakeholders and that trust was essential to investor perceptions.

He noted that the South African growth rate had risen from nearly zero in the early 1990s to about 2.5 percent in the six-year period since 1994, which suggests a shift for the better in the overall growth rate and that it would not have been possible to achieve these rates if they were not supported by social dialogue.

He said over the past year there has been a willingness on the part of all constituencies to engage in constructive negotiations and debates in an effort to move matters forward even where sharp differences of views existed.

Experience has taught them "you make the best progress, when you adopt a problem-solving approach rather than an ideological approach". He said successful areas were those where participants did not debate their ultimate vision.

He told the committee that Nedlac challenges were common to the national agenda: economic growth, global competitiveness, unemployment and poverty. Nedlac’s overarching achievement has been the 5^th Nedlac Annual Summit of September 2000.

Against this background, from the point of view of the business constituency, they think it would be naïve to think that Nedlac’s task was over. Social dialogue in South Africa remains an unfinished business and must adjust its focus to address the relevant concerns of its stakeholders.

In conclusion, he informed the committee that he had attended an international conference in The Hague last month, which was a meeting of all the ‘Nedlac’s around the world - there are about 40 countries that have a Nedlac model.

He said one of the major subjects discussed there was the Seattle saga and the Genoa demonstrations and what this is telling them. The inference was that there was a gap in the global social dialogue that needs to be filled.

Closer to home, he said there was a view from business that when looking at the New African Initiative, especially the Millenium African Programme (MAP) , the lesson is that at some point social dialogue must be taken on board to help to shape the vision of MAP.

He said social dialogue was an important condition for success leading to social stability and that the African continent depends on South Africa being successful at this engagement before exporting it to the rest of the continent.

Discussion
Mr S Mshudulu (ANC) wondered how Nedlac could be representative.

Mr Dexter replied that Nedlac was sectorally represented and by international standards "we were ahead" and suggested that if Nedlac was not sufficiently visible, the problem was communication. They have a small budget for communication and organisations were welcome to invite them.

Mr N Clelland (DP) observed that while Nedlac contributed to economic growth, he wondered how they were going to rectify the social backlog through such a growth rate.

Mr Dexter responded that South Africa has not been unsuccessful as a country and that the threat of a social meltdown no longer exists. He believes that Nedlac has made a contribution to that. He said Nedlac’s mission was to bring parties together to seek consensus in a particular manner and not through ideology. He conceded that social dialogue was not enough and said the key question was how to permeate social dialogue in an environment where there was high disparity in social wealth.

Professor Parsons added that the President had set a target of 5-6 percent growth which business supports wholeheartedly. He said the current 3 percent mark was not enough and the issue was how to make South Africa a leading emerging market.

On the issue of social dialogue succeeding he gave an example of Ireland where the social dialogue issue was on the agenda for over twenty years and currently the country was on a social compact plain. He said it was possible for South Africa to reach that stage.

The Chair asked what were the possibilities for South Africa coming up with its own social compact?

Professor Parsons replied that it was important to deepen social dialogue as well as to widen it and as such there was a need for a series of wide accords as a basis for building trust.

Mr Dexter added that social dialogue was power and what drives it was when constituencies were powerful. The question was: was there a person powerful enough to undo this social dialogue? He thought the best agreement was when everyone was dissatisfied.

He thought to reach social compact would require creating an environment of agreements in areas like productivity and so on. The key was to set a goal for Nedlac to work towards this year.

Mr N Coleman (Cosatu) also added his voice on behalf of Labour to say that Nedlac has entrenched itself substantially over the last couple of years and that there was no possibility of Labour backing off from the social dialogue process.

These sentiments were also expressed by Mr K Mbongo (Community) who expressed their confidence in the future of Nedlac, which "serves as a nerve centre for understanding the situation facing us in the country."

Ms E Thabethe (ANC) asked how the successes of social dialogue can be measured.

Prof Parsons responded that the best measurement could be to look at Nedlac’s Declaration of its Annual Summit (in its Annual Report) where the order of priorities have been listed.

Mr N Middleton (IFP) asked how Nedlac proposes to create more jobs in the country to overcome unemployment?

Mr Dexter responded that job creation at Nedlac was a key issue that was discussed endlessly and there were no easy answers to this.

Mr NJ Clelland (DP) inquired as to what path would Nedlac like to take in order to reach an accord?

Mr Dexter replied that it was not necessary to push for the idea for the accord but that the programme of the Summit Declaration should provide some guideline of what they are trying to achieve.

Mr J Durant (DP) asked when would labour and business reach common understanding in order to create trust?

Mr Dexter responded that Nedlac was a place where people do the talking as long as it takes people somewhere. It would be naïve to think that six years down the line, democracy would stop industrial action. He said there was no country in the world where there was no industrial action.

Mr Mshudulu (ANC) asked Nedlac to brief them on sectoral summits when they next appear before the Committee.

Mr Dexter responded that they would be very happy to make a presentation to the Committee and bring along the people who are involved in those sectors.

Mr N Coleman (Cosatu – Labour) said the Sector Summits came out of the Job Summit Agreement and that it was very important as it engaged workers and employers of a particular sector in issues like "how do we experiment, how do we plan, and how do we protect jobs in the sector."

Mr Mbongo (Community) said that in the Sectoral Summits that is dominated by labour and business, the issues were industry-based such as the issue of productivity. Community’s interest lay in job creation and it is now positioning itself from that angle in Sector Summits.

Prof Parsons said business would welcome discussion on privatization and on the issue of unemployment. He said 40 projects had emerged from the Presidential Job Summit and each stakeholder at Nedlac "took a share of these projects on to their agendas." Some of the projects he mentioned were the Proudly South African Campaign, Umzobomvu Fund, the Mobile Fund, and the Business Trust Fund which are all projects aimed at job creation. Through social dialogue they were talking about turning a low-class society into a high-class society with all the benefits to come such as the 5-6 percent growth rate.

Input by the Convenor of the Labour constituency
Mr E Patel said the best performing economies in the global turbulence were those that have a strong tradition for social dialogue. When captains of industry sat with labour to look at countries from which they could learn lessons, they came up with Holland and Ireland. These two countries have used engagement to shape up policy. He said the two countries had the lowest unemployment rate and the fastest rate of economic growth.

He said it was difficult to copy these countries because of greater inequality and poverty here but the interesting thing was that they too were also engaged in social dialogue.

He said South Africa was one of the few countries in the world where business, government and labour sat on the Board of the International Labour Organisation (ILO) because of having a unique insight in to social dialogue.

He said there was concern from Labour about productivity, which he described as a fundamental engine in any economy. He told the committee that labour productivity has grown every quarter without exception over the last five years.

However he said the growth of this productivity has been in sectors where it has not been accompanied by employment growth. As such labour was proposing a productivity and equity accord which would have the following elements: commitment to investment by the business community, and investment in training. He said productivity and training were synonymous with each other, with one supporting the other.

The other element he mentioned was social infrastructure. He said, "If we under invest in social infrastructure, we also under invest in productivity." Mr Patel told the committee that high performing economies are economies where the health care system, education, and housing are of high quality which helps to complement economic performance.

Appendix:
SUBMISSION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON LABOUR ON THE NEDLAC ANNUAL REPORT 2000/2001 BY PROFESSOR RAYMOND PARSONS, OVERALL BUSINESS CONVENOR IN THE NATIONAL ECONOMIC DEVELOPMENT LABOUR COUNCIL (NEDLAC)
The successes and failures of NEDLAC in any one-year should always be seen in a longer-term perspective. When South Africa formally committed itself to institutionalised social dialogue in 1995, it accepted the reality of a long haul. It was recognised that it would take time to rebuild what economists call the "social capital" of a country like South Africa, given its history.

For it must be acknowledged that social dialogue in South Africa does require time and patience. Yet given the painful legacies of the past -and the historical imbalances to be addressed - the Nedlac process has been found essential to the building of both trust and consensus. A recent book by an American professor analyses the relative economic performance of "high trust" and "low trust" societies. He concluded that one of the lessons of economic life globally is the extent to which the level of trust in a society underpins economic prosperity.

If we look back six years we can see that significant progress has been made in developing our young democracy on sound foundations. From a negotiated constitution to an independent central bank to the role of Nedlac - all these have helped to create an appropriate institutional framework, which consolidates our democracy. And Nedlac has, under difficult circumstances, made its contribution to socio-economic development in South Africa.

Over this period the South African growth rate has risen from nearly zero in the early 1990s to nearly 2,5% in the six-year period since 1994. While there are still key economic challenges still to be addressed, the degree of cooperation that Nedlac made possible undoubtedly contributed to a better environment for higher growth. The economic performance of the past few years would not have been possible had it not been supported by social dialogue.

As Nedlac moves into the 21st century, it faces new challenges. This report itself outlines the wide range of economic social issues with which Nedlac is grappling to underpin visible change and delivery. Controversy is understandably never far from the surface of its activities. Yet the past year has seen a willingness on the part of all constituencies to engage in constructive negotiation and debate in an effort to move things forward, even where sharp differences of view may exist.

The areas in which Nedlac can claim some success are usually those where "a problem-solving approach" is to be adopted. As one business colleague has put it: "The nation expects us to be problem-solving". A notable feature of issues where there are successful Nedlac outcomes is that the participants do not debate their ultimate visions.

By adopting a "problem-solving approach" to certain matters we often find that, instead of being the pre-condition for successful dialogue, consensus and shared understanding are more like an outcome. What happens is that Nedlac discussion which is problem solving and practical can produce consensus, even where there are underlying conflicts of interest, and even where there was no shared understanding at the outset.

And the challenges, which Nedlac faces, are those, which are common to the national agenda. These are economic growth, global competitiveness, unemployment and poverty. A perusal of the work of Nedlac over the past year will show both where Nedlac has succeeded - and where it has failed - to make its contribution to the solutions.

Perhaps the most dominant overarching achievement of Nedlac over the past year has been the declaration of the 5th Nedlac Annual Summit in September 2000, which is outlined on page 30 of the latest Annual report. This has slowly but steadily permeated several of the subsequent initiatives taken by Nedlac, and which are still to unfold in the period ahead.

Given the above context business believes it would be naive to believe that Nedlac’s task is over. Social dialogue in South Africa still has much unfinished business. It must nonetheless continue to adjust ifs focus in ways, which ensure that it addresses the relevant concerns of its stakeholders and the nation at large. The business constituency remains committed to the process.

Cape Town 28 August 2001