Newcastle’s dirty linen

It was there in South Africa’s post-apartheid position paper. It was in Gear, the government’s macroeconomic strategy.

It’s now in the DA’s official election platform and also in the ill-fated youth wage subsidy. It is constantly flagged by libertarian think-tanks and tucked inside the National Development Plan, which feebly and noncommittally takes aim at “high entry-level wages”.

Demonstrating that South Africa cannot afford its various minimum wages is itself a long-suffering local industry. Plans to resegregate the labour market into low and high tiers have been proposed ever since the labour market first became desegregated. It has been a singularly futile exercise, largely thanks to trade union federation Cosatu and labour law, with the promotion of collective bargaining as its primary objective.

It has also rendered government’s developmental agenda fundamentally schizophrenic, with one part talking mere “employment” or “job opportunities” while the other talks “decent work”.

The case of Newcastle’s clothing factories is now emblematic.

In short, clothing factories that illegally pay lower wages than prescribed by the National Bargaining Council (NBC) are suing the minister of labour for extending the NBC’s wage deals to the entire sector.

The fully wage-compliant producers’ grouping, Apparel Manufacturers of SA (Amsa), and Cosatu­affiliate Sactwu, together rule the NBC, but represent fewer than half of those ­expected to honour their deals. This is collective bargaining at its most fragile and open to attack.

The NBC wages have been roundly ignored by more than half the industry since 2003. As a result, we’ve had showy “enforcement drives” – the seizure of machinery and the closure of factories with much mayhem and outrage. Somewhere between 300 and 450 writs of execution for such seizures are at hand right now, threatening 16 700 jobs. Technically, the NBC could close about half the sector – almost 28 000 jobs. This is no ­hypothetical trade-off or rhetorical threat.

The case landed in the Pietermaritzburg High Court this week after two years of preliminaries. The threatened factories make various narrow and technical arguments against the wage extension, arguing mischief from the NBC, lack of diligence from the minister and poking at every vague bit in the law around bargaining councils.

Their major plea, however, is that the minister is obliged to have public consultations and somehow objectively weigh the pros against the cons before extending agreements. The pros, they say, might be “living wages” for some, but that inevitably entails unemployment and lost business for others.

A friendly judgment can have wide repercussions. Bargaining councils set wages for much of the manufacturing sector and the public service, and are loathed by marginal employers everywhere.

This case is, however, no campaign from the fringe. The Newcastle case presents the most laboriously prepared evidence conceivable for such a test of pros and cons, on both sides.

Professor Nicoli Nattrass of UCT’s School of Economics has provided much of the Newcastle crowd’s evidence and makes an argument for a natural segregation of the clothing industry into high, capital-intensive and low, unskilled labour-intensive producers sitting in different value chains.

The wage dispensation should be likewise split, especially to allow piecework, or the low half will simply disappear, she argues.

This line of argument has much in common with defences of the wage subsidy: the cheap unskilled won’t compete with or displace the skilled.

They will sit in an entirely separate labour market. It also attacks the position of Amsa, which has disowned the enforcement drives as a regrettable last resort to tackle unfair ­competition.

In Amsa’s version, either compliant factories get a legal wage break or the non-compliants have to close. It’s become something of a nuclear deterrent in wage negotiations with Sactwu, which has no interest in getting its members in the non-compliant factories retrenched en masse either.

This is not a blanket argument to destroy minimum wages everywhere. The clothing industry with its dual structure, majoritarian non-compliance and its dizzying collapse since democracy is a special case in every sense of the word.

If there was ever going to be a dry run of the labour deregulation so many lobbies have prayed for, this is where it will happen.

But Nattrass also provides a rough critique of government’s “policy fantasies” around the entire manufacturing sector. This is the implicit view that enough subsidies for high-end manufacturers will see South Africa overcome the economy and population difficulties it has now. South Africa, it seems, not ­only belongs “higher up the value chain”, but will get there with none of the more unsavoury “phases of development” in between.

The court may well just rule on any of the vast multitude of technical arguments and counterarguments, but the question is always going to be political and not even the least bit technocratic.

– Sake24