Vol.5 No.25, 30 November 2005

Don't Blame the Tiger

Margaret Legum

Criticism of the ‘devastating’ Tiger Brands merger is a waste of breath. But it holds a number of lessons for us, which we will probably not learn. New thinking is needed. The consequent fear of unintended consequences will probably ensure the continuation of policies that do not work.

Why ‘devastating’? The merger will cause about a thousand otherwise destitute casual workers to lose their jobs in the little town of Ashton. Small as their wages are, they support many times that number. Last year Tiger Brand’s profits were up by 45% to R1.56 billion. The company offered the redundant workers R250,000 – yes, a quarter of a million rand – to share between them. A tribunal put that up to R2m, for ‘retraining’.

Not only the workers and their union are upset about this. The government has held meetings with the company ‘to devise a plan for a more stable industry for the future.’.

The fact that we are angry about this gross demonstration of inequality in the lives of vulnerable people demonstrates a number of illusions. One is that the private sector should have a conscience about the effects of their operations on employment. But that is not their job. They may voluntarily give money to good causes, but increasing employment cannot possibly go into their business outcomes. They would be dead in the water if they did, unless all their competitors did the same – and any regulation to that effect would be derided as distorting the market, and forbidden.

Tiger Brands is doing what multinational companies have to do to compete – and in particular to pay their shareholders more each year. Shareholders have no loyalty to brands; they and their asset managers can move out of a company as soon as wink. To keep shareholders, public companies must reduce labour costs in every way – through redundancies, and through finding labour that will accept less.

Yet we cling to the illusion that employment expansion is a reliable by-product of the functioning of the private sector. The wildest optimism over growth – totally ignoring known facts about the fuel-based and climate change limits – suggests the private sector may halve our unemployed in ten years. Forget it. It is not a solution.

Therefore, those ‘re-trained’ workers will have been sold a pup. They will fail to get other jobs, because, at that level, skills are not lacking.

Policies should have a reasonable chance of success. The Vice-President’s Accelerated and Shared Growth Initiative – an improvement in name at least, as it acknowledges that growth has not been shared by poor people up to now – is based on the same illusions, with some modifications. It names six barriers to growth. First, and key, is currency volatility. That is inevitable with a policy that puts the rights of capital to move around the world above all other considerations.

Second is the skills shortage, which has become an unexamined mantra. We are short of some highly educated professionals; but the townships contain experienced and accredited artisans, who are becoming de-skilled for lack of jobs. We should not design policies to create ‘skills’ which will not produce employment; instead concentrate on naming and training the skills we do need.

Third, the ‘regulatory environment’ refers, I suspect, to unraveling remaining restrictions on the exploitation of unprotected labour. That will create more poverty. Fourth, ‘import-policy pricing,’ which is a consequence of the over- emphasis on export-led growth. Both of these arise from policy prescriptions that are not working.

But the last two factors give a clue to policies that might work. They are ‘infrastructure backlogs’ and ‘delivery’ of government services. The identification of the other four lead to nothing more than a wringing of hands over inevitable outcomes of existing policy. Identification of these two open up real hope for growth based on long-term sustainability. That is because they are about physical and human infrastructure, and the employment that flows from that.

Just as the private sector is labour-saturated, the public sector is starved of human resources. The economy is being strangled for lack of well-run and expanding ports, railways, highways, feeder roads, commuter public transport within and between centers. Highly skilled people leave South Africa because we are not coping with crime – preventing its happening involves upgrading social conditions; effectively catching, convicting and rehabilitating criminals; maintaining high standards of justice. We certainly need jobs there.

Millions of children are receiving inferior education because schools are under-staffed, under-trained, under-managed; others are excluded for lack of fees, and under-perform for lack of nutrition. Pre-schooling, the greatest possible investment, is minimal. The same applies t the health sector. And the AIDS pandemic continues to rage for lack of trained curative and preventive staff. The result is a poorly educated, unhealthy potential work force, which is being exhorted to rescue the economy by entrepreneurial small business activity. Some hope.

So it is these, and almost all other public sectors, that could employ people to huge advantage for the country now and in a sustainable future.

If it is obvious that the private sector is most efficient without more people, and the public sector desperately needs people, why are we not orienting the economy that way? Because it contradicts the bedrock, but outdated, ideologies that private is efficient and enlightened, and public is corrupt and clumsy.

Neither is true. Of course, alternatives will have unintended consequences. So do the present, failed, policies.

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© South African New Economics Network 2006. Page generated at 17:05; 24 September 2006