BUSINESS FRETS THAT UNFRIENDLY LABOR BROKER LEGISLATION

C O N F I D E N T I A L JOHANNESBURG 000161


STATE FOR AF/S
STATE FOR DRL - M MITTELHAUSER AND T DANG
DOL FOR S HALEY AND P WHITE
GENEVA FOR ILO OFFICE

E.O. 12958: DECL: 11/13/2019
TAGS: ELAB ECON EAID PREL PGOV SF AMGT
SUBJECT: BUSINESS FRETS THAT UNFRIENDLY LABOR BROKER LEGISLATION
LOOMS

REF: A) 2008 JOHANNESBURG 154; B) 2009 CAPE TOWN 194

CLASSIFIED BY: Doron Bard, Acting Consul General.
REASON: 1.4 (b),(d)


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


1. (C) The South African business community is concerned over
the impact of a proposed ban or harsh regulations against labor
brokers who employ roughly 550,000 South Africans daily.
Curtailing labor brokers has become a rallying call for the
trade union movement and appears to have gained the support of
many in the ruling ANC as a way to curb other labor demands.
The Department of Labor (SADOL) has accelerated the debate and
hopes to have a policy in place by March 2010. Most U.S.
businesses operating in South Africa make use of labor brokers
for temporary workers. End summary.


Stressed business community
--------------


2. (C) Regional Labor Officer met with Business Unity South
Africa (BUSA) Social and Labor Policy Director Vikashnee
Harbajan on November 9. A visibly exhausted Harbajan noted that
her labor workload had increased tenfold because of the
near-constant scramble of COSATU and the labor movement to gain
policy influence in the Zuma government. BUSA served as the
exclusive representative [lobbyist] of South African business to
the National Economic Development and Labor Council (NEDLAC) and
as such hashed out labor policy with SADOL, the Congress of
South African Trade Unions (COSATU),and FEDUSA (ref A).
However, many officials in the Zuma administration were
concurrently pursuing other avenues to implement hot button
labor issues that would assuage COSATU from larger (and
non-labor related) policy aims. Nowhere was this more evident
than in the Zuma government's attempt to regulate or ban labor
brokering.


SADOL moves quickly
--------------


3. (C) Harbajan said that current ANC pledges to regulate or
ban third-party contracted labor, known as labor brokering, had
reached a fever pitch. The ANC-dominated Ministry of Labor and
Parliamentary Portfolio Committee on Labor had accelerated the
campaign to try to cover up the labor movement split over the
issue. FEDUSA and the International Labor Organization (ILO)
had come out in support of improving regulation of, rather than
eliminating, the labor brokering industry. According to
Harbajan, this left COSATU determined to see some type of
policy, and Minister of Labor Mdladlana was doing everything he
could to please them. The Minister needed COSATU support as his
ministry had shrunk. President Zuma had spun off non-core
functions, including skills development, to the newly created
Ministry of Higher Education and Development (ref A).


4. (C) Harbajan and her colleagues expressed great concern that
Minister Mdladlana's view waffled by the day. He told NEDLAC
that he would not ban labor brokers, but then publicly pledged
to do so. He was even stronger in supporting a ban when
speaking with COSATU. BUSA predicted the Minister would table
draft legislation by early December as a strategic move. This
would occur just before most of the country broke for its month
long `Festive Season' holiday and would limit informed debate
and discussion. The Minister would then expect the policy to be
negotiated and enacted just after everyone returned from break.
BUSA hoped that the Minister did not table an outright ban on
labor brokers as such a ban `would be in bad faith' based on his
statements to NEDLAC. That said, the Minister was under
enormous pressure from COSATU and the Parliamentary Portfolio
Committee on Labor to propose a ban. If the Minister tabled a
full ban, BUSA said it would be forced to withdraw from the
NEDLAC process immediately. (Note: Harbajan also quietly said
BUSA was gearing up to challenge a full ban in the South African
Constitutional Court if needed. End note.)


Poorly drafted legislation no different than a ban
-------------- --------------


5. (C) BUSA and its members were `very concerned' that draft
legislation from SADOL was equivalent to a ban. The Minister
was unwavering in his insistence that brokers be heavily
regulated. He told NEDLAC that clients and employers would
assume full and joint liability for brokered workers under South
African labor law. (Note: Joint liability means that a worker
could take both the client and broker to court alleging they
violated labor law. The employee could also claim benefits from
both. End note.) BUSA expressed the belief that this would
have the same effect as a ban and would shut down an industry
that employed 500,000 to 600,000 workers daily. BUSA, FEDUSA,
and the ILO had proposed that existing and strong labor laws be
enforced and that the Ministry create a registry of labor
brokers. This would allow them to keep tabs on the industry.
BUSA said that joint liability might be an option for
`vulnerable' sectors such as agriculture.


6. (C) Complicating the labor brokering issue was the new role
of the Parliamentary Portfolio Committee on Labor. The long
dormant committee had taken up the issue with a vengeance and
was very much `in bed with COSATU.' August hearings (ref B) had
seen Committee Chair Lumka Yengeni shutting down educated debate
in favor of emotional outbursts. SADOL pandered to the
committee and no party offered any studies on the proposed
economic impacts of a ban or other regulations. BUSA is very
short-staffed and Harbajan lamented that the business community
had not been able to muster the response it should. She also
fretted that BUSA would not have time to do so before 2010
debates on the issue. Harbajan said that while some bad brokers
did exist, particularly in the agricultural sector, many
legitimate economic sectors also relied on brokered labor,
including the South African government. The Gauteng government
(Johannesburg and Pretoria) had responded to the debate on
brokers by eliminating brokered nurses. This had amplified an
already critical sixty percent staff shortage in public
hospitals.


SADOL also tagging on other anti-business amendments
-------------- --------------


7. (C) Harbajan said BUSA was also worried that new SADOL
Director General Jimmy Manyi was tagging onto the momentum
surrounding brokers and pushing through concurrent amendments to
the EQloyment Equity Act. Both Manyi and the Minister had
rallied COSATU and Parliament behind changes to employment
equity legislation. Companies found in non-compliance with
South Africa's strict equity laws would face fines ranging from
one to four percent of total profits. Studies by both SADOL and
BUSA had found that almost no company in South Africa was in
compliance with all provisions of complex equity legislation.
Harbajan agreed that business needed do to better. However, she
and BUSA see Manyi's amendments as yet another legislative
hindrance to doing business in South Africa. While SADOL had
rarely enforced equity law in the past (with fixed fines),it
was very clear that Manyi planned immediate and multiple
prosecutions.


Comment
--------------


8. (C) Contracted (brokered) workers are present in all sectors
of the South African economy because the difficulty of firing
workers in South Africa (along with other stringent labor laws)
has created a large demand for labor brokers to supply workers
to firms that don't want to take on permanent staff. Many labor
brokers are legitimate while others are suspect. The trade
union movement has not backed down from its insistence that
labor brokers be banned or heavily regulated and that view is
backed by strong but uninformed support from SADOL and
Parliament. Any proposed ban or regulation will have
consequences for U.S. business. While it is still too early to
tell, the Department of Labor appears determined to push through
regulations in February with as little debate as possible. The
Embassy, on behalf of the American Chamber of Commerce (AmCham),
has asked that the Minister of Labor meet with AmCham to discuss
the issue.


BARD