Forestry Sector’s Labour Relations Concerns

1. The Forestry Sector’s Concerns Regarding the Labour Relations andBasic Condition of EmploymentAmendment Bills Submission by Roger Godsmark of Forestry South Africa To Parliamentary Public Hearing on Labour Bills July 24th 2012

2. Presentation Outline • Introduction & Background • Industry’s Main Concerns in respect of: • The Labour Relations Amendment Bill • Basic Conditions of Employment Amendment Bill • Conclusion

3. Section 1 Introduction & Background

4. Introduction to Forestry South Africa • Forestry South Africa (FSA) is a voluntary Association which represents the interests of its members in particular and the promotion of the Industry in general. • It does this in part through interacting with those organisations who’s actions have a direct bearing on the wellbeing of its members and the Industry. • Its members, which include all 9 corporate timber companies operating in SA, 1 100 commercial timber farmers and 20 000 emergent black timber famers, own or control over 90% of the Industry. Due to its representivity, FSA is viewed by both Government and the Private Sector as THE body which represents the Forestry Industry

5. Why we are Making a Submission Although the Bills will impact all employers, of significance to the South African Forestry Industry are the following circumstances: • The Industry directly employs 70 000 people, all in rural areas • The outsourcing of forestry operations is commonplace, with over 300 contractors collectively employing over 30 000 workers • Forestry work is seen as employment of the “last resort” making recruiting difficult, even in areas of high unemployment • Labour turnover rates are extremely high • A vast majority of forestry jobs are low skilled ones • Forestry operations are becoming increasingly mechanised Due to the above, the Bills will have a profound impact on future employment practices in the Industry

6. Objective of this Presentation Forestry South Africa fully supports Government’s overall objectives of reducing unemployment, creating more jobs, eradicating exploitation of vulnerable workers and creating sustainable livelihoods…… BUT We are extremely concerned that the Bills will have severe unintended consequences that will result in employers hiring less rather than more workers. We therefore need to bring these to the Labour Portfolio Committee’s attention before the Bills are enacted in their current form.

7. The Current Context The Bills come at a time when.......... • SA has a huge structural unemployment problem – 25.3% (4.4 m) on narrow definition or 36.6% (7.4 m) on the expanded definition • The economy, although technically out of recession, is still far from buoyant • The economy lost over 1 million jobs following the 2008 crisis and continues to struggle to create more jobs • An estimated 2.13 million people (16% of the labour force) are classified as temporary, fixed term or seasonal workers • Red tape, over-regulation, and excessive administered price increases, which are adding to the “cost of doing business”, are impacting negatively on SA’s competitiveness New Growth Path 5 m jobs and halving unemployment to 15% within 10 years

8. Section 2 Industry’s Main Concerns

9. Labour Relations Amendment Bill

10. LRA Amendment Bill (1) Section 51(9): Dispute Resolution Function of Bargaining Council • New sub-section 51 (9)(b) gives bargaining council right to impose a “dispute resolution levy” on all participants • In addition, a new sub-section 51(9)(c) also provides for the payment of a “fee” for any service rendered by the CCMA Problems • Levy unfair to those not using conciliation / arbitration services • Such a levy would increase cost of doing business Recommendation • Scrap levy and institute a “user pay” system using payment of fees for any work actually undertaken

11. LRA Amendment Bill (2) Section 64: Right to Strike and Recourse to Lock-Out • Provision is made for holding of “ballots” before strike action or lock-outs can occur Problem • Level of intimidation and indeed violence (including murder) associated with strike action is commonplace Recommendation • Change word “ballot” to “secret ballot”

12. LRA Amendment Bill (3) Section 186(1): Meaning of Unfair Dismissal • New sub-section 186(1)(b)(ii) states that a worker on a fixed term contract may claim unfair dismissal if there was a “reasonable expectation” that at the end of the contract, he / she would be offered an “indefinite contract of employment” but was not actually offered one Problem • Employers may be forced to employ a contract worker on a permanent contract even if there was no intention to make the position a permanent one. Recommendation • Remove sub-section 186(1)(b)(ii)

13. LRA Amendment Bill (4) Section 188 B: Dismissal of Employees Earning above a Threshold • The dismissal of workers earning over a certain threshold (as determined by the Minister) will be deemed fair if 3 months notice given or pays out in lieu of notice period. • Rationale is that such workers have sufficient bargaining power Problems • This is a huge assumption to make – many such workers will not have such bargaining power • Does not comply with principle of equity Recommendation • Change wording in this Section (and other Sections in Bill) to remove reference to earnings threshold

14. LRA Amendment Bill (5) Section 191 (12): Disputes Over Unfair Dismissals • If an employee’s dismissal results from “operational requirements” can be referred to CCMA or Labour Court if; • Consultation procedure only applies to that employee; • Operational requirements relate only to that employee; or • Employer employs less than 10 employees Problem • Many small & micro businesses will be caught in this net • Will lead to substantial increase in cases going to CCMA & LC • Will have a huge negative effect on small businesses in terms of cost and time Recommendation • Retain Section 191 (12) of original Act

15. LRA Amendment Bill (6) Section 198: Temporary Employment Services • Temporary contracts limited to 6 months unless “justified” • Employers will need to “justify” need for a contract, its length and reasons for any difference service conditions • Non-standard employees to “be treated on the whole not less favourably” than an employee of the client Problems • Contract limitation limits flexibility • Justification process extremely cumbersome and costly • If “less favourably” relates to wages, ok, if all benefits, problem • Will add significantly to cost of doing business Recommendations • Scrap justification obligation – can be done in case of dispute • “Less favourably” to relate only to wages, not service benefits

16. Basic Conditions of Employment Amendment Bill

17. BCE Amendment Bill (1) Section 33 A: Prohibited Conduct • Sub-section 33A (2) states that an employer can oblige an employee to buy goods or services if, in terms of contract of employment or collective agreement, an employee is “required to partake in a scheme” to buy such as long as the employee receives “financial benefit” from doing so. Problem • Pension contributions would be ok but in some cases employee will not get financial benefit from contributing (e.g. medical aid contributions) or not part of a “scheme” (e.g. paying for electricity in company provided housing) Recommendation • Provision needs to be broader to cater for non scheme and non financial benefit situations

18. BCE Amendment Bill (2) Section 55(4)(b): Making of Sectoral Determination • The Minister has the power to set not only minimum wage rates (as currently) but also “minimum increases in remuneration” where setting of such not covered by a collective agreement Problems • In effect the Minister will take on the role of a bargaining council – but will set increases unilaterally. This is unacceptable. • In any event, the “one-size-fits-all” approach to wage determination is highly problematic (no scale taken into account) Recommendation • Remove sub-section 55(4)(b)(ii) thereby allowing the Minister to determine minimum wage rates only

19. BCE Amendment Bill (3) Section 55(4)(g): Making of Sectoral Determination • This amended sub-section empowers the Minister to “prohibit or regulate task-based work, piecework, home work, sub-contracting and contract work”. Problem • This leaves the door open for the Minister to ban these activities • Of particular concern is that the task-based system is universally used in the Forestry Industry. Job losses could occur if banned • A ban could be contrary to section 22 of the Constitution Recommendation • Remove the words “prohibit or” thus allowing the Minister to regulate these forms of work but not to ban them outright

20. BCE Amendment Bill (4) Section 55 (4)(o): Making of Sectoral Determination • This new sub-section makes provision for the Minister to set “a threshold of representativeness within a sector at which a trade union automatically has the organisational rights” Problems • Representivity threshold set at sector level not at workplace • Given the level of unionisation in forestry, threshold will be low • Principle is undemocratic • This is NOT a basic conditions of employment matter – it’s a labour relations one Recommendation • This sub-section is not in the scope of the BCEA and should be removed

21. BCE Amendment Bill (5) Sections 71 & 72: Compliance Orders and Related Matters • The above Sections, which have been repealed, deal with: • Objections to a compliance order issued by a labour inspector; • Appeals to a compliance order issued by an order of the Director General. Problems • The DG can bypass the appeals process and apply directly to the Labour Court for a court order • This heavy handed approach is completely contrary to administrative justice principles & would increase costs • The Labour Court would be overburdened with work Recommendation • These Sections should not be repealed

22. Section 3 Conclusion

23. Concluding Remarks • It is evident that the Bills are aimed primarily at protecting those with jobs – not creating new ones. • New jobs can only be created through sustained economic growth which in turn needs a business environment conducive to achieving this. Will the Bills create this? • Businesses, particularly small ones, are the creators of sustainable jobs – not Government or Unions. They need encouraging to do this. Will the Bills do so? • Any laws & regulations need to be achievable, enforceable and cost effective to implement and comply with. Are these Bills? • To remain internationally competitive, amongst other things, the cost of doing business needs to be low and labour laws flexible. Will these Bills assist in achieving this? Given the above, we would recommend that another Regulatory Impact Assessment be undertaken

24. Conclusions In our view, should the Bills be enacted in their current form... • Employers will respond to the imposition of more stringent labour regulations by: • Cutting down on hiring new/replacement permanent employees; • Not taking on contract workers for fear that they may have to employ them permanently; and • Automating or mechanising operations wherever possible. • The “cost of doing business” for business and the administrative burden on Government will both increase dramatically • The result of the above will be that SA business will become more uncompetitive and the already overburdened taxpayer will have to fund the employment of more civil servants The Government’s job creation objectives will not be met – indeed, the level of total employment may fall

25. The Final Word The South African Forestry Industry wants to assist the Government in achieving its objectives BUT For this to happen, a far more “business friendly” approach to labour legislation and regulation is needed. It is therefore hoped that the Department will take FSA’s comments and recommendations in the spirit with which they were made. At the end of the day we need to work together to create a WIN WIN situation that will defeat the scourge of exploitation & unemployment. That can only happen through sustained long-term economic growth.

26. Thank You