The Forestry Sector’s Concerns Regarding the Four Labour Law Bills Published on 17 th December 2010 Submission by Forestry South Africa to KZN Provincial Public Hearing on Labour Bills January 25 th 2011

Presentation Outline Introduction & Background Industry’s Main Concerns in respect of:  The Labour Relations Amendment Bill  Basic Conditions of Employment Amendment Bill  Employment Equity Amendment Bill  Employment Services Bill ConclusionRecommendations

Section 1 Introduction & Background

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, commercial timber farmers and 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

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

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 Government’s attention in an attempt to persuade them of the need to review the Bills before they are tabled in Parliament.

The Current Context 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 has lost over 1 million jobs in the past 18 months. Figures for the 3 rd quarter of 2010 indicate that jobs are still being shed An estimated 2.13 million people (16% of the labour force) are classified as temporary, fixed term or seasonal workers – of which work for labour brokers The Bills come at a time when New Growth Path 5 m jobs and halving unemployment to 15% within 10 years

Section 2 Industry’s Main Concerns

Labour Relations Amendment Bill

LRA Amendment Bill (1) Repealing of entire Section 198 dealing with Temporary Employment Services New definitions of “employer “ and “employee” Obligation to hire temporary employees on permanent basis Non-compliance with certain sections now a criminal offence A: Major Concerns B: Implications Temporary employment service providers will not be recognised by the LRA Employers will, in effect, become the “employer” of those workers provided to them by TES (e.g. labour brokers) Employers will have to employ “temporary” workers on a permanent basis (unless they can justify a fixed-term contract)

LRA Amendment Bill (2) Many employers will be unwilling to employ workers provided to them by TESs on a permanent basis as their costs and risks will increase Extra DoL staff will be needed to administer the provisions i.t.o. justification for fixed term contract The jobs of thousands of those working for TESs will be at risk “Cost of doing business” will increase due to new obligations C: Consequences D: Recommendations Retain the current definitions of “employers” and “employees” Do not repeal the Sections dealing with TESs Remove new Section which obliges employers to hire workers on a permanent basis Decriminalise non-compliance & reduce penalties

Basic Conditions of Employment Amendment Bill

BCE Amendment Bill (1) Payment of benefits of equal value to permanent and fixed-term contract staff Union threshold determinations i.r.o. organisational rights Repeal of those sections of the current Act dealing with compliance orders Contravention on 35 sections (7 previously) now criminal offences & penalties have increased dramatically A: Major Concerns B: Implications Huge increase in administrative and cost burden on employers Easier for trade unions to “organise” labour Diminished rights for employers (no longer compliance orders) – labour inspectors will determine criminal offences

BCE Amendment Bill (2) Many employers will be unwilling to employ either permanent or temporary workers Employers not given a chance (through compliance orders) to rectify transgressions – now labour inspectors alone will determine non-compliance and possible criminal conviction - opportunities for corrupt practices thus very high Unionisation of workplaces will increase C: Consequences D: Recommendations Remove organisational thresholds – not a BCE issue- keep in LRA Do not repeal sections dealing with compliance orders Do not make non-compliance criminal offences and retain current offences and penalties

Employment Equity Amendment Bill

Employment Equity Amendment Bill (1) Designated employers who employ below 150 people now have to report annually (previously, only every two years) Employers will lose their right to appeal the substance of a compliance order, only the procedure taken by the Dept. The pool of qualified people and regional demographics will no longer be criteria in determining “representivity” compliance It is proposed that penalties be based on turnover (2% to 10%) A: Major Concerns B: Implications Huge increase in administrative and cost burden on SSMEs Many employers (including Government) will not be able to meet the targets set Coloured workers in W. Cape & Indian workers in KZN will be cut Some companies may succumb to the burden of the fines

Employment Equity Amendment Bill (2) Employers will recruit in order to get “their numbers right” irrespective of competence given the penalties proposed for non-compliance Employers will find it virtually impossible to meet targets if the pool of suitably qualified persons and regional demographics are removed from the compliance criteria Coloured and Indian workers living in the Western and Northern Cape and KZN respectively will be disadvantaged as their populations are concentrated in these Provinces The cost of business will increase both in terms of “overt” and “covert” costs The proposed turnover based penalties could result in company closures - impact on employment and economic growth C: Consequences

Employment Equity Amendment Bill (3) D: Recommendations Employers employing less than 150 people, only report every 2 years (as per the current Act), not every year as per the Bill Non—compliance with “income differentials” be removed as this is highly subjective and cannot be determined With regards to the assessment of compliance criteria, the Minister MUST take into account, as per the current Act:  The pool of suitably qualified persons; and  Regional demographics The penalties for non-compliance based on turnover be dropped and those under the current Act be retained.

Employment Services Bill

Employment Services Bill (1) New definition of “employer” and “employee” Creation of Public Employment Services (PES) - capacity of State to deliver on its mandate and funding model Reporting obligations on employers i.t.o. job vacancies Difficulty in hiring foreign workers List of offences and excessive penalties A: Major Concerns B: Implications Employers will, in effect, become the “employer” of those workers provided to them by TES (e.g. labour brokers) Huge increase in administrative and cost burden on employers Huge burden on administrative capacity of Dept. Burden on the fiscus & diversion of UIF & WC funds to PES Employers will find it very difficult to hire foreign workers

Employment Services Bill (2) Many employers will be unwilling to employ temporary workers Will make it virtually impossible for labour brokers to operate “Cost of doing business” for employers will increase dramatically UIF and Workmens’ compensation funds will not be able to fund their primary obligations as some funding diverted to PES The cost to the fiscus of the PES will be considerable The Government will be competing directly in the “employment agency” business with the private sector In order to fulfill it’s PES mandate, the Department will have to hire a considerable number of extra staff SA will be deprived of skills provided by foreign workers which could have assisted in increasing economic growth C: Consequences

Employment Services Bill (3) D: Recommendations Retain current definitions of “employer” and “employee” Re-look at the whole concept of creating the PES Given the dearth of skills locally, make the hiring of suitably skilled foreign workers easier, not more difficult If the PES is created, exempt SMMEs from the reporting obligations and only report on permanent vacancies of R per month and over If the PES is created, exempt SMMEs from the reporting obligations and only report on permanent vacancies of R per month and over Ring fence UIF & Compensation Funds for their original purpose Only oblige employment agencies to keep electronic copies of records and only for 2 years Cut the number of offences down from 13 and make penalties more appropriate

Section 3 Conclusion

Conclusions Employers will respond to the imposition of more stringent labour regulations and harsher penalties by: –Cutting down on hiring new/replacement permanent employees; –Not taking on temporary employees as permanent employees; and –Automating or mechanising operations wherever possible. The “cost of doing business” and the administrative burden on Government will both increase dramatically Economic growth will be hampered by more stringent EE requirements and limitations on hiring foreign workers It is our view that should the Bills be enacted in their current form... The Government’s job creation objectives will not be met – indeed, the level of total employment may fall

Interestingly, our conclusions are not dissimilar to those reached by Government’s own independently conducted “Regulatory Impact Assessment Report” These are as follows

The Regulatory Impact Assessment Report (1) (as reported in the Business Day, 18 th January 2011) Many of the provisions would have “significant” unintended consequences or could not be implemented at all The ban on Labour Broking would:  Result in the loss of thousands of temporary jobs;  Act as a disincentive to employment;  Have “serious destabilising effects” on the labour market;  Violate the constitutional right to choose a trade, occupation or profession freely; and  Breach SA’s international obligations. Making temporary jobs permanent:  Could affect the continued employment of 2.13 million fixed term, temporary and seasonal workers; and  Would cost employers a great deal of time and money. Government’s own independent RIA of the 4 Bills found that..

The Regulatory Impact Assessment Report (2) (as reported in the Business Day, 18 th January 2011) The “cost of doing business” would increase significantly The Bills would make the labour market more inflexible In terms of the Employment Equity Act, the turnover penalties proposed could result in: –The demise of companies; and –Negative results on economic growth It would be better to register the temporary employment agencies, subject to conditions which would protect workers, rather than ban them Their conclusion..... “While Permanent employment may increase, it is a fair assumption that total employment will decline”

Section 4 Recommendations

FSA’s Recommendations (1) The proposed restrictions on temporary employment services be dropped and replaced with regulations to protect their workers rights The regulations governing the hiring of foreign workers be relaxed Offences for non-compliance with labour laws should not be criminal offences The offences for which penalties for non-compliance can apply be based on current Acts and the proposed penalties be reduced to more appropriate levels From an Industry point of view, our overall recommendations are as follows:

FSA’s Recommendations (2) Any regulations that are enacted should be based on reality and not wishful thinking or ideology (e.g. proposed amendments to EE Act) Employers’ rights in terms of a right to appeal should be respected (e.g. proposed amendments to LRA) Government should not be involved in a business that competes with the private sector (e.g. proposed public employment services) We need to get away from the “big stick” approach – employers need to be encouraged to hire staff

The Final Word The South African Forestry Industry wants to assist the Government in reaching its employment creation targets 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 unemployment. That can only happen through sustained long-term economic growth.

Thank You