Are unions holding the grid to ransom?

26 April 2015 - 02:00 By Bruce Whitfield

Two unrelated stories this week show just how beholden the South African economy is becoming to an increasingly militant labour movement. Ironically, the situation is bound ultimately to be as destructive for unions as it is for the rest of us. Last year saw more than 12million work days lost to strikes and the rising level of industrial action, dominated by the platinum sector, contributed to a big drop in the potential growth rate. Economists estimate that South Africa could have grown at 2.2% last year versus the 1.5% it actually achieved had it not been for the disruption caused by strikes.As if to amplify the point, Eskom this week warned that its long overdue Medupi and Kusile power stations would be further delayed, and laid the blame at the door of trade unions disrupting the work of contractors commissioned to bring more capacity to the national grid.There is a big slug of truth in the contention that trade unions are increasingly holding the projects and hence the broader economy to ransom.And, as the battle lines are drawn between the state and a bloated, underproductive civil service, unions representing them are being less than patriotic. About 30% of the formally employed labour force is in the civil service. A 10% increase demanded by unions would cost the fiscus an extra R50-billion a year. It is twice what is budgeted for. The rest would have to be redirected from basic services for South Africans, many of whom are already at their wits' end over government delivery.In the meantime, South Africa's energy-poor economy continues to turn off long-term capital investment concerned about committing to an environment where, in addition to mounting labour and civil unrest, energy shortages are the order of the day.Medupi, slated for completion last year, will not be fully operational until 2021. Kusile will take even longer. By then, sensible households that can afford the technology will have taken themselves off the grid. Start-up entrepreneurs such as former Massmart CEO Grant Pattisson, who is heading up the local business of US renewables giant NRG Energy, will capitalise on the gap, and put solar panels on every office block, factory and shop they can.Unions holding up Eskom's build are like turkeys voting for Christmas.There is a chilling correlation between Eskom's union experience and the story told this week by outgoing Companies and Intellectual Property Commission head Astrid Ludin. She described in detail how her efforts to transform a crucial engine of economic growth from a deeply corrupt public entity into a hi-tech and effective registration and reporting body for business was stymied after the election last year of new leadership at Nehawu, the union that represents a large proportion of her workforce.Ludin claims that there have been serious efforts to undermine her position, and implies an unhealthy cooperation between staff at the commission and officials in the Department of Trade and Industry.Ludin inherited the commission in a state of utter chaos. After years of senior staff departing and multiple CEO comings and goings, she was promoted from within the department at the behest of Trade Minister Rob Davies.Ludin leaves the commission in far from perfect health, but there were indications that she was making progress in stamping out corruption and automating cumbersome registration and reporting processes.Part of the unhappiness with the changes is that it might have led to job cuts. That does not appeal to unions, and certainly flies in the face of the government's plan for a developmental economy.Old Mutual Investment Group chief economist Rian le Roux said this week that, without efforts to make the civil service more efficient and to automate processes to not only make the cost of running the state cheaper and less corrupt, there will simply be less money in the kitty to deliver services.Davies told Business Day that Ludin had failed to bring the people at the com mission with her on her transformative journey. But even if half of what Ludin is suggesting about the com mission and the departm ent is true , there needs to be a serious wholesale investigation .The scenes being played out in the corridors of public-sector power are reminiscent of those in the 1980s political satire Yes Minister, in which hapless cabinet minister Jim Hacker is manipulated routinely by his most senior civil servants, led by Sir Humphrey Appleby.Sir Humphrey: "My job is to carry out government policy."Hacker: "Even if you think it is wrong?"Sir Humphrey: "Well, almost all government policy is wrong, but ... frightfully well carried out."If only it were true of the South African civil service - at least it would give investors certainty. But the civil service is at risk of losing more top talent to a skills-hungry private sector if managers feel hamstrung in their ability to deliver a 21st-century service. Then the job of making South Africa more effective will take far longer than anyone has imagined.Whitfield is a financial writer and broadcaster..

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