Address at the NUMSA Job Security Conference

14 March 2009

President of the National Union of Metal Workers of South Africa/ General Secretary of NUMSA/ National Executive Committee members/ Ministers and Government Officials here present/ Leaders of the Employer organisations here present/ Distinguished Guest/ Comrades and Friends/ Ladies and Gentlemen/

It is indeed an honour for me to have been invited to address this all important Job Security Conference and I would like to thank the National Executive of the National Union of Metal Workers of South Africa for affording me the privilege to participate in this important assembly. This conference happens at the time when all concerned citizens are grappling with global challenges of immense proportions.

The gravity of the current challenges demand strong leadership from key players in our economy and the responses we seek should not only be about "the here and now" but should be geared towards shaping the future we all seek to build.

Secondly, your conference is precisely what the recently adopted framework for South Africa’s response to the international economic crisis called on all of us to do - develop sector specific strategies and concrete action plans to respond to the global economic melt down.

It pleases me immensely that workers are taking bold steps in the manner that you are doing in this conference to find sustainable responses to the global challenges, most of which are not of our making.

The current global economic crisis started as a financial problem in the developed countries.

But due to globalisation and the disproportional economic power relations, the impact of the financial crisis in the USA and European countries spread to the rest of the world.

However, the effects differ from country to country.

For African Countries in particular, the economic crisis just compounded the negative effects of the food and fuel crisis that manifested itself earlier in 2008.

With limited resources, the crisis just puts more pressure on governments and their social partners in developing countries to tighten their belts in ensuring that the poor and the vulnerable do not end up absorbing the shocks of the economic crisis alone.

Like other African economies South Africa has not been immune from the impact of this global economic crisis. It now desperately needs a better strategy to mitigate contagion from the global financial crisis and its adverse impact on the real economy. There are various approaches taken by governments in responding to the financial crisis, from stimulating private sector activity to community driven projects and reallocating funds to better targeted social programmes.

In our case, the Presidential Economic Joint Working Group prepared a Framework for responding to the crisis.

The thrust of our response framework revolves around strategies to cushion the impact of the crisis on job losses, particularly for the poor and the vulnerable.

The vicious cycle of this impact on investment (both private and public), on jobs and on government’s social programmes is what our response framework sought to offset..

The recent statistics released by Statistics South Africa show a decline in the output by 1.8% during the fourth quarter of 2008.

To support these findings the Unemployment Insurance Fund recorded about 32 517 employment termination claims as a result of end of contract, followed by 9 644 retrenchments in the last quarter of 2008.

In particular, the manufacturing industry terminated about 11 809 jobs. This calls for an intensive strategy as outlined in the framework of response, to target sectors that are vulnerable to the current economic crisis. The manufacturing sector is a significant contributor to the country’s balance sheet and it holds real potential to make a huge impact towards dealing with the economic, social and developmental challenges confronting us.

We therefore need to ensure that the negative impact of the slowdown on the poor and the most vulnerable is mitigated. The measures we seek to put in place should embrace elements that promote economic growth and sustainable businesses, assist and protect workers and the vulnerable and help our country meet its developmental objectives. The current global economic downturn is hurting and signalling a deepening malaise in most of the countries in the world.

Among others, the USA, the UK, China, Canada and Europe as a whole have exhibited disturbing signs of responding an uncoordinated manner to the effects of this crisis.

These signals are very alarming to most world leaders and countries need to develop strategies that could alleviate the pains and rescue the global economy.

In responding to the crisis, governments are adopting a range of measures to stabilise their respective economies, but these responses vary according to the extent of the impact of the crisis.

The advanced economies in which the financial crisis has its origin have had to try and inject some solvency and liquidity into their banking systems, while at the same time trying to restore some sense of consumer and business confidence.

Initially, it was hoped that recessions in developed countries would not be protracted and that ‘decoupling’ would enable emerging economies to weather the global storm.

Unfortunately, increased risk aversion by investors, the limited availability of credit for investment and trade and reduced global demand for products mean that developing countries must expect further negative spill over into their economies.

The depth and breadth of the financial economic crisis should not be underestimated in terms of the impact on most economies and in terms of the likely time it will take to make a full recovery.

Economic growth will be much lower, demand will be under pressure, commodity prices have already fallen (hitting exports), access to credit has almost dried up in the short-term and the cost of money has risen substantially.

Like other developing countries which are strongly integrated into the world economy and significantly dependent on its good health, South Africa has been affected by the sharp fall in demand for its export products and the fall in prices of key export commodities.

The result is that our growth expectations had to be sharply revised, downwards. The duration and depth of the downturn cannot be forecast with certainty, but growth is likely to be lower than previously expected at least in 2009, and 2010.

This has serious implications for incomes, employment, and investment; and on social programmes partly through the decline of tax revenues for government.

As you know in December 2008 we convened an extra-ordinary meeting of the Presidential Economic Joint Working Group, to consider how South Africans should respond collectively to the global economic crisis that has, since September 2008, seriously impacted on growth and social cohesion in a number of countries and which has started to affect employment and growth prospects in South Africa.

We all agreed that the economic situation required an effective collective response and accordingly agreed to set up a task team under the auspices of the Presidency and Nedlac to develop a response package for South Africa.

We all agreed that we need social solidarity between all South Africans to ensure that the crisis does not damage the fabric of our society. Those with greater means have a responsibility to those without such means.

Our collective responsibility is to work together to withstand the crisis and ensure that the poor and the most vulnerable are protected as far as possible from its impact. We must also ensure that the economy is ready to take advantage of the next upturn and that the benefits of such growth are shared by all our people.

The Framework for South Africa’s response to the International economic Crisis which was adopted by all stakeholders at the Presidential Economic Joint Working Group held on 19 February 2009 in Cape Town identified five (5) key principles that should underpin the country’s response to the crisis; namely;

· The potential of economic shocks to destabilise the welfare of the vulnerable, including their jobs, health and education, and to increase inequality and poverty, is widely recognised, is our first concern and will require active steps to ensure these outcomes are avoided.

· To ensure that all of our activities that are aimed at strengthening the capacity of the economy to grow and create decent jobs in the future, are protected and supported as far as possible.

· Maintaining the planned high levels of investment in public sector infrastructure and to encourage the private sector to maintain and improve wherever possible their levels of fixed direct investment and continue with corporate social investment programmes.

· Interventions must be timely, tailored and targeted as is appropriate.

· Bold intervention in the form of a broad stimulus package, as signalled in the recent budget that has economic and social components. South Africa has developed a diversified manufacturing base that has shown its resilience and potential to compete with the best in the global economy. The manufacturing sector provides an important platform for stimulating the growth of other activities, such as services, and achieving specific outcomes, such as employment creation and economic empowerment.

Manufacturing presents an opportunity to significantly accelerate the country's growth and development.

It is important to point out that the sector has not escaped the negative impact of the current global economic meltdown. For example, all sectors of the South African automotive industry - retail, component manufacturers, and vehicle manufacturers are experiencing a severe and unprecedented cash flow / profitability / viability crisis, the decline in volume production with negative implications on employment in the component and vehicle manufacturing industries.

Already, the major vehicle producers are operating on a four day working week reportedly to avoid large scale retrenchments.

The decline in production will also compromise the continued viability of an increasing number of component companies.

As a result over 150 dealers close their doors resulting in over 7 000 direct jobs being lost.

In addition some 200 used vehicle dealers have ceased operations over the past year resulting in a further 1 900 direct jobs being lost.

In addition, actual employment losses during 2008 in the component/auto parts sector (particularly during the 4th quarter of last year) totalled over 10 000 jobs, whilst the headcount reduction for 2008 at the vehicle manufacturing plants amounted to just over 1 100 jobs.

In the face of all these negative developments, the need for a united national approach underlined by a cohesive vision cannot be overemphasised. Accordingly, the South African automotive industry is a good example of what could be achieved through real partnerships.

The remarkable accomplishment through the Motor Industry Development Programme (MIDP) has been recognized around the world as one of the most successful and innovative country strategies to develop automotive manufacturing and open up a domestic market in the new environment of globalization.

While it is imperative to respond to the current crises with a thorough review of the functioning of the international financial and monetary mechanisms, a human rights approach will contribute to making solutions more durable in the medium to long term.

This industry has a solid track record of robust social dialogue and it pioneered various innovative ideas including industry training models, three-year wages and working conditions agreement model, the first of its kind in the South African collective bargaining landscape.

Therefore I have no doubt that the industry as a collective would again join forces and come up with innovative ideas on how to weather the current storm.

It is therefore, important to put more effort on investment in skills, sustain the UIF and closely examine policies suggested by experts to alleviate unemployment in South Africa.

Chairperson,

The framework stresses the issue of avoiding job losses through macro economic, industrial and trade policies.

All these policies are considered pregnant with possibilities to save jobs and to create more jobs in the South African economy during this economic downturn.

Most importantly, the employment measure of the framework is emphasizing what had been reiterated across other intervention measures, protecting jobs and where possible creating more jobs.

We need to commit to work together to limit the negative impact of the crisis on South Africa and to turn the crisis into an opportunity to lay the foundations for decent work, sustainable livelihoods and strong economic growth.

Decent work is the foundation of the fight against poverty and inequality and it is agreed its promotion will be the corner-stone of a national response to the global economic crisis.

Decent work embraces both the need for more jobs and for better quality jobs.

In this regard, working together we can succeed, and together we can do more.

We must approach our discussions with the determination and courage of those who understand the inner logic of this crisis.

Remember that this is a struggle which is more complex then the one waged against apartheid and that demands much more subtle grasp of strategy and tactical awareness.

Progress and success is but given to those who continue to win if back through struggle!!

Mobilise and organise all those around you to play a role in saving jobs and preparing to participate in the efforts to create decent work.

I wish you clarity of purpose and success in your deliberations.

I thank you.