Union leaders received a reality check yesterday from Reserve Bank governor Gill Marcus. Speaking at the pre-national bargaining conference of the National Union of Metalworkers of SA (Numsa) in Randburg, Marcus warned that the global crisis posed dangers to South Africa. Against this threatening backdrop, she urged her audience to be aware of the unintended consequences of any actions.
She pointed out that wage settlements averaged about 7.3 percent in the four quarters to June, while productivity increased 1.2 percent. This resulted in unit labour costs increasing by 6.1 percent. And she noted the consequences of excessive settlements would be lower levels of employment creation or job losses.
When Marcus spoke at Numsa’s national conference gala dinner in June, she was apparently snubbed. Delegates had to be called to order and Marcus left the dinner without participating in a scheduled question and answer session. But yesterday the audience paid close attention.
“This global crisis is now in its sixth year,” she told them. “And, if nothing gets worse, it could be five, six, seven years before we come out of this very deep hole. We aren’t talking about a short, sharp trough; we’re talking about a decade-plus from the start to when it might finish.”
She explained that there were consequences for South Africa. She cited the example of the motor industry, in which Numsa members work, that is losing out as its main markets shrink. In April, the National Association of Automobile Manufacturers of SA revised down its vehicle export sales forecast for this year to about 270 000 vehicles from its original forecast of 300 000 units because of the economic problems in Europe.
“The world is very connected,” she said and drew the link between the euro zone recession and the fortunes of South Africa. The euro region is a major export market for China, which in turn has been a big consumer of South Africa’s commodities.
“Not only has South Africa felt the direct impact of poor demand from Europe, there has been a knock-on effect via China, where growth has slowed to 7.5 percent, from previous double-digit levels. This has cut the country’s demand for South Africa’s commodities.
Marcus described low growth in the third quarter as a “self-inflicted” wound. Her comment referred to the loss of mining production in the third quarter due to industrial unrest – which cut overall growth in gross domestic product (GDP) to 1.2 percent.
And she said fourth-quarter growth would probably also be “very low”.
“South Africa is not matching the growth of its emerging market peers. Nor is it getting anywhere near achieving its full potential. Instead growth is declining.”
Touching on the debate about whether policy should focus on growth or redistribution, Marcus said: “Growth matters. With growth of 7 percent, you double your income every 10 years. With growth of 3 percent it takes 24 years to double your income.”
She also noted: “You don’t always get jobs with growth, but you certainly don’t get jobs without growth.”
On the topic of mining disruptions, Marcus said: “Mining is one of our key industries; a key employer; a key export earner. We missed the mining boom twice because we haven’t got stuff out of the ground. You have unbelievably high prices for your metals but you are not getting the earnings.”
She was referring to a commodity boom in 2008 and a strong recovery that peaked early last year.
She also touched on broader issues relating to industrial disputes in general. “You have a responsibility not only to stand for what’s right, but also to stand against what’s wrong.”
And she noted that violence had become an integral part of the bargaining process, a development that carried within it the “seeds of great destruction”.
After her presentation, Marcus and the Reserve Bank team responded to questions from the floor – many of which could be described as speeches.
Asked for an example of “self inflicted” damage, Marcus spoke of shortcomings in education. She drew laughter when she questioned the rationale of nationalisation when the government couldn’t even deliver textbooks to schools in some areas.