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Doing business in a constitutional democracy

It is a pleasure and a privilege to be invited to participate actively in this timely jobs summit. It is also an honour to have so diverse and august an audience. While observing all protocol, allow me to establish the composition of my audience here today:

  1. How many of you are South African citizens?
  2. How many of you regard yourselves as Africans?
  3. How many are public servants?
  4. How many politicians do we have with us today?
  5. How many are in the private sector in full time employment?
  6. How many are managers or owners of private sector endeavours?
  7. How many are workers or worker representatives?
  8. How many are unemployed?

I ask these questions because I have not had a full time job myself since 1980, when I became an advocate. As you all know, advocates just do odd jobs for attorneys. To make matters worse, since 2006, I have been in the non-profit sector, which, as the name implies, is not for the economically active.

So, “doing business” is not a universal pursuit, but it is an activity which is vital to the success of any modern economy. In any economy in which some 40% of the workforce is idle, alarm bells ring loudly. The success of business is reflected in the amount of taxes that the government can raise from the profits business makes and from the earnings of those employed in business. These get used to provide services, to build infrastructure, and to pay salaries in the public sector. The private sector makes money, the public sector spends it, and should spend it well in the sense that accountability and responsiveness to people’s needs are at the front of the stove when decisions are made as to how the public’s money which finds its way into the state’s hands is allocated. The values and principles of the constitutional dispensation should inform the functioning of the public administration so that business opportunities are maximised by a smoothly operating, responsive and accountable system. We have a long way to go to get there in the new South Africa.

The Institute for Accountability in Southern Africa (IFAISA) has as its mission the exacting of accountability from those in positions of power and the promotion of responsiveness to the needs of ordinary South Africans. These twin goals are in fact foundational values of the new dispensation – our “multi-party system of democratic government to ensure accountability, responsiveness and openness” as section 1 of the Constitution puts it.

The way in which this is done so as to advance human dignity, achieve equality and enjoy the various freedoms guaranteed to all in the Bill of Rights is through a supreme Constitution in which the rule of law has pride of place. This is known as the ideology of constitutionalism. Doing business successfully in a constitutional democracy involves an understanding and appreciation of the tenets of constitutionalism. There are three basic tests for constitutionality that must be passed:

  1. Checks and balances on the exercise of power must be in place.
  2. The Constitution must enjoy legitimacy in the eyes of those governed
  3. Respect for human rights must be guaranteed in the constitution.

South Africa has all of these in abundance. Not only are the traditional features of the triangulation between legislature, executive and judiciary in place, we have Chapter Nine Institutions and a vibrant civil society sector to ensure that the values of constitutionalism are properly embedded after the long, dark night of apartheid.

The single biggest difference between the political dispensation in the old SA and that in the new SA is that there was a parliamentary sovereignty in the old SA: this meant that the elected politicians could do as they liked, and they did. In the new SA the Constitution is the supreme law: all other laws and all conduct have to be consistent with it, on pain of being struck down as invalid. The obligations imposed by the Constitution must be fulfilled. Our Courts have the final say as to whether or not law or conduct is constitutional. This makes the Constitutional Court, from which no appeal lies, an extremely powerful force for good. It has the power to strike down laws and conduct which are not capable of passing constitutional muster. This dilutes the power of the executives and the legislatures, unlike in the old order, they can not do as they please, they have to restrict themselves to what they are allowed to do by the Constitution.

Doing business in this constitutionally democratic context ought to be a pleasure. The upholding of the rule of law and respect for property rights are said to be the basic requirements for the attraction of investment, whether foreign or local. Our model constitution expressly affirms the rule of law as supreme. Our Bill of Rights guarantees property rights in a hard fought clause that is nearly as long as that for arrested, detained and accused persons. These create conditions conducive for doing business. Entrepreneurs feel comforted that their investments of time and money are safe and they take note of the other relevant rights guaranteed to all in the Bill of Rights. These include access to courts and to information, the right to just administrative action, freedom of trade, occupation and profession. Slavery, servitude and forced labour are forbidden and everyone has the right to fair labour practices.

Guaranteeing “fair labour practices” to all fits in with the notion of equality before the law which is also a guaranteed right. It is employees, employers and the unemployed who are all entitled to “fair labour practices”. Yet there is an obvious tension between the interests of these three groups. The employer wants as much value for the money he expends on wages as he can get, the employee wants as much money for as little value as he can get away with, and the unemployed would just like to get a look in rather than being excluded despite their best efforts to find a job.

In this constitutional framework, there are some scientific rules and measurements that can not be overlooked if doing business is to be a success. Others will be going into these in greater detail, for present purposes it is important to note that the worth of any job is directly related to the value it generates for the employer. If wages are allowed to rise to above the value they generate, the business paying those wages is bound to fail.

One of the specific rights guaranteed in the labour relations provision of the Bill of Rights is that national legislation may recognise union security arrangements in collective agreements, provided that they comply with the limitations clause of the Bill of Rights. So freedom of association, freedom of trade and fair labour practices can be limited in terms of laws of general application only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom taking into account all relevant factors.

The collective bargaining system has been with us in SA for a long time. Some might say for too long. It was put in place by Prime Minister Jan Smuts and is preserved in section 32 of the Labour Relations Act. In a time of massive unemployment over a sustained period, the efficacy of collective bargaining is open to doubt as the right to “fair labour practices” of the unemployed are placed in jeopardy by cosy arrangements that have the effect of forever making it impossible for the unemployed to secure that ever elusive “decent job”. If minimum wage levels are statutorily set, after Bargaining Councils have determined them, this prevents the unemployed from offering their services at a lower wage. If market forces (especially that omnipresent value of the job) dictate that the unemployed are not able to add value in excess of the minimum wage to the endeavours of their prospective employers, then by law, no new jobs are created. Several questions arise: Should the unemployed be free to decide for themselves the wage at which they will sell their labour, or, conversely, should employers, by law, be precluded from accepting workers whom they pay less than prescribed industry wide levels? Can the unemployed be legally and constitutionally prevented from freeing up their human potential by what is decided by a majority of powerful interests represented in Bargaining Councils? Is this fair, or is it unfair discrimination against the unemployed of the kind not allowed by section 9(3) of the Bill of Rights? Is a slave not a person who is deprived of selling his own labour at a price of his choosing to an employer willing to take him on as a worker by way of freely associating with him? Children’s rights are paramount under the Bill of Rights; is it not a paradox that section 32 of the Labour Relations Act precludes parents from gaining access to the basics of life by preventing those who are unemployed from negotiating a wage below the minimum set by law? How is the promotion of the achievement of equality served by keeping those willing and able to work for less than the minimum wage out of the formal workplace that is regulated by the decisions of Bargaining Councils, especially when those kept out are entitled to fair labour practices?

None of these questions admit of easy answers, but if this job summit is going to achieve anything, it will be necessary for delegates to take a long hard look at what the current dispensation does for the unemployed and for their prospects of entering the marketplace of any work, let alone decent work.

It would be remiss of me to fail to mention that the lofty value system in evidence in our magnificent Constitution, an instrument admired throughout the world, a system designed to develop a humane and compassionate society in which human dignity, equality and the various freedoms of the Bill of Rights prevail, is not universally accepted as the home in which we live out our aspirations as a nation united in its diversity.

On the contrary, there are those, some of them powerful, who consider that the Constitution contains “fatal concessions”; that it unduly dilutes the powers of elected executive and legislative functionaries in favour of civil society watchdogs, Chapter Nine institutions and the ever present Courts. Many of those persons live in the “house of the revolution” to which Julius Malema is fond of referring, especially when throwing foreign journalists out of his press conferences. The values of the national democratic revolution (NDR) are often at odds with those of the Constitution. The NDR is aimed at worker hegemony, the establishment of a one party state in which the party has full control of all the levers of power and in which the theories of Marx and Lenin are to be made a sustainable reality for the first time in world history. The followers of the NDR are entitled to their world view and to express their negative opinions of the constitutional dispensation which has been peacefully put in place as the product of our national accord which prevented a racial bloodbath and messy revolutionary changes in South Africa. However, those who prefer the NDR to constitutionalism should not pretend to subscribe to the values of the Constitution because they are fundamentally inconsistent with the goals of the NDR.

At present there is a paralysis in politics that can be attributed to this clash of values. This clash is imploding the ANC according to Gwede Mantashe, who as Chair of the SACP and SG of the ANC, should know. The National Planning Commission puts out a diagnosis which accords with constitutional principles. The Minister of Economic Development suggests a new growth path that leans toward the NDR; the Minister of Finance suggests constitutionally compliant labour reforms that would swiftly address unemployment if implemented, the Department of Labour counters that it, and it alone, decides labour policy and this is announced by cabinet spokesman, Jimmy Manyi, who also let it be known that there is “an oversupply” of what he, in our non-racial democracy, calls “Coloureds” in the Western Cape and they must, to suit his social engineering aspirations, migrate to provinces to the north, the far north, where an undersupply exists. Hence the political paralysis, hence the lack of proper policy direction, hence the joblessness, poverty and despair for about half of the population. Hence this job summit seeking sustainable solutions.

Cape Chamber of Commerce & Industry
Job Summit
26 September 2011
Paul Hoffman SC

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