Dear Members,

We responded to the invitation of Mr Tito Mboweni to send him ‘Tips’ for the 2019 Budget. We welcome his fresh energy, business insight and desire to do things differently.  

Adv Hein van der Walt and Dr Lawrence McCrystal

Cofesa Budget Tips

Tips for Minister of Finance 2019 Budget

In the spirit of ‘Thuma mina’ Cofesa, the Confederation of Employers of Southern Africa has the following tips:

  • Repeat what you have achieved as Governor of the Reserve Bank when, with Mr Trevor Manuel as Minister of Finance, the country reached a growth rate of 6%   to relieve the hardship of 10m unemployed people and the 17m receiving government grants and treasure the precious 15m people who are employed, employers: entrepreneurs/businesspersons in all industries.

Independent Advisory Council focused on a growth strategy

We propose that NEDLAC be replaced with an Independent Advisory Council of leading economists, business leaders, and specialist high-level government officials to advise the Presidency and the relevant ministries (Finance, Trade and Industry) on appropriate economic policies for growth.

We need to emulate the success of the automotive industry of the late 90’s when you were Minister of Labour and extend this policy action plan to other industries:

  • Automotive-  Positive balance: R84.7bn (2017)  -300 000 jobs created.  This highly successful incentive schemes were developed before 1994.  If replicated the potential growth in jobs can be as follows:
  • Agriculture – With moderated incentives a projected additional 700 000 jobs can be created.
  • Metal and allied (engineering, chemical and associated/allied industries cluster) With incentives a projected additional 300 000 jobs are within reach
  • Other industries, such as clothing, tourism, etc, With ‘focused investment’ they will generate substantial numbers of jobs.

Restructure the government departments. The Department of Labour needs to be incorporated as a sub-department of the DTI  to harmonize,  coordinate and synchronize job creation so that labour legislation does not foil job creation and economic development but should rather attract investors and ensure a business friendly environment.

For more jobs prompt  the Minister of Labour, Ms Mildred Oliphant to ease the constraints of labour legislation. It has stifled economic growth for more than 20 years.

Reduce excessive fines, such as up to six years imprisonment for contravening certain sections of labour legislation. For underpayment of wages  fines of up to 200% of the amount underpaid is stipulated.  For other offences fines of R300 per employee and up to R2,7m or 10% of turnover is provided for.

Excessive fines characterise an investor unfriendly government.

Affirmative action and employment equity– (Originally meant as temporary measures):

It is time to announce a  ‘sunset clause’ for affirmative action, employment equity  and BBBEE. It deters foreign investment and scares professionals away and contributes to corruption.   A rise in unemployment from 4m to 10m is a ‘unforeseen’ consequence of these measures.

The Minister of Labour some time ago mentioned the need to revise this concepts. We agree!

As an employers’ confederation COFESA has witnessed the devastating effects of these employer unfriendly measures in the 52 industries we serve. Modern growth concepts, such as internships, enterprise development and incentives like seed capital for investors create a friendly business environment for economic growth.

Bargaining councils

Stop the extension by the Minister of Labour of Main Agreements to non-parties. Bargaining councils levies and regulations increase wage bills with  between 18% and 33% opening our market to cheap imported goods causing local factories to close.

Encourage Ms Mildred Oliphant, Minister of Labour to put a moratorium on these extensions and to scrap bargaining councils like the UK government did in 1980 to turn their economy around.

Prolonged strikes cripple the economy and scare investors

Apply Pendulum Arbitration as an alternative  practical way of resolving labour disputes quickly and fairly. We need to ensure that legal strikes are both peaceful and of shorter in duration, without causing damage to the economy. Compulsory “Pendulum Arbitration’’, an internationally recognized mechanism, would ensure this ideal.

Temporary employment services – Constraining this service which provides work for close to 900 000 contractors (deemed/presumed ‘employees’) is a ‘job killer’.TES  is an important driver for thriving economies, why not for our economy? It must be encouraged.

Scrap the presumption that a person (an independent contractor) is presumed an employee (Section 200A). This presumption discourages outsourcing and enterprise development and economic growth.

Encourage independent contractors, incubators, entrepreneurs and synergies with them.  They are the large employers of tomorrow.

Our empirical study on the productivity of ‘contractors’ contrasted with ‘employees’ found that contractors are between 50% and 300% more productive than ‘employees’ and are consequently paid accordingly. The ‘cottage industries’ of China, create entry levels to the formal industries. We need to promote similar models.

Minimum wages should not apply to trainees, interns or small businesses, and like in Germany, should not apply for the first six months or perhaps one year for previously unemployed persons.

Land reform-  Mobilise interns, from the more than 1m unemployed graduates, to fast track the transfer of title deeds to tenants and rightful owners. A prominent economist predicts that this will stimulate growth comparable to that of the ‘Marshall Plan’ after the Second World War.

Amend the Competitions Act: No 89 of 1998Collective bargaining and agreements should fall within the ambit of the Act or at least enterprises with less than 200 employees’ should be exempted,  as Mr Trevor Manuel proposed in 2005.

Our economic future lies inside and outside our borders- Trade agreements already link the Cape with Cairo  

A waterway from Egypt to the Cape will paint arid Africa green and create a food basket for global markets

Grow our economy and also  accelerate the implementation of the inter-Africa free trade agreements,  the Tripartite Free Trade Areas (TFTA), the initiatives of the Department of Trade and Industry to revive the economies of Africa; has the growth potential for an ‘Africa Marshall Plan’.  

Fast track mega size local and continental projects and expand the economy. Utilize our reserve capacity in all sectors, construction, engineering, finance etc.   Trade our expertise for water. The trade agreements link Egypt with Cape Town.  Construct a ‘Trans Africa Water Freeway’ for trade, tourism and creating a food basket for the world. (See attached). This will benefit more than 600m people. Developing Africa will alleviate the flood of refugees that overburden our infrastructure, presently close to 3m.

To grow and expand the economies of the RSA and our continent, create wealth and jobs

Rolling out the Tripartite Free Trade Areas (TFTA)  that link  Egypt to the RSA will benefit 600-million people in Africa.  Africa’s shared need for water, trade and tourism are seen as common ‘currencies’. We conceptualized  a  ‘Trans Africa Waterway’  to link the 52 countries on the continent for transport,  trade, tourism, agriculture,  for an ‘Africa Marshall Plan’  effect,  similar to Europe’s successful  ‘Marshall Plan’ which revived their economies after the second  World War.

While South Africa’s international relations are at a high we must capitalize on the window of opportunity created by the signing of the TFTA’s and participate in the birth of a new powerful trade bloc.

Spare capacity in construction and engineering and at the SOE’s

Dr MC (Giel) Bekker, Director: CII-Africa : “Since the completion of the 2010 World Cup, the South African capital project environment has  witnessed a steady decline in activity and productivity. With some of the larger construction projects ending, the immediate future for the industry seems bleak. This has been complicated further by some prominent construction companies off-shoring their business or going into business rescue and even bankruptcy.

The departure of these companies will eventually impact on skills depletion, resulting in the long-term shortage of capacity to deliver on capital project investments”.

  • We have spare capacity in construction, engineering, manufacturing, transport, management, finance, technology, agriculture, nature conservation, tourism, training, legal etc and other resources that can be used for an ‘African Marshall Plan’ to change the face of the continent. Recruit, select and insource expertise from overstaffed State Owned Entities. 
  • This will achieve some of goals of the Election Manifest: ‘‘We must drive innovation and the digital revolution, increase levels of investment in the economy, accelerate the provision of infrastructure to support the economy and meet basic needs, transform and diversify the financial sector, consolidate support for small businesses and cooperatives, as well as the grow the township and village economy. These interventions will be accompanied by the development of an appropriate macroeconomic framework to support the transformation of the economy to serve all people’.
  • Source expertise from the ranks of Eskom, SAA , SABC and the Private Sector to fast track the  roll out of the TFTA’s, and stimulate the economies of the continent.

The threatening job cuts at Eskom, SABC and SAA  presents an unique opportunity. From the ranks of overstaffed corporations valuable expertise can be recruited. Assign them to the ‘Trans Africa Freeway’ project, to fast track the project. The salary bills of the outsourcing corporations will so be reduced,  valuable skills retained as a constructive alternative for redundancies and retrenchments and stimulate continents economies.

It is time to build a ‘Trans Africa Waterway’ to provide sustainable water, realize the Tripartite Free Trade Areas (TFTA)  and generate an ‘Africa Marshall Plan’ effect

A waterway from the Cape to Cairo will be over a distance almost the length of the Roman aqueducts built 4 000 years ago. It provided the empire with water security and has benefitted their economy. Similarly the ‘Trans Africa Waterway’  will change the face of our arid African continent.

The ‘Trans Africa Waterway’  was conceptualized at a strategic study initiated by the ANC (then) Councilor of the Joburg Metro, Mr Willie van der Schyf. It  links the 52 countries on the continent for transport,  trade, tourism, agriculture  (food security and as a food basket for exports), job creation,  (also for  youth employment and for women), ‘transform the economies’ of the continent and  turn back  the flood of migration to South Africa and to Europe.  Local and international funding are available.  Africa’s shared need for water, trade and tourism are seen as common ‘currencies’

Cape water crisis

Source 9% of the water of the Orange River, now running into the sea,  to supply the Cape with water. At the initiative of Mr Willie van der Schyf of the Progressive Business Forum a Dutch engineer Mr Rein Dijkstra conceptualised a pipeline from the Orange River to Cape municipalities and farms.  

Address climate change, a man made disaster of global scale

The development of Africa will alleviate the impact of climate change. Sir David Attenborough, COP 24, Katowice,  Poland in December 2018 declared:

“Right now we are facing a man made disaster of global scale, our greatest threat in thousands of years, climate change.

If we do not take action the collapse of our civilization and the extinction of much of the world is on the horizon”.  

An unexpected 2 degrees jump in temperatures

More than expected, temperatures for South Africa has increased with 2 degrees Celsius in 2018, while the world average increased by 1 degree Celsius. A possible global increase of 3 degrees Celsius may mean an increase of more or less 6 degrees Celsius for our inland regions which will make cattle farming and producing corn, unsustainable in the next decade.

The main culprits, America and China need to reduce pollution levels with 45% relative to 2010 levels.-Prof Francois Engelbrecht, head of research on climate study and environmental health WNNR/CSIR Landbouweekblad 21 December 2018, page 32.

‘Report of the Commission of Enquiry into Water Matters’ of 1970.  Dr Lawrence McCrystal, chairman of Cofesa participated in intensive research on our water resources in the sixties with Dr  Sieg Kuschke, Mr Eric Thorrington-Smith and Mr Marius de Waal which culminated  in the ‘Report of the Commission of Enquiry into Water Matters’ of 1970. The report recommended that water be sourced from our northern neighbours  for future industrial development in North West and from Lesotho and the Tugela to the Sterkfontein Dam- this recommendation resulted in innovative schemes which now provides water security to millions of consumers.

Saving a continent: Endangered chimpanzees and forest elephants

The project will drive sustainable economic development and job creation, also saving the continent’s natural resources from poor people who are forced to survive on wildlife and forests which contributes to Global Warming. Without alternatives the poor occupy national parks, like in the Ivory Coast where 80 percent of its virgin forest was lost between 1960 and 2010 with 269 000 hectares being cleared annually.

Up to 53 000 illegal farmers and their dependants have already been removed and hundreds of thousands remain to be evicted in desperate attempts to save the endangered chimpanzees, forest elephants and the rare pygmy hippopotamus. Surveys by scientists have found that 50 percent of the protected areas have lost their entire primate populations and that the near total disappearance of forests in some parts, have seriously impaired microclimates and altered rainfall patterns.

New dawn: We welcome your fresh approach,  business insight and desire to do things differently. May we again become a prosperous country and continent for the sake of all our citizens, a place where people want to do business.