P 131356Z NOV 09
FM AMCONSUL JOHANNESBURG
TO SECSTATE WASHDC PRIORITY 6639
INFO USDOC WASHDC PRIORITY 0054
DEPT OF COMMERCE WASHINGTON DC
DEPT OF LABOR WASHINGTON DC
USMISSION GENEVA PRIORITY 
AMEMBASSY PRETORIA PRIORITY 
AMCONSUL DURBAN PRIORITY 
AMCONSUL CAPE TOWN PRIORITY 
AMEMBASSY WINDHOEK PRIORITY 
AMEMBASSY GABORONE PRIORITY 
AMCONSUL JOHANNESBURG

C O N F I D E N T I A L JOHANNESBURG 000161 
 
 
STATE FOR AF/S 
STATE FOR DRL - M MITTELHAUSER AND T DANG 
DOL FOR S HALEY AND P WHITE 
GENEVA FOR ILO OFFICE 
 
E.O. 12958: DECL:  11/13/2019 
TAGS: ELAB ECON EAID PREL PGOV SF AMGT
SUBJECT: BUSINESS FRETS THAT UNFRIENDLY LABOR BROKER LEGISLATION 
LOOMS 
 
REF: A) 2008 JOHANNESBURG 154;  B) 2009 CAPE TOWN 194 
 
CLASSIFIED BY: Doron Bard, Acting Consul General. 
REASON: 1.4 (b), (d) 
 
 
Summary 
------- 
 
¶1.  (C) The South African business community is concerned over 
the impact of a proposed ban or harsh regulations against labor 
brokers who employ roughly 550,000 South Africans daily. 
Curtailing labor brokers has become a rallying call for the 
trade union movement and appears to have gained the support of 
many in the ruling ANC as a way to curb other labor demands. 
The Department of Labor (SADOL) has accelerated the debate and 
hopes to have a policy in place by March 2010.  Most U.S. 
businesses operating in South Africa make use of labor brokers 
for temporary workers.  End summary. 
 
 
Stressed business community 
--------------------------- 
 
¶2.  (C) Regional Labor Officer met with Business Unity South 
Africa (BUSA) Social and Labor Policy Director Vikashnee 
Harbajan on November 9.  A visibly exhausted Harbajan noted that 
her labor workload had increased tenfold because of the 
near-constant scramble of COSATU and the labor movement to gain 
policy influence in the Zuma government.  BUSA served as the 
exclusive representative [lobbyist] of South African business to 
the National Economic Development and Labor Council (NEDLAC) and 
as such hashed out labor policy with SADOL, the Congress of 
South African Trade Unions (COSATU), and FEDUSA (ref A). 
However, many officials in the Zuma administration were 
concurrently pursuing other avenues to implement hot button 
labor issues that would assuage COSATU from larger (and 
non-labor related) policy aims.  Nowhere was this more evident 
than in the Zuma government's attempt to regulate or ban labor 
brokering. 
 
 
SADOL moves quickly 
------------------- 
 
¶3.  (C) Harbajan said that current ANC pledges to regulate or 
ban third-party contracted labor, known as labor brokering, had 
reached a fever pitch.  The ANC-dominated Ministry of Labor and 
Parliamentary Portfolio Committee on Labor had accelerated the 
campaign to try to cover up the labor movement split over the 
issue.  FEDUSA and the International Labor Organization (ILO) 
had come out in support of improving regulation of, rather than 
eliminating, the labor brokering industry.  According to 
Harbajan, this left COSATU determined to see some type of 
policy, and Minister of Labor Mdladlana was doing everything he 
could to please them.  The Minister needed COSATU support as his 
ministry had shrunk.  President Zuma had spun off non-core 
functions, including skills development, to the newly created 
Ministry of Higher Education and Development (ref A). 
 
¶4.  (C) Harbajan and her colleagues expressed great concern that 
Minister Mdladlana's view waffled by the day.  He told NEDLAC 
that he would not ban labor brokers, but then publicly pledged 
to do so.  He was even stronger in supporting a ban when 
speaking with COSATU.  BUSA predicted the Minister would table 
draft legislation by early December as a strategic move.  This 
would occur just before most of the country broke for its month 
long `Festive Season' holiday and would limit informed debate 
and discussion.  The Minister would then expect the policy to be 
negotiated and enacted just after everyone returned from break. 
BUSA hoped that the Minister did not table an outright ban on 
labor brokers as such a ban `would be in bad faith' based on his 
statements to NEDLAC.  That said, the Minister was under 
enormous pressure from COSATU and the Parliamentary Portfolio 
Committee on Labor to propose a ban.  If the Minister tabled a 
full ban, BUSA said it would be forced to withdraw from the 
NEDLAC process immediately.  (Note:  Harbajan also quietly said 
BUSA was gearing up to challenge a full ban in the South African 
Constitutional Court if needed.  End note.) 
 
 
Poorly drafted legislation no different than a ban 
--------------------------------------------- ----- 
 
¶5.  (C) BUSA and its members were `very concerned' that draft 
legislation from SADOL was equivalent to a ban.  The Minister 
was unwavering in his insistence that brokers be heavily 
regulated.  He told NEDLAC that clients and employers would 
assume full and joint liability for brokered workers under South 
African labor law.  (Note:  Joint liability means that a worker 
could take both the client and broker to court alleging they 
violated labor law.  The employee could also claim benefits from 
both.  End note.)  BUSA expressed the belief that this would 
have the same effect as a ban and would shut down an industry 
that employed 500,000 to 600,000 workers daily.  BUSA, FEDUSA, 
and the ILO had proposed that existing and strong labor laws be 
enforced and that the Ministry create a registry of labor 
brokers.  This would allow them to keep tabs on the industry. 
BUSA said that joint liability might be an option for 
`vulnerable' sectors such as agriculture. 
 
¶6.  (C) Complicating the labor brokering issue was the new role 
of the Parliamentary Portfolio Committee on Labor.  The long 
dormant committee had taken up the issue with a vengeance and 
was very much `in bed with COSATU.'  August hearings (ref B) had 
seen Committee Chair Lumka Yengeni shutting down educated debate 
in favor of emotional outbursts.  SADOL pandered to the 
committee and no party offered any studies on the proposed 
economic impacts of a ban or other regulations.  BUSA is very 
short-staffed and Harbajan lamented that the business community 
had not been able to muster the response it should.  She also 
fretted that BUSA would not have time to do so before 2010 
debates on the issue.  Harbajan said that while some bad brokers 
did exist, particularly in the agricultural sector, many 
legitimate economic sectors also relied on brokered labor, 
including the South African government.  The Gauteng government 
(Johannesburg and Pretoria) had responded to the debate on 
brokers by eliminating brokered nurses.  This had amplified an 
already critical sixty percent staff shortage in public 
hospitals. 
 
 
SADOL also tagging on other anti-business amendments 
--------------------------------------------- ------- 
 
¶7.  (C) Harbajan said BUSA was also worried that new SADOL 
Director General Jimmy Manyi was tagging onto the momentum 
surrounding brokers and pushing through concurrent amendments to 
the EQloyment Equity Act.  Both Manyi and the Minister had 
rallied COSATU and Parliament behind changes to employment 
equity legislation.  Companies found in non-compliance with 
South Africa's strict equity laws would face fines ranging from 
one to four percent of total profits.  Studies by both SADOL and 
BUSA had found that almost no company in South Africa was in 
compliance with all provisions of complex equity legislation. 
Harbajan agreed that business needed do to better.  However, she 
and BUSA see Manyi's amendments as yet another legislative 
hindrance to doing business in South Africa.  While SADOL had 
rarely enforced equity law in the past (with fixed fines), it 
was very clear that Manyi planned immediate and multiple 
prosecutions. 
 
 
Comment 
------- 
 
¶8.  (C) Contracted (brokered) workers are present in all sectors 
of the South African economy because the difficulty of firing 
workers in South Africa (along with other stringent labor laws) 
has created a large demand for labor brokers to supply workers 
to firms that don't want to take on permanent staff.  Many labor 
brokers are legitimate while others are suspect.  The trade 
union movement has not backed down from its insistence that 
labor brokers be banned or heavily regulated and that view is 
backed by strong but uninformed support from SADOL and 
Parliament.  Any proposed ban or regulation will have 
consequences for U.S. business.  While it is still too early to 
tell, the Department of Labor appears determined to push through 
regulations in February with as little debate as possible.  The 
Embassy, on behalf of the American Chamber of Commerce (AmCham), 
has asked that the Minister of Labor meet with AmCham to discuss 
the issue. 
 
 
BARD