What happened to the workers?

The implications of informalisation of ‘work’

Speaker: Prof Eddie Webster (Head of the Sociology of Work Unit, University of the Witwatersrand)

Respondent: Prof Johan Maree (Professor of Sociology of Work, University of Cape Town)

Harold Wolpe Memorial Trust forum meeting

Institute for Democracy in South Africa, Cape Town, 31 July 2003






Happiness is a street vendor who sells curry and rice in Durban’s Warwick Ave Triangle. She works from 7am to 5.30pm every day of the week, including public holidays. She makes R10–R50 per day and has many identities: black, Zulu-speaking, born and brought up in rural KwaZulu-Natal, a woman, a widow, a member of the Shembe church, middle-aged, a mother of six children, and the head of a household of seven dependants. However, one of the most important features of her life is her lack of formal employment and the conditions she works in, both on the street and at home.

Work and employment structure our lives. My point of departure is that work is about those activities that are essential for survival. But is Happiness really a worker? Most would describe her as self-employed or as an entrepreneur. But she is engaged in a survivalist strategy, occasionally employing others. She is dependent on her work as a street vendor, which she has been doing for three years, having started working as a domestic worker at the age of 13. She has no access to productive resources or assets, and she only has her labour to sell. She does not earn a wage, and she has no employer. She is a widow brought up in rural KwaZulu-Natal where patriarchal values are dominant. She is embedded in the Shembe church, from which she gets emotional support and physical resources, including loans.

A gap has opened up in the way we think about work. We think about work as a career. The word ‘career’ means a carriage on a road, but the reality of most people’s working lives is that they do are not in a carriage on a road of lifelong employment. A ‘citizenship gap’ has opened between what people expected from the new South Africa and its reality.

I have three propositions:

1.   Market liberalisation has changed the structure of the labour market. A section of the population is ‘connecting’ with the global economy, and another is ‘disconnecting’.

2.   This is a global phenomenon, it is not just something which in South Africa has come as a result of the shift away from apartheid.

3.   These changes have undermined organised labour as we know it.

The structure of the labour market

There is a distinction between the full-time labour market in which maybe 50% of the adult population falls; casual and part-time workers (about 20%) – people engaged in irregular contracts of employment with no benefits; the self-employed (about 10%); and the unemployed (about 20%). (These figures are drawn from the October Household Survey and the Labour Force Survey.) If we extend our gaze to the Southern African Development Community, we find 20% of the population in full-time employment, 20% in casual employment, 20% working in the informal sector or self-employed, and 40% unemployed.

Employment is traditionally something in which you have a contract and get some benefits. The full-time sector is connecting to the global economy. The people in this sector are working harder, and there is intensification of work. Absenteeism has given way to ‘presenteeism’ – people go into the office even if they are ill. There is an emphasis on teamwork, and an emphasis on participation in the workplace.

For the first time in our history, manufacturing is our highest export earner. BMW is an example of this – it is the second most popular car imported from South Africa into the US. It calls its workers ‘associates’. Even in the gold mines there is an attempt to introduce teamwork on the rockface, as part of a concern to benchmark against an international norm. Companies like Shoprite and Steers dominate retail trade in southern Africa. In the eyes of Zambians, to work for a South African company is to become part of the global consumer culture. Sections of the workforce are connecting with the international labour market – taking the ‘high road’. These human resource innovations bypass the unions, because the unions are unable to deal with this level of sophistication.

We see new forms of work like call centres. Lufthansa has its call centre in Cape Town because South Africa is in the same time zone as Germany and they can find educated German-speaking people here to do the work. This is part of globalisation. This global connection is not creating jobs. At best it may be retaining certain jobs. However, downscaling is often the price of competitiveness, so many jobs may in fact be shed. The theory that growing economies are able to absorb unskilled labour is proving unfounded. Even the skilled part of the workforce frequently works in the absence of a contract, doing irregular work with no benefits.

Pietermaritzburg used to be the centre of shoe manufacturing in South Africa. (It was known as ‘shoe city’.) But since the mid-1990s, much of the work in this industry has been outsourced to part-time casual workers working in sweat shops, usually vulnerable and insecure black women workers. Much of the production of the self-employed – people working for own account, is not recorded. The output of Happiness selling curry and rice in Warwick Ave, a car guard standing on the street, and people working from home is generally not accounted for in available statistics.

With regard to ‘the unemployed’ – there is no such thing as an unemployed person in South Africa because there is no welfare system. Everybody has to have a livelihood strategy. In places like Durban survivalist strategies like being willing to receive payment in kind rather than in money are on the increase.

The point is that the structure of the labour market has changed fundamentally. An increasing proportion of the population is no longer part of the formal employment structure.

A global phenomenon

Informalisation’ is not only a feature of South Africa, it is a global phenomenon. The informal sector is very large all over the world – in Latin America and the Caribbean 80% of the workers are informal, in Africa, the figure is 40%, while in Asia informal work accounts for 15% of employment. The dominant view is that the growing informalisation of work in South Africa is a result of labour market inflexibility. Employers are bypassing labour legislation by setting up labour brokers to employ their workforce, or by defining employees as ‘independent contractors’. This makes it easy to fire them, and easy to hire them. More employers are willing to hire people if it is easy to fire them. John Kane Berman of the South African Institute of Race Relations argues against minimum wages because he says it is pricing labour out of the market. Much of the press also says legislation and labour market policy is pricing labour out of the market. This is the dominant view.

This phenomenon is not peculiarly South African, it is part of a global shift to a new work order. by Jack Welsh, former CEO of General Electric in the US is known as ‘Neutron Jack’ because he was able to wipe out the workforce like a neutron bomb in order to make the company profitable. He is a cult figure. His view that companies should retain only their core businesses and outsource ‘non-core’ functions (all those that are not essential to the enterprise) is very influential. This is what is driving these changes that we are seeing.

We have had a triple transition in South Africa. There has been a racial transition away from a white-dominated economy, we have had a political transition, and we have had an economic transition. All of these have had a marked impact on the workplace. The economic transition has emphasised efficiency, the political transition has emphasised rights, and the racial transition has emphasised equity. This triple transition is driving a new work order in South Africa. There is an emphasis on downsizing and outsourcing non-core activities, with consequent loss of employment.

The response of workers

How are workers responding to this change in the structure of the labour market? In 1987 there was a massive strike on the mines and 40 000 men were dismissed. The National Union of Mineworkers started the Mineworkers’ Development Agency (MDA) to create jobs for these retrenched miners, trying to set them up as rural enterprises, small and medium size enterprises in Transkei, Lesotho and other areas from which migrant labourers are drawn. Most of these businesses have failed. Setting up a dress-making concern in a small village in the Transkei fails because there is no access to a market. Trying to create an international niche market for such products as beadwork is an option, but it is enormously complex and people tend to overproduce. The MDA as an attempt at rural enterprise development has imploded. The MDA tried to establish co-operatives and it failed. Co-operatives rely on the sense of being part of a collective, in this case a collective employed at a single workplace or in a single industry. This element was missing from the mix.

I visited branches of Self-Employed Women’s Union (Sewu) in Indwedwe and Emzinyathi. There women are working for themselves making dresses, picking and selling herbs, picking up waste and selling it. Sewu tried to organise street vendors into a trade union by gathering them together to bargain collectively. But if you are self-employed, who do you bargain with? You need such things as space, the right to trade and access to water and electricity. You can negotiate with the city council, or negotiate with wholesalers for better prices. Sewu’s attempt to organise the self-employed has failed. It is dependent on donors, it has been unable to build up a significant membership base, and its members are uncertain about spending time in meetings and about the benefits the union offers them. The only future for Sewu is to link up with formal sector unions, for example, for self-employed textile workers to link up with textile labour unions. On the street, future is bleak. On the positive side, I was amazed to find that even men from patriarchal households in KwaZulu-Natal were delighted about the involvement of their wives in Sewu. They said they liked the way the project empowered the women, and the fact that they were able to earn more money. Sewu has also taken on reproductive health issues such as HIV/Aids and sexual harassment – this is a powerful motive for women wanting to become organised.

I began by introducing Happiness. She is both a street vendor and a worker and neither. She has limited education and her access to productive resources is weak. She is not a worker in the traditional sense and she has no career. She is not likely to become a successful businesswoman either. Herman De Soto’s idea that the informal economy is an alternative path for development is difficult to accept. We have a growing informalisation of the labour market that is characterised by poverty and inequality, becoming disconnected from the global economy. Alongside this we have a section of the workforce which is able to connect to the global economy. This is a permanent shift. It is a new mode of development.

As Manuel Castells argues, we have moved from the industrial to the information age. We cannot escape the challenge of becoming more competitive. But how can we do this in a way that retains jobs? If we accept that we need to become part of the so-called information economy, we need to think of new ways in which people can find income security and access to health, education and a safe environment – ‘social citizenship’. (A distinction has been drawn in the literature between political, legal and social citizenship.) This is the challenge that we face at this point.

There is a need to reconceptualise how we see work. Instead of seeing commodity production as primary, we need to turn our understanding of production and reproduction on its head. We need to concentrate on civil work – caring work, historically unpaid work, work that was historically done by women. If we look at civil work as unpaid work, but work nevertheless, and we think about the crisis that Aids has visited on so many households, the idea of a Basic Income Grant seems to miss a key point. What we should be thinking of is how to link the need to alleviate poverty with paying for civil work. Work is not just a source of income – it provides structure and meaning to people’s lives. People should be given an income for engaging in civil work.

In our pension fund industry we have close to R1 trillion under management. Our Pension Act provides for the boards of pension funds to be comprised of 50% union representatives and 50% employer representatives. Yet labour has not walked through that door. It has not thought of putting a proportion of pension funds aside for investing in labour-friendly strategies to begin to address the disappearance of jobs in the formal sector. It should begin to do so.



Why is there an increasing trend towards informalisation and casualisation of labour, and how can we respond to it? Eddie concentrated on how the unions are dealing with it. He was working in Durban at the time of the 1973 strike, when trade unions arose to respond to the challenge. He has also spoken about how Sewu has tried to respond. The Warwick Ave Triangle has been a developmental feat on the part of the Durban Metropolitan Council. It has provided facilities for informal traders on the site and put in walkways so that commuters alighting from taxis and buses or going to the ranks walk directly past the traders.

I want to give a picture of change in employment over time, drawing on the October Household Survey and the Mesebetsi study. The October Household Survey for the period 1996–99 shows that total employment has gone up, but formal sector employment has stagnated or declined. It is possible to unpack the findings of the survey more carefully by going to the raw data, but what I will say is based on taking the findings at face value.

Over the period 1995–99, there has been a casualisation of labour in agriculture, and a growth in employment in manufacturing, wholesale and retail trade, and the hospitality industry. The informal sector has grown at a faster rate than the informal sector. In financial services, the phenomenon runs the other way around – there, the formal sector has grown enormously. There has been a decline in community services, including state services, as a result of commercialisation, rationalisation and privatisation. There is a growth of informal provision of services in that sector. In every economic sector, informal employment is growing. Some sectors are growing, some are declining, but the net result is apparent stagnation. There has hardly been any net growth in employment.

Women are entering the labour market in greater numbers than men – the labour participation rate of women is approaching that of men. There is a broad democratisation sweep in the world against patriarchy, but patriarchy is a very strong force in parts of South Africa. South Africa does not have a strong women’s movement that takes up patriarchy as an issue.

My explanation of the global trend is as follows. The collapse of socialism has led to unbridled capitalism, because there is no threat of an alternative system to hold capitalism in check. There has been a move from mass production to flexible specialisation – a distinction between core staff on the one hand and flexible non-core staff who can be easily hired and fired on the other. This phenomenon has been fuelled by the revolution in information and communication technology, something which allows for global instantaneous communication, making it possible to produce and plan far more flexibly than was previously the case.

Information and communication technology also fuels globalisation, compressing time and space, allowing for faster transport of goods, instantaneous communication and instant transfer of capital. Capital searches out the most profitable areas, decides what returns are acceptable, and cuts costs to the bone. Keynsian economics have collapsed and neo-liberalism has taken its place. Some say that job losses in South Africa have been fuelled by some of our labour regulation, but this is a controversial point of view.

Sewu was started in Cape Town by Pat Horn, a former trade unionist, before she moved to Durban. There are a few ways of dealing with people like Happiness. The first is organisation through institutions like Sewu, but how is it possible to organise the people in the informal sector? Organisation helps them negotiate with any other group they relate to, but they have no bosses and their contractual relationships with suppliers and authorities are weak. They can negotiate with municipalities and suppliers about prices. Sewu allows access to loans of up to R18 000, but membership is restricted to people who do not regularly employ more than three people. As soon as a Sewu member employs more than three people, she must leave. I don’t agree with this because enabling people to move out of being members of the working poor depends on them being able to grow a small business beyond the level of three employees. I am saying there is too much emphasis in Sewu on its working class roots and not enough on its potentially developmental role in creating employment.

In the white fish processing industry in the Western Cape, 90% of the production comes from two companies, and 40% of their production is exported. One factory has a core of people it can employ all the time, and it calls the rest of its staff ‘flexi-workers’ – 20% of the staff who are employed only when there is work for them to do. The other company has employed a labour broker to supply 50% of its labour force. This labour broker employs four personnel people in the factory to manage these staff. These sub-contracted workers do not get the productivity bonus that the others do. They are entirely flexible. The union in that factory has been told that it is not allowed to organised the employees of the labour broker, and it has not done so, in spite of the employment law and the Constitution. Employers are reluctant to employ people if it is hard to dismiss them and expensive to do so. Employers have now learnt that the old ‘hire and fire’ dispensation is something of the past, that good manners are necessary in employment relations. They are switching to commercial contracts to get rid of the employment obligations that have come with newer labour legislation.

We need to find ways of creating employment. There are four ways of doing this. The first is through developing suitable macroeconomic policy can assist rapid economic growth. However, we are not reaching the 6%–7% we need to create employment quickly enough. Our pool of unemployed people is growing faster than our rate of economic growth. The second is public works programmes which create employment at the same time as building infrastructure. The third is assisting individuals to take the initiative to create jobs for themselves, and if successful, to create jobs for other people. The fourth is the good work that Sewu is doing. It has a good organisational base, but it could add a developmental angle to its work.

People employed in the informal sector are the most vulnerable. Our labour law is geared towards the formal sector, but it does not reach the informal sector. The law needs to reach the informal sector without inhibiting its potential to create employment.



Migrant labour

       Eddie did not mention the migrant labour system at all. What is the position with this sector today?

Eddie Webster: There has been a re-emergence of casual work – migrant labour was a casual work system of one-year contracts. The shift towards casualisation of work has created the kind of insecurity felt under apartheid. Our research underground in mines shows the workers come from Mozambique and Lesotho, and that migrant labour is still a feature of core activity in the mines.

Johan Maree: The Western Cape was declared a coloured labour presference under apartheid. Now that Africans can come to this province, there is a massive in-migration taking place. About 85% of the Africans in the Western Cape were not born here, they come from the Eastern Cape where there has been a collapse of public services. The Western Cape’s population is growing at about 45 000 people per year, a 1% annual increase, mostly comprised of people who originate from the Eastern Cape.

Labour market policy vs. employment protection

       Employment stability is very influenced by the trade-off between labour market policy and employment protection. Employment protection legislation is uppermost in the government’s mind – for example, it insists on employers stating the reasons for retrenching and restructuring. With regard to independent contractors, the burden has shifted onto the employee to prove he or she is an independent contractor.

Eddie Webster: Our government has managed to strike quite a good balance between employment legislation and labour market policy.

Is our labour legislation pro-capitalist?

       To what extent has the pro-capitalist grouping in ANC been able to sway the organisation away from the Reconstruction and Development Programme and how this impacted on labour market policy emerging from Parliament? The Labour Relations Act is quite divisive, it protects the employer more than the employee. How can we protect workers, given that the ANC does not speak of the working class anymore?

The restructuring of capital has driven changes in the labour market

       The changes in the labour market have largely been driven by the restructuring of capital – it has been driven by market forces. We are well over any illusions that the operation of market forces will not reproduce inclusion and exclusion in the society. The state must intervene.

State intervention

       There must be state intervention in the market. We need an immediate boost to employment through public works programmes, through training and upgrading and skills development, and through the encouragement of co-operatives. The International Labour Organisation has tried to raise the quality of jobs in the formal sector. We need to look at interventions which have been successful elsewhere in the world.

What is a worker?

       Is Happiness a worker or not? In a traditional Marxist analysis, a worker is not necessarily the poorest of the poor, workers are concentrated at the point of production, they have some level of organisation, and they are a countervailing power to capitalism. Workers affect the balance of forces.

Prioritise people in the Budget

       The Department of Housing spends R3.5 billion on housing every year, creating 88 000 jobs. Yet the arms deal has seen an overemphasis on scrap industries to the detriment of housing, health and education. We need to turn away from the industrial era towards the information era by putting the emphasis on people.

Eddie Webster: I am all for spending money on bread rather than armaments. I focus on the pension fund industry because there is so much capital there that could be used.

Greater employment among women

       We need to take account of class when the statistics appear to show a greater proportion of women are working. Working class women have always worked. More middle class women are working now because aspiring to a middle class lifestyle requires two salary earners in the household. When labour legislation in the UK compelled employers to pay benefits to women, they shortened working hours to avoid having to do so.

The Swedish model

Johan Maree: The Reconstruction and Development Programme had the support of all three partners in the ANC Alliance. The Growth, Employment and Redistribution strategy (Gear) was presented to the Congress of South African Trade Unions (Cosatu) and the South African Communist Party as non-negotiable. They did not buy into Gear. In 1995, the presidential commission on the labour market argued for a social contract in South Africa, based on the Swedish model. Between 1929 and the 1960s, Sweden had a social contract in which labour, government and business agreed to a set of compromises that provided full employment, a steady balance of trade payments and steady prices. A social contract must be backed by appropriate macroeconomic policy, but there is not enough buy-in by all the parties to ensure a social contract. We are controlling inflation, but this has a slightly deflationary effect, causing low economic growth. During the Growth and Development Summit, the government refused to open up macroeconomic policy for discussion, business would not commit itself to how much it would invest, and labour would not commit itself to wage restraint. So the basis for a social contract is not in place.

Eddie Webster: For me the problem with the Swedish model is that it rested on some kind of full employment situation – full time paid employment. They finance the welfare through their taxes. But half of our labour force is not paying taxes – they have irregular, untaxed employment, so they fall outside the tax net. In the past the notion of unemployment was that it was a temporary condition, but it is no longer seen as that.