The Youth Wage Subsidy: Mixing Farce with Force

By Leonard Gentle · 23 May 2012

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Picture: The Democratic Alliance/Flickr
Picture: The Democratic Alliance/Flickr

The spectacle of the blows between a Democratic Alliance-led crowd and COSATU (Congress of South African Trade Unions) would have been the stuff of farce if it weren’t so tragically unedifying. The DA has every right to march and be “provocative”. COSATU’s response betrays its own hard-won struggles in the past for the right to march, assemble and protest.

This was no kristalnacht or fascist street gang about to storm the workers’ movement. This was a DA rent-a-crowd happy to don any T-shirt. The simplest response would have been to take their memorandum and invite them to the next COSATU meeting. After all, there are so many COSATU resolutions about organising the unemployed and the unorganised.                      
The whole event was layered with irony upon irony. Two forces that have almost no relation to the unemployed or the informalised working class, came to blows over an issue that is being pursued by a third party that wasn’t even present at the brouhaha.

So why did this happen?

Like some French farce in which characters set up elaborate deceits while the audience is invited to laugh at the multiple contrivances going on, each character was carrying out some hidden agenda, which requires close attention lest we lose the plot.

The DA knows that the ruling party is constantly ahead of it rolling out SA-style neo-liberalism because the ANC has the liberation credentials to do so with legitimacy. In fact, the DA is so happy with the ANC’s main policy thrust – the GEAR policy – that it has declared the ANC’s, Trevor Manuel, South Africa’s best finance minister. It bestows similar accolades on his successor. 

On the “youth wage subsidy” it is in total agreement with current ANC finance minister, Pravin Gordhan’s, plan. So it cannot schedule a march to the Union Buildings, let alone to the ANC’s Luthuli House.

So it invents a fiction: The youth wage subsidy is stalled because COSATU is blocking it.

Well, this is the COSATU that campaigned against GEAR, privatization, high interest rates and the privatised Reserve Bank – all unsuccessfully. It is the COSATU that fought for the banning of labour brokers, but couldn’t get its tripartite ally, the ANC, to comply. In every case, the ruling party simply swatted COSATU away and went ahead with its plans anyway because it knows that COSATU will simply endorse the ANC at election times, as the leader of the “National Democratic Revolution” (NDR).

And yet the DA wants us to believe that on the youth wage subsidy, things are different…why?

Well one answer is “Mangaung”. President Jacob Zuma needs COSATU now. So, for once, COSATU’s wishes are carrying the day. But why then, in the year of Mangaung, does COSATU lose out on its call for banning labour brokers?
The DA knows COSATU is no block to ANC policy. The DA also knows that on economic policy, it has no difference with the ANC. At most it positions itself as a kind of moral sound-check nodding along with every rim-shot from the Treasury whilst attacking the occasional high-flown rhetoric from some ministers about a “developmental state” and “industrial strategy”.

But COSATU has been stealing the DA’s thunder on everything else that the official opposition positions itself on - as the watchdog on corruption, the moral turpitude of state officials, government inefficiency and so on.

So the DA has to invent a fiction: COSATU is the enemy.        
Meanwhile COSATU, while wearing the cloak of the working class, is happy to deflect attention away from its neo-liberal partner, the ANC government, by casting the DA as the villain.

Way beyond the DA’s station, COSATU affiliate leaders rushed to the defence of its headquarters hysterically proclaiming the DA as the “class enemy”, as the spokesperson of the capitalist class, as the voice of neo-liberalism. To be sure the DA aspires to this, but the position of neo-liberal spokesperson has already been taken. That post has been filled by the ANC and the largely white capitalist class is very happy with the incumbent, thank you very much.
The youth wage subsidy is not an invention of the DA. It is a project of the ANC government. So as to steal Helen Zille’s thunder, Western Cape ANC leader, Lynn Brown, even claims that it was the ANC in the Western Cape that first experimented with it.

But the ANC is COSATU’s ally, so the it has to invent a fiction: Fighting the youth wage subsidy means fighting the DA, not the ANC.

By responding in this way, COSATU has played directly into the hands of the DA, seeking to present the trade union federation as a labour elite against the unemployed, and as thugs opposing the right to march and to protest.

But what about the merits of the youth wage subsidy?               

We have all heard the government and DA argue that it is possible to create some 400 000 jobs in this way.      
Against this, COSATU’s arguments are well known: that it will create a two-tiered labour market; that companies will not use the subsidy to employ more people, but simply dismiss current workers and replace them with cheaper young workers and that the whole exercise is simply a further bail out for the rich that doesn’t address the root causes of unemployment.

The whole exercise smacks of a public snapshot of the debate at NEDLAC where, notoriously, and inevitably, some compromise will be found where the youth wage subsidy will go ahead to the joy of some employers accompanied by a little tightening of regulations, which will satisfy COSATU.

It will all most likely go the way of other initiatives to throw money at the bosses, like the Skills Development Funds and the 2009 National Jobs Initiative, which did nothing to dent unemployment, youth or otherwise.

All of this disguises the need to look at what is really causing the near-40% unemployment that is ruining the lives of the majority of South Africans.                    

The School of Economic and Business Sciences at Wits University has shown that there are two major structural reasons for South Africa’s high unemployment rate: 1) The restructuring of the state (historically the biggest employer), which led to the 1987 commercialisation of state enterprises followed by the rationalisation needed to incorporate the Bantustans after 1994 and the adoption of GEAR in 1996; and 2) the shift of South Africa’s major firms to financialisation and capital flight.

The biggest single job shedder in the last 30 years was the commercialisation of South Africa’s biggest single employer, the old SA Railways and Harbours. A most damning recent statistic by University of Western Cape’s School of Public Health also shows that a 40% vacancy level still exists in the public health sector, unfilled since 1996.

In short, the consequences of a “lean and mean” state and the investment strike by South Africa’s world-class firms means that we’re left with both a crisis in public services and a crippling unemployment rate.

This is exacerbated by high real interest rates, which encourage speculation and increased debt rather than expanded investment in job creation.                              
Instead of looking at these causes, the idea of the youth wage subsidy falls squarely into the current dominant mode of economic reasoning: the supply-side obsession of neo-liberalism.

Firms want to invest, want to make money - the argument goes - but the costs involved are too prohibitive. There are too many obstacles like pesky trade unions and regulations. If they take their ideology seriously, of course, the neo-liberals would need no help from the state. But in reality they do need the state’s assistance.

So they proclaim that the role of the state is to make the “costs of doing business” less. Less “red tape” (meaning less environmental, social and planning processes), less tax and lower input costs of electricity, water and of course labour costs.

In other words cheapen the “supply side” by taking “obstacles” away. In short, let’s sacrifice our social needs and then businesses will flourish. We will get employment and will all benefit. It’s the classic trickle-down argument.

A common refrain is to blame the unemployed themselves. They do not have skills or the right skills, they enjoy too many unemployment benefits and/or they’ve become discouraged.
In this kind of neo-liberal phase - let’s call it Neo-liberalism Phase One - the role of the state is to cut benefits, which discourage work-seekers, remove obstacles and then get the hell out of the way so that business can do what it does best. This can also be called the “race to the bottom”.

It has been tried now, globally, for almost 30 years and still unemployment worsens to the point that a 2010 International Labour Organisation (ILO) report argues that global unemployment has now reached levels of World War One.

So in the last few years what we are now being introduced to is a new phase: let’s call it Neo-liberalism Phase Two. Here the call is for a kind of state, which actively intervenes in the supply side to help make the cost of business less by “topping up the pot” as it were. A state, which spends money on infrastructure like railways, roads and new ports for freighting and increases broadband connections so that businesses can reap the benefit of sweeteners -- all at the public expense.

Only after public resources have been skewed in this way will we receive the benefits of burgeoning businesses. Notice that we’re back to “trickle down”.

In both cases, the starting point is that the role of the state is to make it possible for business to profit. In both cases, the reasoning is that what is good for business is simply good for everyone else. In both cases we must make sacrifices so that businesses can profit. That private greed is public good. In both cases the public is encouraged to be grateful for getting what “trickles downs”. But, in the former, the state must simply deregulate and the get the hell out of the way, while in the latter the state must actively molly-coddle business so that it can become winners.

Whilst the ANC and the DA are both wedded to neo-liberalism and are both competing for the attentions of big businesses (although the ANC has won that battle for now). The rhetorical difference is that the DA speaks to the latter perspective and the ANC to the former. I say, rhetorically because when it comes to the substance of South Africa’s kowtowing to financialisation and its globetrotting monopolies, there exists not an iota of difference between the ANC and the DA.

The youth wage subsidy is an example of this latter. The state will pay employers and give them tax credits if they employ young people. For the DA, as some in the business media have remarked, this marks a shift into the ANC’s territory (to Neo-liberalism Phase Two) and so it’s hard to maintain the profile of being the official opposition.

Hence, the idea of focussing on COSATU…who promptly took the bait.
And what about the so-called DA marchers themselves - poor, black and unemployed – and COSATU’s natural constituency in its 80’s and 90’s heyday?

If the DA are able to get a crowd of people ready to march on COSATU then the question arises, “Why has COSATU been so singularly unsuccessful and, even disinclined, to organise the unemployed and the informalised sections of the working class into a genuine people’s movement against neo-liberalism?” This, at a time when the “service delivery” struggles of largely unemployed township dwellers have made South Africa the protest capital of the world.

If we can answer this question, perhaps then we’ll be able to end this farce and do something serious about unemployment.

Gentle is the director of the International Labour Research and Information Group (ILRIG), an NGO that produces educational materials for activists in social movements and trade unions.

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Solly Mothabela
23 May

Biased Opinion

The writer seems to be fixated with making biased opinion. We cannot continue to entertain opinions, why do you say that the DA is in cahoots with the ANC and thus strive for Cosatu to be ostracised. I mean there is no material evidence of that statement. Focus on unemplyment and stop wasting time on an analysis which is not objective.

Respond to this comment

24 May


Both the ANC and the DA are happy with the GEAR macroeconomic policy that brought the high unemployment rate to more than 40%. It is clear that the DA sees the COSATU as a stabling block to the ANC progression with neoliberalism. It is high time that COSATU take a clear decisive position against neoliberalism and its political parties. COSATU must cut ties with the neoliberal ANC and play a role in transforming the neoliberal state into a socialist state that is not controlled by "white" monopoly capital.

As the working class, we cannot rely on a centre-right political party like the ANC. The time for the ANC to play on liberation credentials is over. People are aware and more need to be made aware that it is not the ANC that liberated them from apartheid, but themselves. It is clear that the ANC as a whole was in exile when the masses of South Africans fought apartheid through COSATU and the UDF. What the ANC did was to demobilise the UDF and encouraged COSATU to adopt the Freedom Charter and become its alliance partner.

Today it is clear that the ANC does not have anything to do with the Freedom Charter (FC) because the FC is anti-neoliberalism and had too many elements of the welfare state. The transnational corporations are totally against the FC and are very happy to see that the ANC is coming no closer to the FC which inspired most South Africans, particularly the working class.

It becomes difficult to understand why COSATU continues in the alliance with the ANC that is anti-working class emancipation - but supports bourgeoisie exploitation. The ANC government is prepared to make sure that the capitalists exploit the working class with ease and also supply the capitalists out of taxpayers money rebates. The ANC is the leading party that applies austerity measures in South Africa. Our taxpayers money is used to bail out the clumsy capitalists so that they can make more profits while the majority of South Africans are getting poorer.

The workers must stand against neoliberalism by not voting for the ANC and the DA, but voting for themselves on their feet, for whatever they want. As workers, we cannot rely on both the DA and the ANC. The working class must also engage in elections by forming their own political party that is anti-capitalist. We must know that COSATU will always have more members than the ANC and DA, unless they continue to vote for neoliberalism by campaigning for the ANC.

Idi Amen
23 May


This article is filled with unsubstantiated assumptions and biased opinion. For instance, I have yet to see a shred of evidence that the DA used a "rent-a-crowd happy to don any t-shirt", a vague accusation used by many but proven by none. Even Zwelinzima Vavi pointed out that the 3,000 marchers, mostly young blacks, showed growth in support for the DA. As for the ANC and the DA being two sides of the same coin, well, well, well...

Respond to this comment

23 May

Nice Economic Analysis but the Rent-a-Crowd Stuff Is Very Disappointing Stuff

This article makes a brilliant point - that the ANC are the real neoliberals and that COSATU are just using the DA to distract us from their complicity with the ANC. But the casual complicity of the agency of the black people who chose to support the DA march is contemptuous and comes out of the worst traditions of the left.

Respond to this comment

24 May


Apologies, I meant to say that:

This article makes a brilliant point - that the ANC are the real neoliberals and that COSATU are just using the DA to distract us from their complicity with the ANC. But the casual complicity with the ANC's denial of the agency of the black people who chose to support the DA march is contemptuous and comes out of the worst traditions of the left.