The deputy President, colleagues and distinguished guests, this summit comes at a time when the public spotlight is focused on the Nedlac process of dialogue between government, labour, business, and community, and on whether this process can deliver on the expectations which accompanied Nedlac's launch. Social dialogue is a relatively new phenomenon in our country. Through Nedlac we areattempting to develop a cooperation between the key social and economic actors in South Africa on a broad agenda of transformation. In reporting on the progress made since the launch it is necessary, in the spirit of openness and honesty, to accept that in some areas we have produced successful outcomes while in others progress has been slow.

My task today is to report on the work of Nedlac over the last 15 months. My address is based on the document in your information packs entitled "Report on Nedlac activities". I should point out that this report will form the bulk of the Nedlac annual report, which is to be released in early July, once our audited financial statements have been approved by the Nedlac Executive Council.

In assessing the "Report on Nedlac activities" placed before this Summit, it should be noted that a wide range of fundamental policy initiatives are taking place in South Africa in all arenas. We are experiencing a transformation more profound than has occurred in most countries this century. Within this context, Nedlac is required to deal with an ever- increasing number of matters. Consequently, each party is forced to spread its personnel and resources more thinly. This is a major challenge. We need a multi faceted strategy to strengthen the capacity of the parties as well as focus the process.

Since Nedlac was launched a number of agreements have been reached and a fairly substantial amount of work is in progress in the chambers. Some of this is for purposes of agreement-making, while in other areas chamber discussions influence decision- making processes, for example, the 1996-97 Budget and plans regarding support measures for industry.

Agreements reached

The most significant agreement reached so far has been on the labour relations bill, which was completed after ten weeks of negotiations. We were only able to move at such speed because the negotiations were based on a comprehensive document tabled by government just after Nedlac's establishment. This document incorporated years of work, originating from the Cosatu-Nactu-Saccola accord.

The Labour Relations Act (LRA) provides for a more structured and effective system of industrial relations and considerably strengthened dispute-resolution mechanisms. It establishes several new institutions that will play a profound role in South African labour relations in future years. These include a new Labour Court and the Commission for Conciliation, Mediation and Arbitration (CCMA). The Act also provides for the establishment of statutory councils and bargaining councils at industry level, as well as workplace forums. The LRA will be operational by 1 August 1996.

In addition to the LRA, several other agreements have been reached.

Nedlac has agreed that government should ratify six conventions of the International Labour Organisation dealing with freedom of association, the right to organise and collective bargaining, forced labour, and discrimination. In addition, agreement was reached on convention 175 on part-time work, while noting Business's concerns regardingits practical implications.

A draft bill on mine health and safety was considered and agreed in Nedlac. The bill was drafted by the Mining Regulations Advisory Council (MRAC), a tripartite bodyrepresenting stakeholders in the mining industry. The bill was passed by Parliament in May1996.

We have agreed on the formation of the National Investment Promotion Agency (Nipa).This agency will provide information and assistance to potential investors and coordinate investment-promotion activities. Nipa has been registered as a section 21 company and aboard, comprising representatives from business, labour and government, was established bythe Minister of Trade and Industry in April.

Agreement was reached on the establishment of a competitiveness fund to assist small, micro and medium-sized enterprises (SMMEs) to improve their competitive capabilities. This followed a study initiated by our predecessor, the National Economic Forum (NEF). The fund will administer matching grant schemes for SMMEs to develop strategies to improve their competitiveness by enhancing their technical and marketing capabilities.

In completing consideration of an item passed on to Nedlac from the NEF on the Sasolsynthetic-fuel investigation, agreement was reached on the phasing down of synthetic- fuel protection, while allowing sufficient time for the restructuring of the synthetic-fuel industry. Recommendations were also made for determining the level, mechanism and durationof protection.

Finally, agreement was reached on the establishment of an advisory committee toinvestigate and advise on the provision of future support to organs of civil society, inparticular the feasibility of establishing a national development agency.

Particularly since the conclusion of the LRA negotiations in July last year, the workof the four Nedlac chambers has begun to gather momentum. The production of policy papersby government has contributed greatly to an increase in the number of issues underconsideration in the chambers. Substantial work has already been done on many of theseissues.

I will now turn to the work of each chamber, beginning with the Trade and IndustryChamber.

Trade and Industry Chamber

The scope of the chamber's work includes matters pertaining to the economic and socialdimensions of trade, industrial, mining, agricultural and services policies.

In addition to its contribution to the list of agreements outlined earlier, thechamber's work programme currently consists of:

• A technical sectoral liaison committee to support government negotiators in preparing South Africa's mandate for trade negotiations with the European Union. This committee serves as an information channel through which negotiators can consult with the business and labour constituencies at sectoral level.
• Negotiations on a social clause have explored the link between labour standards and trade agreements. Much progress has been made toward finalising a multifaceted strategy to promote worker rights in the international context.
• Discussions are underway on the development of supply-side measures to support industrial development and for enhancing the international competitiveness of the industrial sector.
• A task group is considering proposals for a social plan to address the negative social consequences of industrial restructuring.
• The chamber is currently concluding an agreement on the draft national small business enabling bill, which defines SMMEs and provides, inter alia, for the establishment of key institutions to promote SMMEs.
• The Japanese Grant Fund, which operates under the auspices of the chamber, deals with various policy studies focusing on industrial development. The fund was established with resources provided by the Japanese Government. Studies underway include:
  • The financing of training.
  • Regional industrial development.
  • Cluster studies on electronics, pottery, footwear, jewellery, wool and mohair, petrochemicals and plastics. Other cluster studies are also being conducted by the Department of Trade and Industry and the Industrial Development Corporation.

The Trade and Industry Chamber's agenda for the year ahead remains a full one. Inaddition to the issues outlined above, the following issues have also been placed on theagenda:

• Public-sector procurement policy.
• Competition policy.
• The development of the southern African region.
• A national strategy for tourism development.
• A strategy for restructuring the liquid-fuels industry.

Public Finance and Monetary Policy Chamber

The brief of the Public Finance and Monetary Policy Chamber includes matters pertainingto the framework within which financial, fiscal, monetary and exchange-rate policies areformulated; the coordination of fiscal and monetary policy; and related elements ofmacroeconomic policy.

In the past year, the chamber focused on the 1996-97 Budget. The discussions werecharacterised as an exchange of information and views in order to reach a commonunderstanding of the different views. The parties did not seek a formal agreement on theBudget.

Through the chamber, labour and business were invited to participate in the functioncommittees and in the Budget committee. Business and labour delegates eventuallyparticipated in the function committees for education, health, intergovernmentaltransfers, scientific research, welfare, roads, defence, agriculture and housing.

The Budget paralleling exercise, which allowed labour and business toparticipate in and influence the Budget process, was conducted throughout the year andallowed for several presentations, briefings, and consultations.

A task group was also formed in July to investigate issues relating to exchangecontrols. The work of the task group is continuing.

The year ahead

In the year ahead, a similar Budget paralleling exercise to that of last yearwill take place. The chamber has already begun an interaction with the Katz Commission inthis regard. There will also be a process of discussion on broad areas of macroeconomicpolicy, to maximise a common understanding of the various issues, leading towards thedevelopment of consensus on medium-term policy.

Four broad areas have been identified:

• A macroeconomic policy framework.
• The Budget reform process.
• Debt management.
• Tax reform.

The Public Finance and Monetary Policy Chamber has a role as a point of dialogue andinteraction which is less often tied to formal agreements than the other chambers. It hasplanned to play a role in developing an informed policy dialogue through holding educativesessions, conducting briefings, and developing a close interactive relationship withbodies such as the Financial and Fiscal Commission and the Katz Commission.

Development Chamber

The Development Chamber's scope includes all matters pertaining to development policy,implementation strategies, financing of development programmes, and campaigns to mobilisethe nation behind the RDP.

The important step of constituting the community constituency resulted in the chamberbeginning its work later than the other Nedlac chambers. However, particularly during thefirst months of 1996, a discernible momentum to its work programme has been observed.

In response to the urban and rural strategies tabled by government, the chamber isattempting to develop framework agreements in the following focus areas:

• Job creation.
• Local economic development.
• Human resource development.
• Access to land and housing.
• Services, tariffs and affordability.
• Strategies for the inclusion of marginalised sectors and rural local government.

A special information session has already been held on job creation, to assist thedevelopment of a framework agreement in this area.

Another area, crucial for development and currently being addressed by the chamber isthat of local economic development, with an emphasis on measures to facilitate theestablishment of representative local structures.

The formulation of national guidelines on tariffs is also under discussion, with eachparty having already tabled submissions.

The Development Chamber is in the process of arranging a national workshop, which wouldinclude all key stakeholders, to identify mechanisms through which the Masakhane campaigncan be taken forward.

Other issues on the chamber work programme include the identification of possible areasof constituency support for addressing crime and violence, areas for intervention andsupport in respect of housing policy and rental stock, and consideration of a green paperon an integrated national disability strategy.

Labour Market Chamber

The Labour Market Chamber deals with all matters pertaining to the world of work andthe associated institutions of delivery.

The Labour Market Chamber has had a busy year and has concluded several agreements. Inaddition to those already mentioned earlier, it has recently finalised an amendment to theInsolvency Act, aimed at improving the position of workers' claims for wages in the eventthat their employer goes insolvent.

During this year, the chamber's focus has been on the implementation of the LRA anddecisions have been reached with respect to the following bodies:

• CCMA: The chamber ratified nominations from business, labour and government for representation on the CCMA. These nominees have been appointed by the Minister of Labour and include Mr Ray Zondo as the chairperson of the CCMA.
• Labour Court: Nedlac was involved in the appointment of the Judge President and deputy Judge President of the Labour Court, and also made nominations for representatives to the Rules Board of the labour courts. Nedlac also agreed that Johannesburg should be the primary seat of the court, with additional seats in Cape Town, Durban and Port Elizabeth.
• Nominees to serve on the essential services committee: Nedlac has recommended the appointment of certain nominees to the essential services committee. The nominations are under consideration by the leaderships of the constituencies.

Work on the implementation of the LRA is ongoing, including in the areas of thedrafting of codes of good practice on picketing, codes for dismissals and thedetermination of criteria for the demarcation of sectors and areas, as well as thedemarcation of sectors and areas for statutory councils.

The Labour Market Chamber this year commissioned research into trends in collectivebargaining. The report which was subsequently produced represents the first attempt everundertaken in South Africa to describe what is taking place in collective bargainingacross all sectors of the economy. The report raises a range of issues for considerationby unions and employers at company level, sectoral level, and at the level of the LabourMarket Chamber. These issues will be taken forward by the chamber.

The chamber has nominated representatives to several statutory institutions, includingthe Wage Board, the National Training Board and the Unemployment Insurance Fund board.

Much of the chamber's attention is currently focused on negotiations around thedevelopment of an employment standards statute. Negotiations are currently continuing in apositive and urgent mode.

The chamber's work programme will continue to be full and issues that will be tabled inthe course of the year include:

• A draft bill on employment equity.
• A white paper on human resource development.
• The restructuring of the UIF.
• The report of the Labour Market Commission.
• Occupational health and safety.
• Social benefits.
• Public holidays.

Other issues and activities

From time to time, issues arise which, due to their sensitivity or because they cutacross the work of more than one chamber, need to be addressed through a special process.The Management Committee and Executive Council have taken direct responsibility forcertain of these areas.

stituting the community constituency

Following the launch of Nedlac, a process was initiated to identify those organisationswhich met the criteria for inclusion in Nedlac as part of the organised community anddevelopment constituency, which is now referred to as the community.

The criteria were that the successful organisation would need to:

• Represent a significant community interest on a national basis.
• Have a direct interest in development and reconstruction.
• Be constituted democratically, and have a constitution which provides for democratic decision-making procedures.
• Be able to seek mandates from their own members, and obtain compliance from their members with regard to the resolutions and policies of Nedlac.

Following a selection process, the following sectors and organisations were acceptedand at this stage make up the community constituency:

• Civics: South African National Civics Organisation.
• Youth: National Youth Development Forum.
• Women: Women's National Coalition.
• Rural people: National Rural Development Forum.
• The disabled: South African Federal Council on Disability.

The National Youth Development Forum has since disbanded, and the youth are in theprocess of forming a new body to represent their interests.

Restructuring of state assets

Restructuring of state assets came onto the Nedlac agenda in early 1995. This processcommenced with a briefing to Nedlac by the Minister of Public Enterprises on government'sproposals. It was agreed that a task force would be established to consider a policydocument developed by government. Labour's concerns about restructuring, which was alreadytaking place at enterprise level, led to a series of bilaterals between government andlabour, initially facilitated by the Nedlac secretariat. This process culminated in abilateral national framework agreement (NFA) being signed in February 1996. The NFA hasbeen tabled at the Management Committee and is to be considered shortly. In addition,Nafcoc and BSA have also tabled submissions on this matter for consideration by theManagement Committee.

Strategic framework for social partnership and agreement-making inNedlac

A key focus of Nedlac debate during its first year has been on the need to develop aframework for social partnership and agreement-making. At one level, this debate has beenabout coordinating the work of Nedlac's chambers. As early as March 1995, the partiesexpressed the need for a strategic framework to coordinate and align the work of thechambers, recognising that areas under discussion in one chamber often had a bearing onthe work of other chambers.

There was also a need to avoid a piecemeal, or ad hoc, approach to policy-making, and arecognition, after the LRA negotiations, that on many critical issues a superficialconsensus existed. The debate has also been about acknowledging the need for an agreedeconomic-policy vision and an implementable strategy for growth and jobs where theresponsibilities or requirements of the Nedlac constituencies are spelt out and negotiatedin Nedlac and at industry or sectoral level. In the course of these debates thepossibility and feasibility of the social partners reaching a broad social accord or aseries of accords has been discussed.

To take these debates forward, the Executive Council in July 1995 tasked thesecretariat to develop a document which would address the strategic thrust and agenda forthe Nedlac work programme. This document, entitled "Framework for social partnershipand agreement-making in Nedlac", was developed in a consultative manner and drew ondiscussion taking place in each of the Nedlac constituencies.

The November 1995 Executive Council meeting agreed that the secretariat document shouldbe followed by the development of a joint document which should take account of the issuesraised in the secretariat document. It also agreed on a process for taking discussionsforward. As input to the joint document, Nedlac constituencies began work on constituencyproposals. To date the following documents have been developed:

• Labour: "Social equity and job creation-the key to a stable future, proposals by the South African labour movement".
• Business South Africa: "Background document for 'social accord' process".
• Nafcoc: "Growth and development with equity strategy".

The Executive Council reviewed the process underway at its April 1996 meeting, andagreed to realign the process and adjust timeframes. It was agreed that the next stepshould be the preparation of a consolidated document which would take account of theproposals in the constituency documents, and also other inputs from the constituencies.The document should identify areas of potential agreement and disagreement, and shouldserve as the basis for a series of senior planning meetings.

Research reports

Besides the ongoing work conducted by constituencies and the secretariat to informdiscussions taking place within Nedlac's chambers, certain specific research reports werecommissioned in the course of the last year. These include:

• A report on the international experience of social-economic accords.
• A report on collective-bargaining trends.
• Research on policy options for a social plan in South Africa.
• Research conducted under the auspices of the Japanese Grant Fund, including a study on the financing of training and the promotion of foreign direct investment.

Workshops and seminars

Throughout the year Nedlac has held numerous workshops and seminars for Nedlacdelegates. These have been useful in informing the discussions within Nedlac's chambers aswell as for learning from international experiences.

Communications and publications

As a means of keeping constituencies and other important stakeholders informed aboutdevelopments within Nedlac, three initiatives have been taken during the past year:

• The Nedlac News Update.
• The Nedlac bulletin.
• The Nedlac site on the World Wide Web.

Social and economic challenges

Along with the report on Nedlac activities, a report on social and economic conditionshas also been prepared, as required by the Nedlac Act. The report brings togetherimportant information on South Africa's economic development and on progress towardsachieving the goals of reconstruction and development.

The first part of the report looks at the key themes of growth, employment and equity,which are of critical concern to all the Nedlac constituencies. The second part providesan overview of key macroeconomic developments in the economy over the last decade; and thethird part examines current conditions pertaining to Nedlac's four main areas of work(public finance and monetary policy, trade and industry, labour market, and development).

The report shows that South Africa suffers from one of the highest levels of inequalityin the world, that our current growth rates are insufficient to address unemployment, andthat millions of our people still live in dire poverty.

Although there have been important improvements in the economy in recent years,including modest economic growth, lower rates of inflation, and higher investment, theseimprovements are insufficient to address the needs of the majority. Indeed, theimprovements which we have seen have translated into only modest benefits for the majorityof South Africans.

Nedlac's founding declaration seeks a path to social and economic transformation whichpromotes growth, equity and participation. We need a mix of policies that not onlyencourage much higher levels of growth, but respond to the critical problems of risingunemployment and poverty.

The report points out that in the early 1990s South Africa suffered serious economicsetbacks. The economy contracted by an average of over 1% in 1990, 1991 and 1992. Theequivalent of 6,5% of total employment was lost in this period. From 1993 GDP growth ratesturned positive and strengthened in 1994 and 1995. This was largely due to strongperformances in industry, construction and services, as well as strong inflows of capitalfrom abroad. The performance of the primary sector, comprising mining and agriculture,fluctuated widely, although both have improved in recent months. Higher capacityutilisation in manufacturing was one of the factors contributing to higher growth.Increased private investment also played a key role. Public investment has, however,declined significantly since 1989. Overall fixed investment has dropped as a percentage ofGDP, and now stands at 16,9% as compared with 24% in the mid-1980s. These trends raise thequestion of whether the current growth rates are mainly cyclical in nature, and whetherhigher growth rates can be achieved without significant structural changes.

Relatively little progress has been made over the past few years in terms of achievinggreater equity. Millions of our people face debilitating poverty despite the fact thatSouth Africa is a middle-income developing country with a GNP per capita similar to thatof Malaysia. This is testimony to the extremely high level of inequality in our societywhich, when measured by the Gini coefficient, is second only to Brazil. Inequality can bemost strongly seen in racial and gender terms. According to the 1994 CSS October HouseholdSurvey, more than half of all African families survived on R726 per month or less, and 44%of all female-headed households survive on R410 or less per month. There is also a strongregional aspect to inequality. Sixty-nine per cent of all those classified as poor by theWorld Bank study conducted for the RDP live in rural areas, and the burden of poverty ishighest in the former homelands. Thirty-five per cent of the poor live in shacks orself-made dwellings.

The World Bank report also shows that 32% of the poor rely on a regular wage as theirprimary source of income and another 18% rely on remittances from an employed relative.This shows the importance of employed workers in supporting the unemployed, and also showsthat unemployment is not the only contributor to inequality. Although unemployment iscritical, inequality is also a consequence of differentials in earnings among theemployed, and of unequal access to infrastructure and services.

Poverty is also reflected in the state of our children. According to a recent study,28% of African children are stunted as a result of nutritional deficiencies. Only 9% ofSouth African children attend formal pre-school programmes. We also have some 250 000street children as a result of poverty, displacement, political conflict and violence.

Figures on the delivery of social infrastructure and services show that there have beendelays and obstacles to the achievement of the goals of the RDP. We need policies andinstitutional arrangements that deliver social infrastructure, including housing, water,education, health and electricity, in the short to medium-term. These services also needto be delivered in a manner that supports job creation, local manufacturing andconstruction.

Despite improved economic growth in recent years, there has been little growth inemployment, and the rate of unemployment has continued to rise. In this growth cycle,employment has grown later and more slowly than GDP. According to the Central StatisticalService, formal-sector employment now stands at 56%, with 33% of the economically activepopulation unemployed and 11% employed in the informal sector. The biggest job losses havebeen in the mining sector where 150 000 jobs have been lost since 1987. There have alsobeen significant job losses in state enterprises.

Clearly there is still much to be done to shift the economy onto a high-growth pathwhich delivers tangible benefits to our people. This includes the need to create jobs,reduce the gap in earnings amongst those employed and deliver basic services.

How do we achieve this? The report points to a number of underlying challengesincluding investment, productivity and capital flows. However, these cannot be separatedfrom an overall economic strategy which links growth with reconstruction.

Challenges for the year ahead

A number of areas in the Nedlac process require attention in the near future.

Building the capacity of the constituencies to participate fully in Nedlac is a keychallenge. The limited resources of the Nedlac capacity fund can make only a smallcontribution to assist labour, small business and the community constituency in thiseffort. Ways will have to be found to increase the resources available to the parties forcapacity-building. At the same time, even the limited funds available have not beenadequately utilised over the past year. This requires an increased commitment from theparties to capacity-building.

We need to streamline and expedite the Nedlac process. This may require more of a focusso that negotiations can be completed on a manageable set of issues before the partiesbecome absorbed in the next set. Currently, there is increasing demand for the involvementof senior leadership of each constituency in concluding negotiations on each issue. We mayneed to evaluate Nedlac structures, especially the key decision- making structures ofNedlac such as the Executive Council and Summit so we make the best use of the precioustime of the leadership who attend meetings of these structures.

Negotiations on the labour relations act showed that all parties have deep-rootedrespect for their internal mandating requirements. As a result it is most unlikely thatNedlac could ever become simply a "club" of the leadership engaging in talksabove the heads of their members. However, the quality and style of communication betweenthe parties has often been overly robust. This has been exacerbated over the past fewweeks. Effective communication is key to achieving success in Nedlac. More attention needsto be given by all constituencies to enhancing a problem-solving process of dialogue inNedlac.

We need to continue to develop the relationship between Nedlac processes andParliament. During this year, we have begun to establish more of an interaction with keyparliamentary standing committees. However, there is still much more to be done toestablish greater complementarity between the two processes.

There is also a need for all parties to be realistic about timeframes to avoidartificial crises of confidence. One of the reasons that agreements take time is that theparties need time for internal mandating processes. This process must be respected and iscritical to a serious and sustainable agreement-making process.

Building the Nedlac process requires a clear commitment to a common set of goals.Developing such a consensus will take a while. Although there are differences of opinionon many important issues, equally there are also common aspirations and interests on someimportant issues. We need to work towards a common vision focusing, in particular, on theissues where parties currently have a common interest, such as productivity, workplacechange, training, trade policy, industry support and a number of other issues. While theproposals tabled by business and labour are by no means identical, there could be much tobe gained from focusing on those areas in which we are capable of agreement, rather thanexpending all our energy on those matters on which we are furthest apart.

Finally, our challenge remains to make full use of the special "window" forfundamental social transformation which has opened as a result of the transition todemocracy. This "window of change" will only stay open for a while, and notforever. Let us work to make the coming year a period of successful agreement-making andimplementation.

I would like to thank all the delegates to Nedlac structures and members of thesecretariat who have given so much of their time and energy to the process. A special wordof thanks goes to the members of the reconstruction and development programme office whogave their full and enthusiastic support to the Nedlac process in general, and to the workof the Development Chamber in particular.

Let's build the process.