Private prisons could undercut decent work goal
November 27, 2009
Even that generally more conservative public sector union, the Public Servants Association (PSA), is opposed to plans for four privately built and operated prisons.
"We don't necessarily oppose all privatisation, but we certainly feel that prisons should not be in private hands," says PSA deputy general manager Manie de Clerq.
The spokesman for the majority union in the prisons service, the Police and Prisons Civil Rights Union (Popcru), was taken aback when confronted with the news that tenders had been invited for four public-private partnership (PPP) prisons. It was the first he had heard of it.
Popcru led a vociferous campaign against the privately built and operated prisons in Makhado and Bloemfontein.
Federation of Unions of SA general secretary Dennis George was shocked to hear about the new prisons plan. "We have heard nothing about this and we oppose it. International studies show that outsourcing destroys decent work," he said.
He pointed to the fact that industries based in US prisons were now a major contributor to job losses in the US.
National Council of Unions general secretary Manene Samela said he was "completely against this" when told of the plan. He maintained that inviting tenders for PPP prisons was "against everything we are discussing at Nedlac about building a developmental state".
Confederation of SA Workers Unions general secretary Khulile Nkushubana dismissed the plan as "madness". According to him "the world is already reeling from the legacy of Thatcher and Reagan, we want no more of this".
The main fear voiced by the unions was that private prisons were the thin end of the wedge to introduce cut-price, convict-staffed industries such as those in the US. This is a growing and profitable sector of the US economy, producing everything from jeans and lingerie to golf balls and furniture for sale on the open and export market.
"But we're not like that here," said Stephen Korabie, a former head of Makhado's PPP prison and a consultant to companies operating prisons. "We have workshops where prisoners are given skills training, but there is nothing commercial about it."
Monetary policy
Interest rate policy works, but often at a great cost. In South Africa the cost of containing inflation by hiking interest rates is particularly high because the economy is seriously flawed, a subject explored by a group of Pretoria researchers.
They concluded that high interest rates work only indirectly - through job losses. If prices were more responsive to high interest rates, the damage to the fabric of the economy would be less.
Many of the factors keeping inflation high in the face of high interest rates are on the supply side. Among these is that producers may simply be so powerful, or collusive, that they are able to dictate prices.
One of the most effective solutions is to expose them to competition from abroad, which is precisely what happened in the late 1990s and the early 2000s, a period when inflation fell below double-digit levels and briefly close to zero in early 2004.
But two things are key to this process: low tariff barriers and a strong rand.
Ironically, the interest groups squealing hardest about the use of interest rates to contain inflation are precisely the same groups that would like to see high tariff barriers and a weak rand. They are arguing for policies that would entrench the power of big business and promote inflationary pressures.
Another problem is chronic shortages - of skills, technology and electricity - that increase operating costs, the Pretoria researchers say. If Cosatu's Zwelinzima Vavi wants to restructure the economy, these are the areas he should address.
Fifteen years after apartheid, South Africa's schools still turn out people without the skills needed to join a productive workforce. And unionised teachers are partly responsible for this policy failure.
Mvelaphanda
The most obvious question to ask about Mvelaphanda's decision to withdraw an ordinary resolution just before this week's annual general meeting (AGM) is why the resolution was included in the first place.
The resolution, apparently withdrawn after shareholder opposition, aimed to secure shareholder approval for giving the directors authority over the authorised but unissued shares until the next AGM.
The approval was "to enable them (the directors) to allot and issue such preference shares at their discretion" subject to the provisions of the Companies Act and the JSE's listings requirements.
A JSE announcement issued after the AGM said that the resolution had been withdrawn prior to the meeting, but gave no explanation.
It is amazing how many companies continue to put forward this sort of resolution. While these resolutions were generally guaranteed support in the "old days", in the more engaged corporate governance environment of the 21st century very few institutional investors will give approval.
No matter how successful management is, or how popular it is with its shareholders, very few shareholders will provide the sort of blank cheque that comes with such a resolution. "If management wants the type of funds that would require a share issue, then it must come to us for specific approval for whatever it is planning", is the common refrain these days.
So here we have Mvela, one year into a three-year winding down programme, and it's three-person executive team (with a skeleton staff) wanted authority to issue shares. What were they thinking?
One corporate governance expert remarked that a surprising number of companies take a rather formulaic approach to AGMs and submit standard resolutions without thinking too much at all. Of course, given the traditional level of AGM neglect by shareholders that may not be an unreasonable approach - most of the time.
Edited by Peter DeIonno. With contributions by Terry Bell, Ethel Hazelhurst and Ann Crotty.
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