Temporary worker backlash is bad news for financial services

South Africa's Labour minister does not mince his words. Membathisi Mdladlana has compared private employment agencies to "human traffickers, companies which sell labour to the highest bidder at the lowest possible wage." He has declared in Parliament his intention to amend the Labour Relations Act to outlaw private labour broking, a practice which, he alleges, leaves workers vulnerable to unfair treatment or dismissal and unable to seek recourse.

The government's threat of a backlash against the R23bn sector is causing deep concern. "Due to the requirement of more flexible workforces, the industry plays a key part in the modern economy," says Jan Coetzee, managing director of Manpower SA. "A recent ban placed on labour broking in Namibia resulted in 30% of the contract workers losing their jobs. The impact for South Africa could be a million jobs lost."

The sector also has a crucial role to play as the main entry point to the labour market for young people: since 2000 it has introduced 3.5m first time job seekers to the market, one third of whom secure a permanent job within a year and 47% within three years.

The mining and construction industries require the bulk of temporary workers and are the most likely targets of the minister's wrath, but financial services are a big user of contract employees as well to adapt to changing business needs. SA banks employ contract workers mainly in IT, back office processing and call-centres. The need to comply with Basel II rules has also led to a temporary recourse to accountants.

Opponents of the Labour minister's crusade say that South Africa's powerful Congress of Trade Unions (Cosatu) is behind the move. "What this is really about is that temporary workers do not join trade unions, which means Cosatu does not have as many members and is not collecting as many dues," says Blumenthal.

"This is certainly being driven by Cosatu," agrees Coetzee. "There is a misconception among the unions that the temporary employment services industry exploits workers, which is certainly not the case. However, tighter regulation of the industry would certainly be a good thing as it would eliminate unethical and fly-by-night labour brokers."

The hope is now that Mladlana will agree to a reasonable compromise that would introduce regulation rather than ban the industry.