Lack of ‘fallback fund’ hurts workers, economy

WITH ongoing and impending mass retrenchments, the lack of an unemployment insurance fund or safety net for workers threatens their livelihoods and the Namibian economy in general.

The Social Security Commission Act does not provide for retrenchment benefits for workers who lose their jobs as a result of economic crises, industry-related issues, or downscaling; and the absence of any other safety net makes all workers, particularly the poor, vulnerable.
Herbert Jauch, Senior Researcher at the Labour Resource and Research Institute (LaRRI), says for workers, and especially the poor, the lack of an unemployment fund ‘means that they have nothing to fall back onto and thus are facing a crisis of survival once they are retrenched’.
On severance pay in the case of retrenchment, the Labour Act prescribes a minimum of one week’s pay for each year of service for employees who have completed 12 months of continuous service.
This means a worker who has worked for an employer for one year can expect a (minimum) retrenchment package of one week’s salary; or for four years, a month’s worth of income as his/her severance pay – a pittance in the context of personal and family security.

SA EXAMPLE

In South Africa, the Unemployment Insurance Fund (UIF) is an act of parliament that provides protection to certain workers who become unemployed by retrenchment, dismissal or end of contract. It prescribes claiming unemployment benefits for unemployment, maternity benefits, illness benefits, adoption benefits and dependents’ benefits.
Workers that have contributed to the fund for more than four years can claim up to 238 days, while those who have contributed over a shorter period can claim for one in every six days that they contributed to the fund. The Fund pays up to 58 per cent of the wage/salary that a worker earned while contributing to the fund.
‘The current (Namibian) system of retrenchment packages as set out in the Labour Act is insufficient to provide any security for retrenched workers. It merely keeps them afloat for a few weeks and then forces them to face the hardships of unemployment without any support,’ says Jauch. He emphasises that setting up an unemployment insurance fund in Namibia would give workers more time to find another job after being retrenched, and thereby give them some protection for the period immediately after their dismissal.
In the case of South Africa, where 10 000 retrenchments were announced two weeks ago, the period for which retrenched employees are paid extends up to nine months, usually with a payout of 45 per cent of the worker’s average salary – a far cry from the one-off retrenchment packages received by Namibian workers.

JOB LOSSES

For Namibia, unconfirmed projections for job losses in the mining sector are no less than 2 000.
‘Given the structural weakness of the Namibian economy with constantly high levels of mass unemployment, this means that retrenched workers are faced with a battle for survival that affects them and their extended families,’ Jauch says.
The national unemployment rate currently stands at close to 40 per cent, and the mass retrenchments, particularly in the mining industry as a result of the ongoing global financial crisis, only add to this problem.
Moreover, if a worker doesn’t secure employment within six months of being retrenched, he or she can expect to lose all Social Security benefits – membership lapses after six months.
Evilastus Kaaronda, Secretary General of the National Union of Namibian Workers (NUNW), says the NUNW’s position is that there is a need for something broader than just a fund.
‘An unemployment insurance fund needs to be interwoven into the current social safety net, that is the Social Security Commission; and the idea is to have a fund that caters not only for the employed that have been retrenched, but also for the hitherto unemployed, and we plan to take this idea into discussion with the Ministry of Labour and the Social Security Commission.’
Kaaronda believes such a fund could complement a development fund by ‘giving a decent allowance to retrenched or unemployed workers until they are absorbed back into the system’, and that such a fund ‘can and should be financed by Government, the private sector, and those already absorbed in the labour market and social security framework’.
The unions have been engaged in negotiations with various mining companies for retrenchment packages higher than the amount prescribed by the Labour Act, and ensuring the inclusion of additional benefits above the severance pay.
Bro Joseph Hengari, General Secretary of the Mineworkers Union of Namibia (MUN), says that in negotiations, the union looks at modalities to minimise the impact on workers, at recall provisions to consider the reappointment of workers should companies reopen, and at placement systems whereby permanent employees are favoured against retrenchment above contractors, temporary workers and consultants.
‘When negotiating a package, you are also putting a life in jeopardy. Once the services of an employee are terminated, it is not just the employee that is affected, but a whole household even up to 10 people.’

UNION ROLE?

Neither the MUN, nor any union in the country, has an unemployment fund to benefit retrenched workers. Hengari, however, says that in addition to the representation services provided for its members, the MUN also considers a funeral benefit arrangement.
‘Once our business arm – Nam-Mic – becomes strong, we will look at providing sufficient benefits for our members (beyond the funeral benefit),’ he says.
But Jauch thinks the unions could do much more. ‘I believe that unions should become proactive in opposing retrenchments and insisting on alternative ways of saving money at company levels so that jobs can be secured,’ says Jauch.
‘This is certainly a challenge in any capitalist market economy where decisions about retrenchment are taken by the business owner. Nevertheless, unions should look at strategies on how they can minimise retrenchments in the years to come.’
Kaaronda says there is a dire need for national dialogue to address the retrenchment problem.
‘We need a comprehensive approach where labour unions, government, employers and the Namibia Chamber of Commerce and Industry (NCCI) can sit down as a nation and address this issue in its entirety, and not on a piecemeal basis.’
The role of the unions, he says, should be to mobilise their members and lobby Government institutions. ‘The unemployment problem is a matter that hasn’t enjoyed enough priority amongst the powers that be,’ he says.
In addition to a heightened union role, Jauch argues that large companies such as those in the mining industry have a role to play, by setting up funds to deal with times of crisis that are bound to occur occasionally.
‘Being linked to the global economy and global commodity prices always creates a level of uncertainty and thus companies should have contingency measures in place that will protect employees form being dismissed in times of crises. Sadly, neither the fishing nor the mining companies seem to be well prepared in this regard and thus are quick to resort to retrenchments. This means that in good times, the companies may make record profits that accrue with the owners, while in bad times workers are the first to lose their livelihoods as a result of retrenchments. This is certainly unfair and should not be allowed to continue.’
And retrenched workers aren’t the only ones to feel the pinch of economic hardship when the going gets tough for employers. Jauch argues that retrenchments always have far-reaching effects because in addition to threatening the livelihoods of workers and their extended families, they also reduce local demand for goods, negatively affecting other sectors of the economy.
‘Wages tend to circulate in the local economy and thus form the basis of survival for many businesses offering consumer goods. Thus, retrenchments are always a disaster for the economy,’ says Jauch.