Multinational corporations and workforce empowerment : an examination of the labour dimensions of a water privatisation venture in contemporary South Africa : a thesis presented in partial fulfilment of the requirements for the degree of Master of Philosophy in Development Studies, Massey University

Abstract

"FDI has become the largest and most stable source of external finance for developing countries." (World Investment Report 2000: 58) As private funds increasingly replace foreign aid as the main mode of defining North-South economic relations in the early 21st century, the debate over the impact of multinational corporations (MNCs) on host developing countries has become ever more alive. On the one hand, proponents view MNCs as conducive for development as they bring with them much needed capital, technology and skills without which developing country economies are deemed to be stagnant. Opponents, on the other hand, regard MNCs as exploitative of developing country resources and cultures, thereby being detrimental to the development of host developing countries. This thesis attempts to examine this debate more closely. It examines foreign direct investment (FDI) in the form of water privatisation involving public-private partnerships (PPPs). It takes a close look at the operations of one water MNC, Waterco, acting as main shareholder and operator of the concession company South African Water Company (SAWCO) in the north-eastern part of South Africa. As customary of MNC operations worldwide, particularly concessions, Waterco operated in joint-partnership with a local black empowerment group, Localco, to form SAWCO. As the main driving force behind SAWCO, its operations are assessed through SAWCO's performance. The objective of the study is to assess the impact of SAWCO on its workforce, in the light of the argument that MNCs arguably empower the workforce of the host country by creating employment, offering better conditions of service and transferring skills. In particular, the study seeks to examine the extent to which SAWCO had led to greater or lesser empowerment of its workforce by the end of its first year of operation. Lessons are then drawn from this examination in order to inform SAWCO's management, government bodies, stakeholders involved in the SAWCO concession, and global/local debates on considering similar concession agreements. The study discovers that in the case of SAWCO, policies fostering workforce empowerment were in place. However, these policies suffered from lack of long-term foresight. The policies indeed mitigated against the possibility of a short-term erosion in employment quantity (job security) and quality (competitive conditions of service, workplace democracy and skills upgrading) but lacked long-term prescriptions on these measures. In practice, no short-term employment losses had occurred, though this result could not be guaranteed for the future, especially given the lack of long-term policy prescriptions. Employment quantity appeared to be mainly hindered by poor communication channels between the workforce and SAWCO's management and inadequate monitoring tools, which had bred numerous problems. These problems included worker discontent and confusion related to workers not knowing their work-related rights and entitlements, as well as company operations. The effectiveness of the training programmes offered by SAWCO were also questionable due to poor worker consultation. At the time of the study, no provisions were being made in terms of skills acquiring, to prepare for public operation of the services at the end of the concession period. From analysing the type of input labour made in the establishment of SAWCO (labour participation), It became clear that labour never fully supported the privatisation process involving SAWCO. This was due to the fact that labour consultation had not occurred at some of the critical initial stages of the privatisation process. This outcome raises questions relating to the amount of national leverage, and subsequently 'protection', that the South African government is able to grant to its citizens (represented in this case by labour) against MNC interests. Extrapolating from the SAWCO case study, it is concluded that in the context of South Africa where unemployment is high, labour union movements strong, the economy's labour absorptive capacity and labour's level of skills are low, involving MNCs in PPP arrangements has the potential to be beneficial for the empowerment of the local workforce. In order to make this possible however, the government bodies employing an MNC in such arrangements need to have leverage over the MNC by being politically cohesive, set stringent policies (with time-lines) governing the MNC's labour performance, create an environment fostering healthy industrial relations, and tighten monitoring tools to ensure compliance of the MNC with the laws and policies binding it.