Japan Productivity Centre: presentation on Lessons for South Africa

LABOUR PORTFOLIO COMMITTEE
22 August 2006
JAPAN PRODUCTIVITY CENTRE: PRESENTATION ON LESSONS FOR SOUTH AFRICA

Chairperson:  Ms O Kasienyane (ANC)

Documents handed out:
PowerPoint Presentation by Prof Akira Goshi of the Japan Productivity Centre (JPC)

SUMMARY

Prof Akira Goshi of the Japan Productivity Centre highlighted the objectives and outcomes of its work and its involvement with the SA National Productivity Institute. He discussed how South Africa could draw on his centre’s work and programmes to achieve higher levels of productivity.  South Africa could adapt the strategies used by countries such as Malaysia, Singapore and Japan to become economically competitive and more productive.

Members raised various questions and concerns. These included the different understanding of employer-employee relations, the exploitative character of business practices in South Africa and the different challenges faced by South Africa and Japan.

The Committee had expected the National Productivity Institute to brief Members on its work and objectives.  The Institute would be invited to address the Committee on domestic challenges to higher levels of productivity at a later stage.

A Committee study tour to Japan would be considered to observe the practice of the three guiding principles of productivity and management in Japanese companies.

MINUTES

Presentation by the Japan Productivity Centre (JPC)

Prof Akira Goshi from the Japan Productivity Centre briefed the Committee on this institution’s role in advancing productivity in Japan. The presentation aimed to show how South Africa could employ similar strategies to improve levels of productivity.

The JPC was guided by three fundamentals of productivity: job security and job creation; cooperation between labour and management; and the sharing of gains between employers and employees. This body was formed at a time when the Japanese economy was least productive and a need existed to introduce and spread new productivity principles to companies and labour. The organisation consisted of academics, labour and management and had evolved into an independent institution. 

South Africa could adapt the following important Japanese business strategies to address critical domestic economic realities and to better harness its natural resources:  bottom-up decision making, joint-consultation, and the idea that everyone is a stakeholder.

The South African government should act as a catalyst for business, government and labour.  It should establish a pro-active programme geared towards the creation of a competitive economy.

The JPC considered the South African National Productivity Institute (NPI) as the sole body to spread and to promote new principles and programmes of productivity.  Its success depended on the support of government for capacity building, the support of more enlightened union leaders, as well as the need for a massive publicity campaign.  The JPC would assist in the capacity building of members of the NPI and the development of productivity specialists and programmes.

Discussion

The Chairperson said that the Committee had expected the National Productivity Institute (NPI) to brief Members on its activities and structure. However, Prof Goshi’s presentation helped to clarify and highlight issues around productivity.  She voiced agreement with the presenter’s opinion that if people were free to work in a creative manner, levels of productivity would improve.

Prince N Zulu (IFP) raised concerns about the applicability of the Japanese experience to South Africa.  He said that the presentation suggested that a high level of national cooperation was needed for the advancement of productivity.  The introduction of the concept of “life-long employment” in a South Africa that still struggled with attaining social cohesion, could unleash antagonism between different groups.  Did Japan suffer any problems related to ethnicity? What was the demographic character of the country?

Prof Goshi responded that Japan was made up of one major ethnic group and one minor group. The latter was fully integrated into the Japanese culture. He explained that linguistic differences between regions had been overcome through the introduction of one national language into the education system.  This had ensured that everyone was able to communicate and understand one another without the sacrifice of local dialects. Special processes were followed to ensure that the different views of the population were listened to and understood. Japan was therefore guided by the belief that the more nurtured and happy its population felt, the more productive they would be. He concluded that the human resources department was considered to be the most critical part of a company as it was responsible for the employment, promotion and development of people.  Care was taken to develop the only natural resource Japan possessed – its people.

Mr Mashudu (ANC) commented that studies of the political and economic situation of South Africa often underestimated the significance of existing contradictions (especially income disparities) within the economy. These studies often contributed to the notion that South Africans were lazy.

Mr Goshi answered that South Africa had adopted the Western business model which endorses significant income disparities between workers and the top management of a company.  In Japan, the top management of a company was not regarded as a separate entity.  This was a result of the company specific character of unions and the automatic union membership of all employees. This ensured that the executive members of a company would have been union members themselves and this had ensured a more harmonious relationship between management and the labour force. He stressed that if an employee felt valued and respected in the work environment, the more sustained productivity would be.

Mr S Mashudulu (ANC) said that gender imbalances within the workplace contributed to distortion of South African markets. He said that despite the stipulations of the Employment Equity Act, companies were still refusing to submit organisational audit reports. How did Japan fare in ensuring gender representivity?

Prof Goshi answered that the biggest obstacle in achieving gender equity was the mindset of consumers and customers.  In the banking sector of Japan, clients often refused the financial advice of female consultants. Therefore, there was a need to educate people more about gender issues.
 
Mr Mashudulu commented that South Africa faced challenges of unemployment and underemployment. How can South Africa draw on the experiences of Japan? Given the lack of career advancement and employment flexibility, the “bottom-up” approach to decision making would be difficult to implement. In addition to this, the relationship between employers and workers are differently understood in South Africa.

Prof Goshi answered that the JPC would identify model South African companies willing to follow the Japanese model. These companies would become case studies, and the expertise of the Japanese would be harnessed to the effective running of the company.  In turn, these companies would be required to learn, develop and share their experiences with the whole industry. He stressed that a driving force was needed to ensure that productivity within the economy is raised.  The centre would focus on the manufacturing sector. The agricultural sector was viewed as a potential focus point as it could curb large-scale migration as well as promoting self-sufficiency.

Mr L Maduma (ANC) asked who controlled production at the time Japan instituted these fundamental changes.  This was important background information when considering the lessons South Africa could learn from the Japanese experience.

Prof Goshi replied that companies were Japanese owned, but that the process of ownership assumed a protective character.  During US occupation the holding companies of pre-war Japan were dismantled.  Then, to avoid foreign ownership, the member companies followed a policy of cross-ownership.  This ensured that as a group, the majority of shares in each company were Japanese owned

Mr Maduma wanted to know the rate of unemployment in Japan.  What happened to those individuals not eligible for life long employment?  Did Japan incorporate the concept of cooperatives as a means to counter unemployment?

Prof Goshi said that the current unemployment rate of 4% was not a cause for concern.  The seasonal unemployment of rice farmers ensured a constant unemployment rate of 2%, regardless of how well the economy performs.  The concept of lifetime employment had evolved. Currently, only 20% of bigger companies adhered to this principle while the rest had adopted a more flexible system. Although the majority of university graduates prefer the security of bigger companies, there were plenty of opportunities for those people who did not wish to work for a company for an extended period of time.

The Chairperson commented that the idea of joint consultation is important for worker-employer relations.

Prof Goshi stressed that this concept should be adapted to the realities and needs of South Africa.  “Joint consultation” would only succeed if both management and employers worked hard, and were dedicated to ensure that long-term employment security was achieved rather than mere short-term increases in salaries

Mr A Mpontshane (IFP) requested clarity on the annual spring offensive. Were these demonstrations not examples of labour discontent?

Mr B Mkongi (ANC) asked what, in light of this, were the three guiding principles effective in Japan?

Prof Goshi replied that at the beginning of each fiscal year, union members rally together to voice their demands.  These could not be considered as strikes as rallies were held over the weekends and workers did not see a need for a general stoppage of work.
 
Mr Mkongi asked whether the concept of “employment for life” allowed for career advancement or career change.

Prof Goshi responded that ‘life-time employment’ meant that the company assumed responsibility for the training and career development of employees.  There were opportunities for advancement – no glass ceiling existed in Japan.  Employees were regularly assessed and training was provided when an employee was considered ready for promotion. Companies could also provide capital to those employees seeking to establish their own businesses.

Mr Nqito, Director of Foresight, added that sustained productivity was needed to ensure that companies honour this commitment.  He said that the issue of productivity was not discussed enough in South Africa, especially during wage negotiations or labour disputes. This was a cause of concern.

Mr Mkongi asked what strategic lessons the National Productivity Institute could learn from the example of the JPC.
 
Prof Goshi responded that the JPC considered the NPI as the sole driver of the productivity movement in this country. The capacity of the institution had to be developed to ensure that, with the assistance of the Japan, this body could eventually evolve into an independent driver of productivity.

Mr Mkongi asked what the strategic capacity of JPC is in relation to the NPI. How could the institute deal with the challenges of human resource mobilisation?
 
Dr Y Dladla, Executive Director of NPI, said that the institute had held discussions with the JPC and Asian Productivity Organisation (APO) to establish the ways in which its capacity could be developed and information could be shared.  The training of NPI staff would start soon and would continue for the next three years after which NPI staff would be qualified training specialists.

The Institute would hold a conference next week to develop a master plan.  The JPC and APO would also be in attendance.  The Japanese government expressed a willingness to provide the necessary funding for the training of South African workers, politicians, businesses and the labour federation.  She admitted that without the necessary training and guidance, the institution would have a very limited impact.

Mr I Sathekge, NPI Executive Manager, added that there was a need for “greater participation in stakeholder relations”. The planned conference next week would consider the strategies of the productivity movement in South Africa which would be drawn from the experiences of successful countries such as Malaysia, Singapore and Japan.  The Institute would provide the Committee with the outcome of these deliberations.  He reiterated that the goal of higher productivity should not be considered as the responsibility of the institute. All South Africans would have to work towards this goal.

Mr Mashudulu said that the introduction of new technology compromised the jobs of South African workers.  Companies did not have procedures in place for workers to be retrained and absorbed into other sectors of the economy.  Moreover, the South African economy was currently more service oriented. How did Japan assist workers during the evolution of its economy?
 
Prof Goshi responded that the idea of “joint consultation” meant that jobs would not be sacrificed with the introduction of and changes in technology.  Workers should be trained to work in different departments of a business. In Japan, the established joint consultation committees of each company recommended and evaluated new business procedures and processes, and thus would never approve of methods that threaten job security.

Mr M Mzondeki (ANC) said that for the productivity movement to succeed, the mindsets of people had to change.  What would be the best method of changing the way employers and employees view themselves and each other?

Prof Goshi emphasised the importance of utilising the education system in the drive towards higher productivity and improved relations between all economic actors. This new thinking would emerge with time.

The Chairperson wanted clarity on the relationship between the NPI and public institutions and forums such as the National Economic Development and Labour Council (NEDLAC).

Dr Dladla responded that the Institute had a three-year old working relationship with NEDLAC.  It was agreed that all social partners within NEDLAC had to participate in the drafting of a Productivity Accord.  NEDLAC had requested the NPI to produce a technical report on productivity.  However, disagreements between business and labour regarding the issues raised in the accord hampered the adoption and development of concrete plans of action. A government-led task team intended to explore issues of productivity had not yet materialised.  The NPI was however encouraged by its permanent seat in NEDLAC as it was now better positioned to influence public policy.

Mr Mzondeki asked whether South Africa’s reluctance to export its natural resources posed an obstacle to Japan.

Prof Goshi considered the mere export of raw materials as unnecessary.  South Africa would have to utilise its own resources to produce products of its own to develop its manufacturing sector and to become economically competitive. Japan was willing to provide the capital and technical expertise to reinvent and expand the manufacturing industry. Japan was also a potential market for these products.

Prince Zulu said that the manner in which natural resources were utilised or not utilised depend on who decided on what to produce.

Prof Goshi said that the issue of ownership was critical.  The foreign ownership of South African companies should be controlled. Profits should remain and be reinvested into the country while the relationship between workers and employers should be improved to ensure that both parties benefit.  The case studies of Singapore demonstrated how foreign ownership could be more regulated and mutually beneficial. This country established a decade-long moratorium on foreign investment.  It stipulated that any foreign investment had to be an equal venture with a local company.  In 1996, as the moratorium was lifted, Singapore businesses had learnt to be independent.

Mr Mzondeki requested more information about the Deputy President’s visit to Japan earlier this year.

Dr Dladla replied that the discussions between the Deputy President and Asian Productivity Organisation as well as the Japan Productivity Centre had focused on youth development and youth service. The NPI was currently in discussion with the National Youth Commission to identify the needs of South African youth and to develop programmes of action.  This was needed in order to start capacity development of both bodies.

The Chairperson commented that this was a significant development especially in the light of the recently held public hearings on youth development.
 
Mr Mpontshane thanked the delegation for their presentation and said that the Committee would want the national Productivity Institute to discuss domestic productivity challenges in the near future.

The Chairperson reiterated that a planned study tour of Japan would be important to compare the South African challenges to that of Japan’s.

The meeting was adjourned.