Employers in the steel sector have signed an above-inflation multi-term wage deal with the largest union, potentially setting a precedent for future labour agreements and raising operational costs for the embattled sector.
The National Union of Metalworkers of SA (Numsa), which speaks for the majority of workers in the Metals and Engineering Industries Bargaining Council, framed the three-year deal as “progressive”. It will secure wage increases of 7%, 6% and 6% a year over each of the three years, beating the prevailing consumer inflation rate of 5.3%.
The deal is a significant victory for workers, who would also benefit from extra money specifically for housing in the engineering sector.
“This deal is progressive because consumer price inflation is at 5.3% and, despite the poor economic outlook, the union continues to secure increases that are truly beneficial to workers and their families,” said Numsa general secretary Irvin Jim.
Still, the agreement ripples out beyond the immediate bank balances. It raises operational costs for steel companies, potentially affecting the sector’s global competitiveness and employment rates. The steel and engineering sector is a vital component of the economy, contributing about 3% to GDP and counting household names such as ArcelorMittal SA.
“Three decades into our democracy it is heartening to witness that it is indeed possible for negotiating partners, in the heat of robust and adversarial collective bargaining, to put the interests of the metals and engineering sector — and, indeed, the interests of our country — first,” said Lucio Trentini, the CEO of the Steel and Engineering Industries Federation of Southern Africa.
Inflation
For Reserve Bank governor Lesetja Kganyago, who describes inflation as a stealthy thief that steals from the poor, the wage hike poses inflationary risks. Numsa’s victory could inspire workers in other sectors to hold out for inflation-beating increments, causing a spiral in which higher wages lead to higher prices.
The Bank and some economists expect inflation to average about 5% for the year, down from 6% in 2023.
Trentini said the 2024 agreement was reached in record time, with no industry disruption and within the mandate. The deal was endorsed on Monday by 57% of the workers in the sector, including 115,000 Numsa members.
There was a commitment by parties to “meaningfully address access to housing for industry workers”, Trentini said, adding that the parties have agreed to request the Metals and Engineering Industries Benefit Fund’s board of trustees, who oversee investments under management of more than R149bn, to develop an institutional framework.
Trentini said this framework would address aspects including eligibility, legal criteria, funding models, subsidy mechanisms and programmes. Substantive policy approaches will be formulated within three months of the signing the agreement.
The wage deal, effective from July 1 to June 30 2027, is based on the minimum rates of pay and not on actual rates of pay, a stance that forced Solidarity to reject the revised offer. Solidarity general secretary Gideon du Plessis could not immediately be reached for comment.
The steel sector, which provides the automotive, mining, construction, aero and defence, and rail industries with steel, has been a victim of declining prices due to an increase in cheap imports.
Lufuno Munzhelele, a principal analyst at the SA Iron and Steel Institute, said that the importation of cheap steel products was “still very high”.
“About 30% of primary steel is being imported and that affects volume and the ability of mills to run at a sustainable basis.”
She said primary steel mills had shed jobs. “We have noted a significant drop in terms of jobs. In 2019 the sector employed 40,838. In 2023 the total employment in the sector was 17,814. It’s a bloodbath,” said Munzhelele.
ArcelorMittal SA has said that from 2019 to 2022 its use of road transport to get raw materials to its plants more than tripled, while production fell 20%.
In the 2022/23 financial year, the company said Transnet’s inefficiencies cost it R600m in lost sales and R500m in lower efficiencies and higher operating costs.
Munzhelele said the overall value chain had not been performing at sustainable levels. “There is a slow demand locally, which is linked to the performance of the economy. The slow rollout of infrastructure projects by the state has affected demand. It’s a challenging environment,” she said. “The sector is not in a healthy state.”
Update: May 13 2024
This story has been updated with new information.
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