It is unsurprising that the National Union of Metalworkers of SA (Numsa) did not accept the offer made by the Steel and Engineering Industries Federation of Southern Africa (Seifsa) of a 6% wage increase.
While some might suggest 6% is a seemingly favourable outcome if one considers that the Reserve Bank governor says “we all expect” inflation to be about 4.4% or so by 2022. Yet, as Irvin Jim and his more than 400,000 comrades continue with their picket, they will be looking at more than just inflation in calibrating their demands. They are entirely justified in doing so, in the context of the rally in steel and iron ore prices that we have seen in the recent moment.
Iron ore prices cleared $220/tonne in July, and later plummeted to below $94/tonne on the back of administered steel production caps in China. These caps, which could shut downstream Chinese mills if rigorously enforced, could lead to further rises in global steel prices, a reality whose impact may be felt in real ways. From the planned public infrastructure programmes to residential constructions and renovations.
The Construction Materials Price Indices for August 2021 released by Stats SA, compares material purchases for the whole construction industry, indicating that steel-based products experienced strong purchasing growth in a favourable price environment. For instance, there was a 77% increase in the purchasing of “angles, shapes, sections and similar products of iron and steel”.
Why does all this matter, to the ongoing protest in the steel and engineering sector?
High stakes
First, in a good price environment such as this, the stakes are higher — any lost production means forgoing any momentary price premiums that arise from “scarcity” and any uptick in consumer and industrial demand. Therefore, work stoppages and labour withdrawal are much more painful than if steel prices were lower. The foregone market opportunities are more valuable than they otherwise would have been, had prices been much lower.
Second, global supply chain market failures will even in a context of oversupply in some regions, continue to buoy the prices of much needed and globally traded inputs that are in short supply due to long, and now seemingly broken global value chains.
Third, the domestic and global focus on the role of infrastructure in recovery efforts requires not only a focus on the efficiency and cost-competitiveness of critical inputs, but rather, the role of resilience in critical building supply value chains. It means little if flat steel can be imported cheaply from Asia, if the ships will take months to dock at the harbour, delaying the delivery of orders.
Moreover, the Numsa picket shows that in a favourable commodity and product price environment, the distribution of value and whatever firm-level windfalls might arise, requires a durable and institutionalised framework for value distribution, rather than the ad hoc approach where such contests are resolved through antagonistic bargaining, deadlock, picket and conflict.
We know prices will fall as they have momentarily risen, and that when they rise again there will be the same distributional contests. The National Development Plan recognises the importance of the equitable sharing of productivity improvements through expansions in employment and wage improvements. Similarly, there is a need to respond to the distributional contests — between firms, communities and other stakeholders in response to the vagaries of commodity and product prices — in a way that complements rather than solely relies on bargaining platforms. As we have seen deadlocks are broken in the streets and in ad hoc deals where they cannot be resolved in bargaining chambers.
This is not just unique to the steel and engineering sector, as the conflict we have seen at Richards Bay Minerals for instance; are not entirely unrelated to the dollar prices of rutile and titanium slag produced in that part of the country. The alternative to such institutionalised agreement on value distribution “when the sun shines” are the social and commercial costs of conflict, “when the cold winters come”.
• Cawe (@aycawe), a development economist, is MD of Xesibe Holdings and hosts MetroFMTalk on Metro FM.
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