The opening gambits have been played by business and labour in the chess game of wage negotiations that have come to define the collective bargaining landscape in the metals & engineering (M&E) sector.
Speaking to the CEOs of the two major employer organisations this past week — Lucio Trentini of Steel & Engineering Industries Federation of Southern Africa (Seifsa) and Gerhard Papenfus of the National Employers’ Association of SA (Neasa) — and reading through the National Union of Metalworkers of SA (Numsa) demands, it is clear a long, cold, discontented winter awaits. This is especially disheartening given all the work that has gone into laying the groundwork for more pragmatic talks over the past three years.
At the heart of the issue lies the relentless push for higher entry-level wages, a noble endeavour on the surface but one that has had dire consequences for the M&E sector. Trentini candidly admits that these wages, inflated by decades of collective bargaining, have in effect priced out many entry-level workers, rendering them unemployable unless companies seek exemptions from the collective agreement — a cumbersome and inefficient process.
What’s worse, Trentini revealed, is the audacious demand from some employer bodies for a drastic 50% reduction in these entry-level wages — a move which, while understandable, would undoubtedly worsen the industry’s woes and further widen the chasm between labour and management. The wage genie cannot be put back in the bottle. The underlying threat of deindustrialisation looms large, a prospect that should send shivers down the spine of every South African.
According to Seifsa the M&E sector has bled roughly 250,000 jobs over the past 15 years, leaving the industry 37% smaller than in 2008. A Neasa survey of its members reveals that 71% of businesses have reduced the size of their workforce in the past three years.
Reading through Numsa’s demands one could be forgiven for thinking the table has been set for more reasonable talks this year. General secretary Irvin Jim has toned down his rhetoric and in a nutshell has called for the three-year agreement to be rolled over into the next three-year period, and proposed a scheme for union members to access a portion of their retirement funds to pay for housing. I’m not sure the latter will fly given the regulation of pension funds, but that’s unlikely to be a sticking point for employers.
Where the talks seem destined for stalemate is over the issue of the exemption process. To understand why, we need to understand the history of collective bargaining, its pernicious effects to push up entry-level wages to unaffordable levels for smaller employers and how the Labour Relations Act in effect gave a lifeline to trade unions through an undemocratic process.
There is broad agreement, even among ideologically opposed Seifsa and Neasa, that collective bargaining has pushed wages up to unaffordable levels. For entry-level employees, after all the additional cost-to-company items such as housing and medical, this takes the cost to employers to about R13,000 a month. I don’t know how many people actually survive on that as a single household income, but what I do know is that many smaller businesses won’t survive with that wage structure in a competitive environment.
As the situation emerged over the past 80 years the Labour Relations Act tried to provide a lifeline for smaller businesses and non-signatories to the main agreement (because, remember, these agreements are extended industry-wide) by providing room for exemptions from the main agreement via the regulations.
When it comes to the extension of agreements it’s not the number of employers that counts but the number of employees employed by a business. It is a devious arrangement in the act, which in effect secured the sustainability of trade unions and explains why big businesses have become the focus of trade union recruitment.
At the level of the Metals & Engineering Industries Bargaining Council, if one business employs 1,000 people it has the voting power of 100 other businesses each employing 10, so the odds are stacked against small businesses.
Neasa represents most of those smaller businesses and is calling for an automatic exemption for its members. What’s on the table is a phase-in process that will require acceptance of the main agreement, followed by an application for exemption based on some sort of means testing.
To qualify for the phase-in arrangement a company must prove that it’s in financial trouble. But you can’t run a business on that basis. The moment you are profitable you are forced into a wage dispensation that will eventually destroy you.
At risk of stating the bleedingly obvious here, there’s a reason we want to encourage companies to be profitable and why we want to make them more profitable. We have a youth unemployment rate of 60%. How do you get young people into the workplace with a system that’s created such bizarre barriers and disincentives?
Even Seifsa, which represents the large employers, recognises this. The irony is that if these talks do end up in strikes it’s the big businesses that sign the agreement that will suffer most. As the clock ticks down to the commencement of negotiations, the stakes could not be higher.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at badger@businesslive.co.za.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.