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‘Captains’ of Industry caught in their own trap

By Gerhard Papenfus

For the Afrikaans version of this Opinion Piece, please click here
Notwithstanding its crucial role, if the South African economy stands any chance to grow, Small, Medium and Micro Enterprises (SMMEs) face an uphill battle in South Africa.

In the arena of centralised collective bargaining, the Labour Relations Act (LRA) is carefully, deliberately and surreptitiously drafted in such a way that big business and big trade unions can collude (within bargaining council structures) in the setting of wages and conditions of employment and then, by means of an utterly undemocratic provision enforce those decisions on SMMEs all over South Africa.

Although ninety percent of business in the Metal and Engineering Industry falls within the category of SMMEs, the LRA’s provisions on the extension of agreements have all but wiped out any influence that SMMEs might have had to protect themselves against these hostile labour arrangements.

Certain large employers, who control the price of steel, also determine Industry wages, not only for themselves, but also for micro employers in the most remote areas of South Africa. For years, not only SMMEs suffered under this unconstitutional burden, but South Africa as a whole.

SMMEs in the Metal and Engineering Industry in particular are constantly hit by a perfect storm – a hostile Labour Relations Act which strips SMMEs of negotiating powers, negotiators who just do not have the ability to say ‘no’ to trade unions purporting to be powerful (through violence and intimidation) and a biased bargaining council secretariat with a deplorable governance record.

Within this completely biased model, the Metal and Engineering Industry was negotiated into South Africa’s most expensive labour dispensation, at least thirty percent more expensive than the second most expensive centralised collective bargaining structure in South Africa. The fact that SMMEs have been suffering under the yoke of this brutally undemocratic dispensation, that hundreds of thousands of jobs have already been lost and thousands of potential workers were denied any prospect of a job, did not concern neither the ‘Captains of the Metal and Engineering Industry’ nor the ‘powerful’ trade unions, at least not to the extent that they illustrated any concern.

This Metal and Engineering Industry dispensation dictates that, unless a product justifies paying a low skilled and inexperienced worker, whether in Gauteng or in the most remote area in South Africa, R108 000-00 per annum cost to company, escalating at ten percent in perpetuity, it would rather be more cost effective to import that product. The prime consequence of this approach has become South Africa’s most significant challenge: unemployment.

The system always favoured the ‘Captains’ and the trade unions – it bought short-sighted and short-term ‘labour peace’ (long term socio-economic instability was always inevitable) and it holds SMMEs in check and serves as a lifeline for trade unions.

That was until circumstances on the world stage changed. The unfettered and unregulated importing of Chinese steel, exacerbated by the cooling down of the Chinese economy, resulted in the flooding of the South African market with cheap steel. Suddenly, the unaffordable and rigid labour dispensation, which for decades destroyed SMMEs, now hit home for the ‘Captains’. All of a sudden, this made it impossible for them to manoeuvre and address the demands of a drastically changing environment.

What follows is astonishing. The same role players who made the Metal and Engineering Industry unaffordable – the ‘Captains’, their negotiators and NUMSA – now approached government for help – for themselves! It is unlikely that they will confess to all the damage they have caused the Industry, or explain why they made this the most unaffordable Industry to conduct business in South Africa.

The crisis of job losses is not a new phenomenon; it has been a bloodbath for years as a consequence of the labour environment which has been created, the result of constant capitulation to unrealistic trade union demands. The ‘Captains’ most probably also did not admit to their selfish conduct over decades, where they, disproportionally empowered by an undemocratic labour law arrangement, negotiated deals which suited them, completely ignoring the plight of SMMEs.

What China is currently doing to them, they have done to SMMEs over decades. China is not in the least concerned about the difficulty it is causing the ‘Captains’’ enterprises. The ‘Captains’ in turn were not in the least concerned about the consequences of their deals with trade unions on SMMEs. China is now to them what they have been to South Africa’s SMMEs.

The ‘Captains’ and big trade union alliance never bothered to do anything about the constant job losses in the Industry. The job losses now envisaged by these big players are insignificant (not that the loss of a single job could ever be insignificant) in comparison to what has transpired in the Metal and Engineering Industry throughout South Africa over decades. The General Secretary of the Metal and Engineering Industry Bargaining Council (MEIBC) in 2014 admitted that the Industry had already lost 700 000 jobs.

Should Government consider any form of assistance, we implore them not to consider any rescue plan without affording SMMEs the same benefits, rights and protection. No assistance must be granted unless it is ensured that the inappropriate dominant role the ‘Captains’ have played in the Metal and Engineering Industry over years, is brought to an end and that the interests of SMMEs, in all aspects, are incorporated in any solution for the Metal and Engineering Industry.

The measures agreed to by government and announced on 24 August 2015, address the concerns of five big primary steel producers. They do not in any way assist 11 000 other businesses in the Industry, especially not the concerns of SMMEs. To the contrary, it will again increase the price of steel for manufacturers. This is a continuation of an old established practice in the Metal and Engineering Industry, where the primary steel producers look after their own interests with no regard whatsoever for the interest of downstream manufacturers.

Government is called upon to conduct a full scale investigation as to the cost of doing business in South Africa, with special regard to electricity, the cost of labour and red tape compared to the global competitive environment (China in particular), and address these challenges in partnership with ALL role players.

The challenges facing the Metal and Engineering Industry, and for that matter all other Industries, are immense. Although extremely critical of the role played by certain industrialists in contributing to the crisis in the Metal and Engineering Industry, the long term solution does not lie in hostilities between the big and small role players, but in an approach where all are accommodated and the challenges facing South Africa are tackled as a unified force.