Last week the National Union of Metalworkers of South Africa (NUMSA), one of the country’s largest trade unions, went out on strike, shutting down much of an industry already taking immense strain from tough business conditions. To add muscle to its show of force around the strike, NUMSA was joined in some industrial areas by marching phalanxes from the Economic Freedom Fighters (EFF).
Rather than show union muscle, this strike could show union weakness. NUMSA no longer has the ability to impose wage deals on the entire industry and the steel sector and South African manufacturing are in a severe downturn in which the jobs of many union members are at risk.
Offer rejected
Earlier this week, NUMSA rejected a revised offer from the Steel and Engineering Industries Federation of SA (SEIFSA), an employers’ body, and stuck to its original demands for an across-the-board increase of eight percent for the first year, and an increase of the consumer price index (CPI), plus two percent, for the second and third years. It is also demanding that if CPI plus two percent drops below six percent, employers must offer six percent or reopen negotiations.
NUMSA has made additional demands for an improved sick benefit, a subsidy to cover transport in certain circumstances, an allowance for working underground, a dropping of the Youth Wage Subsidy to Employers, and Provident Fund benefits for family members. In the current depressed climate these are ambitious demands.
High industry costs, in part due to high wage pressures, the long Covid downturn, and the poor state of the economy mean the steel sector and manufacturing in general are contracting. Since September last year the price of hot rolled steel coil, the basic input into the manufacturing of steel products, has nearly doubled. The downturn and higher steel prices have forced users to scrap or delay projects, and sales have dropped for many companies in the sector.
Apart from the dire economic situation, NUMSA’s position has also weakened because the deal it might ultimately strike with some employees cannot be imposed on the industry as a whole. That is a sea change in South African industrial relations.
Court action
A series of court actions over the years by the National Employers Association of South Africa, (NEASA), which represents smaller companies, has meant fundamental change to the mechanism for wage settlements in the steel sector. No longer can settlements that emerge from an employer-union bargaining council be applied by the Minister of Labour to the entire industry, as they are in other sectors.
NEASA’s court action has been historic in ending the extension of wage agreements between unions and big players to smaller firms in the industry that often cannot afford such settlements. For a large company, which enjoys high margins because of economies of scale and a dominant market position, salaries might make up about two to four percent of total costs. By contrast, for a small player with only minimal economies of scale and who faces full competitive pressures, salaries are more likely to make up more than 15 percent of costs. In South Africa, centralised bargaining and extension to “non-parties” in a sector allow big players to undermine smaller businesses by imposing costs on them.
The consequences of the court action by NEASA are that steel companies can now reach settlements that are based on their own unique circumstances. Instead of being forced to pay a new unskilled entrant R12 500 under a deal with NUMSA, a company could, in theory, pay the worker the minimum wage of about R3 500 per month. NUMSA rejects the view that being able to pay lower wages allows more jobs to be created and insists that this amounts to a return to apartheid-era labour relations.
Under Section 32 of the Labour Relations Act, wage rates and settlements are made to apply to all firms within an industry. Due to NEASA’s court action, settlements in the bargaining council now apply to a minority of companies. SEIFSA, which represents large corporations, has 1 100 company members that employ about 173 000 people. NEASA’s steel section represents 1 800 companies, largely small businesses, and employs 65,000 workers.
Court battles
It has taken almost six years of court battles by NEASA to achieve its aim of preventing wage agreements being applied to non-parties. NEASA’s Chief Executive, Gerhard Papenfus, says the issue is about larger companies in SEIFSA having no right to impose wage rates on smaller companies, many of whom cannot afford a higher cost base.
In 2016 NEASA began litigation in the Labour Court to halt agreements reached within the Metal and Engineering Industries Bargaining Council (MEIBC) being extended to parties that were not part of these deals. In 2018 the Labour Court found that the actions of SEIFSA and the trade unions were in contravention of the MEIBC’s constitution, because of the inadequate representation of smaller firms on the Council. As a result, the court found that the Minister of Labour could not extend these agreements to non-parties, who tend to be smaller companies.
That amounts to a significant brake on union power. And even if there is an appeal to the Labour Court to overturn its past decisions and allow the settlement to be applied to “non-parties”, it is likely to be rejected. It is likely that NEASA will have to continue to defend its position in court.
Labour lawyer Andrew Levy says the Labour Court’s decision in preventing extension to “non parties” in the steel industry does constitute a precedent. It might not be easy to get this applied to other sectors, but in similar circumstances courts might make decisions in line with this precedent, he believes. Bargaining councils have to increasingly prove that they are representative of people covered by an agreement.
NUMSA hostility
NUMSA has been hostile to SEIFSA in the current strike, but its real wrath has been directed to NEASA, because of its refusal to be part of any settlement with the unions.
But much of the reason for the erosion in NUMSA’s power is due to its own actions. Wage settlements and strike action have elevated costs and undermined competitiveness.
With the decline of older industries, trade unionism has declined throughout the world and this is proving true in South Africa, although this trend has a long way to go here. But with our industrial decline it might happen here faster than was the case in the advanced industrial countries. The once mighty COSATU now largely represents government workers.
The current strike in the steel industry is against the backdrop of what increasingly looks like the terminal decline of South Africa’s manufacturing industry. Last week a well-known economist, Mike Schüssler, pointed out that the number of people employed in formal manufacturing during the second quarter of this year was lower than it was in 1969 and has dropped by 40 percent since its high point in 1990. And he points out that South Africa’s manufacturing output is now lower than it was a decade ago.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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