The breakdown in wage negotiations in the metals and engineering sector between some employer associations and trade unions suggests that SA could be in for a bumpy ride once the new national minimum wage comes into effect next year. Having shed 140,000 jobs in the past 10 years, employers in the sector adopted a radical new approach in this year’s wage negotiations in an effort to take back control of the wage bill.
Their initial proposal was that new hires be paid R20/hour at the entry level and that a wage increase of 5.3% (equivalent to about R1/hour) be levied off this new level for everyone. This meant that those earning R40/hour would receive a rise of 2.6%.
R20/hour is equivalent to the new national minimum wage (NMW), which comes into effect in May 2018. However, the metal and engineering sector’s current minimum is R40/hour. So the plan would halve the sector’s minimum wage, but only for new, entry-level workers employed in the future.
The NMW agreement struck between government, business and labour last year is unambiguous, according to Prof Imraan Valodia, who chaired the NMW panel: "R20 is the new floor, and any wage that is above it will stay above it."
Roughly 2.3m workers are not covered by any existing bargaining council agreements or sectoral minimum wage determinations. Most are in manufacturing, construction and financial services. The NMW was designed primarily to protect them. Where existing wage agreements exceed R20/hour, they will continue to apply to new and existing employees after the NMW comes into effect.
This means that the metal and engineering sector may not halve its entry wage, even for new hires, unless the unions agree to it in a new negotiated settlement.
Firms may not unilaterally lower wages to R20/hour
You can’t blame business for asking, but if the reaction of the National Union of Metalworkers (Numsa) is anything to go by, the mere request could ignite a furious backlash from labour, plunging SA into a fresh round of industrial-relations strife.
"It is a concern," agrees Valodia. "There is an imperative for business to act in line with the agreements reached. The objective of the NMW is to lift those below the line up to the line. It is certainly not to drive down the level of wages."
Neil Coleman, labour’s lead negotiator on the NMW, slams the employer proposal as "an opportunistic abuse of the NMW". He says care must be taken to ensure the final NMW legislation prohibits any employer from unilaterally reducing wages because of the introduction of the NMW, and that this must also apply retrospectively.
Gerhard Papenfus, who founded the National Employers’ Association of SA (Neasa), which initiated the entry-level wage proposal, sees things very differently.
He points out that over the past year the steel industry alone has lost 25,000 jobs and 500 small and medium-sized enterprises (SMEs) in this sector have closed their doors. About 90% of Neasa’s 1,957 members in the metals sector are SMEs.
Papenfus, who spent 19 years at the department of labour, where he acted as the registrar of labour and head of labour relations, thinks the entry-wage proposal will create new jobs. And he doesn’t believe firms will use it to reduce the pay of existing workers or replace them with new hires. Not only is this prohibited by law, but why would firms fire staff they’ve spent time training and replace them with people with no experience, he asks.
"By basing the increase on the R20, the intention is to bring the unaffordable wage bill down a bit," Papenfus explains, pointing out that R40/hour is the highest sectoral minimum wage in SA. In the motor industry components sector it is R19/hour, in the road freight and clothing sectors R26/hour, and in the building sector R22/hour.
We warned the ANC that the national minimum wage [it] had proposed would have disastrous consequences, but [it] arrogantly ignored us. Now the proposal is causing chaos in the engineering sector by ensuring that workers who fought to earn more, risk being downgraded to this pathetic, poverty wage of R20/hour
— Numsa
In May, there was agreement between the plastics subsector, Neasa, the Plastics Convertors Association (PCA) and the union Solidarity to reduce the entry wage from R40 to R25/hour and to base all increases on this new minimum.
Numsa is up in arms. In a letter to its regional secretaries, its leadership decries the "counter-reactionary agreement" driven by a "backward, primitive, exploitation agenda".
It exhorts its members to mobilise for "the mother of all battles" and "open war" against Neasa, the PCA and others. Employers such as Papenfus are singled out by name and the suggestion is made that his face be put on the T-shirts of those engaging in industrial action.
"We warned the ANC that the national minimum wage [it] had proposed would have disastrous consequences, but [it] arrogantly ignored us," Numsa says in a statement. "Now the proposal is causing chaos in the engineering sector by ensuring that workers who fought to earn more, risk being downgraded to this pathetic, poverty wage of R20/hour."
Numsa is demanding a 15% wage increase across the board based on actual wages, not on the minimum rate. It also wants any final agreement extended to nonparties, including Neasa and the PCA.
The Steel & Engineering Industries Federation (Seifsa) is trying to distance itself from the entry-wage proposal, which it initially supported.
"The entry-level position on wages was never Seifsa’s position, but we went along with it at first in the interests of employer unity," says Seifsa CEO Kaizer Nyatsumba. "When the negotiations ... deadlocked, Seifsa walked away from the joint-employer position [which included entry-level wages] and directly articulated its position in bilateral meetings with labour."
Seifsa declines to disclose its new position but it seems confident that it is close to reaching an agreement with labour and avoiding a strike. Nyatsumba says the sector is in a "terrible state" and that industrial action would have "a devastating impact".
But Papenfus doesn’t think avoiding a strike should be industry’s chief motivation. "They say a strike would be the end of the world; I say another increase on top of existing wages would be the end of the world. Rather take a strike and bring about a lasting correction in the industry."
There is no love lost between Seifsa and Neasa. The two have been in a long-running legal battle over the extension of wage settlements struck between Seifsa and labour to the rest of the industry.
The sector’s two previous main wage agreements (2011-2014 and 2014-2017) have been nullified by the courts following challenges brought by Neasa.
Papenfus accuses Seifsa of being "a terrible negotiator" that selfishly serves the interests of large firms and betrays SMEs by concluding wage agreements that are unaffordable to small firms.
This is because up to 60% of a small firm’s total costs are made up of labour costs while this ratio can be lower than 5% for large firms. On the other hand, small firms are much less strike sensitive than big firms since it’s harder for unions to organise strikes across many, scattered companies.
"Big firms are very strike sensitive. That’s why they do these deals," says Papenfus. "I don’t think their intention is to wipe out SMEs, though that’s the result."
He expects Seifsa and Numsa to conclude a normal wage deal that will exclude any mention of entry-level wages. It is also likely that they will request the minister of labour to extend it to the entire sector, assuming Seifsa can muster enough support in the bargaining council to do so.
Seifsa has just four of 21 seats on the bargaining council’s management committee, while Neasa has 13, but the minister looks at the number of employees affected. Neasa’s 1,957 affiliated member firms employ roughly 60,500 people while Seifsa’s 1,298 affiliated members have more than double that.
If the rules of extension are not followed precisely, Neasa, which fields a permanent team of 55 lawyers, intends to fight the matter in court.
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.