22 Jul Labour strikes – 25 m days lost
Industrial action is costing the economy dearly, with more time expected to be lost this year than last WHAT IT MEANS.
“It is a well-known fact that unskilled workers in the steel industry are paid higher rates than those in other industries in the construction sector” Vin Naidoo.
As a series of strikes by metal and chemical workers moved towards settlement this week, and with hundreds of thousands of municipal and mine workers contemplating similar labour protests in coming days, latest estimates are that SA will lose almost 25m days (on a per person striking basis) to industrial unrest this year up more than 20% on 2010. On Monday, the Steel & Engineering Industries’ Federation of SA (Seifsa) and the six industry trade unions signed a three-year agreement, extending to June 2014, providing for a staggered wage increase of 8%-10% for skilled and unskilled hourly paid employees.
But it is an agreement that left owners of small and medium businesses worrying that any double-digit increase would almost certainly lead to job losses in an industry that has been on the rails for much of the past 18 months.
A damaging strike by 70000 workers belonging to the Chemical, Energy, Paper, Printing, Wood & Allied Workers Union (Ceppwawu) and the General Industries Workers Union of SA since July 11 has severely affected oil refineries and the fuel transport sector. Again, with damaging consequences for the economy.
Despite warnings that the strike could protract into another week, union members were mulling an offer from employers on Tuesday which pointed to a possible early settlement.
Industry employers raised an offer for pay increases to 8%-10%, up from a previous offer of 7%, against the 11%-13% sought by the unions. But fuel shortages in SA’s inland areas are negatively affecting much of the country’s economic and industrial heartland.
In Gauteng, more than 150 petrol stations have been without fuel since the weekend. There are fears that this may lead to a shortage of pharmaceutical and food supplies.
Last month, figures compiled by Adcorp Holdings, one of SA’s top employment companies, found the country’s labour market competitiveness had fallen by 8,1% in a year in which there had been significant drops in employment in the construction (-20,1%) and manufacturing (-11%) sectors.
Peggy Drodskie, executive adviser to the CEO of the SA Chamber of Commerce & Industry (Sacci), says it’s too early to estimate the cost to the economy of the latest round of industrial action, but believes this could be one of the more difficult years for business.
We are not involved directly in any of the wage negotiations, but we are receiving daily reports from our members, who are especially worried about the levels of violence and intimidation that have marked these strikes, she says.
A recent Sacci survey revealed deepening negative perceptions of the impact of labour behaviour by its members. It also found that increased wage and administrative costs associated with above-inflation wage demands by unions will be passed on to consumers and may have the consequence of reducing employment. Last weekend, the 220000-strong SA Municipal Workers Union and the powerful National Union of Mineworkers (NUM), with more than 320000 members, were canvassing constituents with an eye to potential labour action. Talks deadlocked last week between the NUM and the Chamber of Mines, which represents mining companies such as AngloGold Ashanti, Harmony Gold and Gold Fields. As 117000 members of the National Union of Metalworkers of SA (Numsa) embarked on the strike last week, demanding a 13% wage increase, a number of smaller steel and metal operators expressed their concern. They said most wage agreements seldom factor in the implications of above-inflation increases for their businesses.
Seifsa, which negotiates on behalf of the metal and steel industries, represents businesses as diverse as giants ArcelorMittal, Aveng and Murray & Roberts, and small and family-owned operations employing fewer than 20 people.
The owner of Thekweni Reinforcing in KwaZulu Natal, Vin Naidoo, says his company directly employs about 100 people and a further 100 workers are indirectly reliant on it. This does not include subcontracted fixing teams. All of this is placed at risk when demands for wage increases of 13% are placed on businesses which are battling to break even in an industry that is dominated by conglomerates, says Naidoo.
A company of similar size, Metalix, based in Isithebe on the north coast, says it has lost almost its entire export business to Chinese, Indian and Vietnamese competitors in the past five years.
Managing director Guy Hamlin says almost 90% of his 200 staffers are unionised under Numsa and, in the face of such stiff competition, a 10%-11% wage agreement would ultimately result in between five and eight job losses.
We operate with extremely tight margins and the structure of these [collective] wage agreements is seriously hindering our ability to grow, says Hamlin.
Both he and Naidoo complain that the wage negotiations seldom take into consideration the fact that smaller businesses operate outside the main industrialised economic centres, where the cost of living can be 20% lower.
It is a well-known fact that unskilled workers in the steel industry are paid higher rates than those in other industries in the construction sector, says Naidoo. Our concern is, therefore, around the survival of small to medium businesses in the steel industry, which will not be able to afford this level of increase and will close down because of continued losses. It is talk of above-inflation increases, job losses and retrenchments such as those announced by retailer Pick n Pay, which will trim its work force by 3137 people (9%) that puts union backs up.
Following a meeting of Numsa’s national executive committee two weeks ago, the union position is that wage negotiations need to move away from a model that is centred on fluctuations in the consumer price index and, instead, factor in the question of administered prices, which, it says, increased by 10,9% between March 2010 and 2011.
Numsa spokesman Castro Ngobese says increases in the price of food, electricity, transport and petrol placed an intolerable financial burden on workers in the past year. He says a union study found that workers covered by the Metal & Engineering Industries Bargaining Council (MEIBC) have almost 6% less purchasing power than they did in July 2007. Workers in the automobile and motor industries sectors are at least 10% worse off than they were three years ago.
An increase of 14,6% in the MEIBC would be needed just to make sure workers are not worse off by mid-2011 than they were in 2007, says Ngobese.
And reports which show that company executives enjoyed salary and bonus hikes ranging from 23% to 56% have not helped the management case.
Arjen de Bruin, director at business improvement consultancy OIM International, says too many companies move first to retrenchments as a means of cutting costs, often to their detriment.
Companies looking to cut their wage bills often end up taking out too much of the muscle with the fat, says De Bruin. It’s a short-term solution and when the turnaround comes, these companies find they are behind their competitors. He says his company seldom advises retrenchments, which can have a spiralling effect and leave remaining staff feeling demoralised and defensive.
In a downturn, De Bruin suggests companies hold off filling vacancies and redeploy staff to other areas of the business, while planning for growth when trading conditions improve.