Collective bargaining in South Africa. A lucrative playground for big business, big trade unions and big government.
… and this is how it plays out in the Steel Industry:
- big business, supported by a minority of extremely naive SMMEs (collectively representing at most 10 percent of employers in the Industry), through their agent Seifsa, signs a wage deal with a big trade union (supported by a few collaborating small trade unions – whose only role is to make up the numbers);
- then, by means of a blatantly SMME hostile (probably unconstitutional and definitely undemocratic) provision in the Labour Relations Act (LRA)*, the Minister of Labour is requested to extend it to employers not party to that agreement – 90 percent of the Industry;
*In respect of the extension of agreements, in terms of the employer vote, the number of employees in the employ of employers is regarded as the determining factor, and not the number of employers. As a result of the above, an employer employing 1000 employees has hundred times the voting power of an employer with 10 employees, which for all intents and purposes completely negates the voting power of SMMEs when it comes to the extension of agreements.
- since monopolistic capital does not enjoy sufficient representativity to satisfy the legal requirements for extension, the Minister extends this agreement unlawfully – which explains why all the extensions of these agreements (in the Steel Industry), since 2011, have been declared null and void by the relevant courts; and
- since the Minister has realised that she can no longer extend agreements lawfully (as a result of the strong voice of SMMEs), she has introduced legislation in parliament to nullify the voting power of SMMEs. This legislation, with many other legislative changes, was approved by the National Assembly on 29 May 2018.
This is done notwithstanding the fact that:
- the cost of labour as a percentage of turnover of a small business may be as high as 60 percent, whereas in the case of a big business, it may be as low as 5 percent and even lower;
- the operational realities of a SMME in a rural area cannot be compared to that of a big business situated within an economic hub;
- SMMEs do not enjoy the benefits of economies of scale; and
- in a certain sense big business can be regarded as ‘price givers’, with the ability to pass on the effect of wage increases, to the downstream, by means of price increases on their products. SMMEs, in contrast, are limited in passing on price increases to customers, resulting in SMMEs effectively paying for both their own wage increases and those of big business.
According to a recent article published by the Sunday Times on 20 May 2018 titled, Big business bullies choke SA’s economy:
- corporate giants dominate the South African economy;
- most industries are controlled by a handful of players;
- the status quo has a stranglehold on the country;
- concentration levels in the South African economy are worsening; and
- in manufacturing in particular, concentration levels have increased: in 16 out of 80 sub-sectors, 5 companies were holding 70 percent or more of the market share in 2008. By 2014 this had risen to 22 sub-sectors in which a small number of firms dominate. This results in:
- barriers to entry for smaller companies being created; and
- investment and dynamism being inhibited.
The provisions of the LRA, insofar as collective bargaining is concerned, absolutely strengthens this anti-SMME, anti-growth, anti-employment arrangement. It is therefore not surprising that, during the course of the last 10 years, the Steel Industry alone has shrunk with 100 000 jobs.
On this topic, President Ramaphosa, in his State of the Nation address on 16 February 2018, addressed the following issues:
- increasing unemployment and poverty levels;
- the placement of job creation at the centre of the national agenda;
- the addressing of the decline of our manufacturing capacity which seriously affects employment;
- endeavours to re-industrialise in order to draw ‘millions of job seekers’ into the economy, and that;
- the economy will be sustained by small business, as is the case worldwide.
As outlined above, as far as the South African collective bargaining landscape is concerned, the vision of the President is entirely undermined, in each and every respect: it is as if we are talking about two different planets: does the one hand not know what the other hand is doing? Does nobody notice; does anybody care?
If government is serious about the alleviation of poverty, the creation of jobs, industrialisation and the importance of SMMEs to achieve that, they will address this crucial area of our labour law dispensation – as a priority.
By Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA)