The extension of bargaining council agreements in the Steel Industry is indefensible

The Steel Industry Federation of South Africa’s (Seifsa) defence of the current regime, in terms of which bargaining council agreements are extended to non-parties, is addressed herein.

Although a recent Seifsa article speaks to the extension of bargaining council agreements in general, I will, for the purposes of this article, and for the following reasons, only focus on the Steel Industry:

  • Seifsa is only involved in the Steel Industry; and
  • the entry-level wage in the Steel Industry is 40% higher than that of the second most expensive industry governed by bargaining council agreements. 

The entire system is designed to protect big business and trade unions. Surprisingly, trade unions derive their greatest benefit out of this dispensation, not from their own membership numbers, but from the number of employees, employed by employers in the Industry, irrespective of whether they are affiliated with any trade union.

The role of big business in keeping this SMME-hostile dispensation alive, is therefore paramount.

This dispensation, and in particular the manner in which it is applied in South Africa, is entirely undemocratic. Since the ‘vote’ of a business is valued according to the number of employees it employs, the value of the ‘vote’ of an employer with a 1000 employees, is a 100 times the value of a vote of an employer with 10 employees.

This dispensation, by its very nature and structure, not only disenfranchises SMMEs, but severely undermines its interests in favour of the interests of big business.

This explains how Seifsa, which represents approximately 10% of employers in the Steel Industry, but accommodates by far the largest portion of big employers, is still able to play a significant (albeit destructive) role in the Industry.  

The extension-dispensation in the case of the Steel Industry, makes it possible for businesses, situated mainly in Gauteng, and in particular Johannesburg (and to a lesser extent in Durban and Cape Town) to extend their agreements to employers in less populated, less industrialised, rural and even deep rural areas.

This means that, in terms of wages, the same demands are placed on small businesses, that are subjected to higher-cost structures, in respect of materials and other infrastructure costs. This is particularly true where companies that do not have the benefit of economy of scale, and where the cost of labour as a percentage of turnover may be as high as 60%, are subjected to the same wage arrangement as big business, that has the benefit of economy of scale, and whose cost of labour as a percentage of turnover may be as low as 5%.

To suggest that these two types of employers are subjected to the same wage arrangements, in order to level the proverbial ‘playing field’, is, to say the least, ludicrous.

Why does big business support these SMME hostile arrangements? The only conclusion one can come to, is that the Seifsa/big business arrangement is simply too weak to resist NUMSA’s demand that the extension of agreements to non-parties forms part of any settlement. Instead of rejecting such a demand on the basis of the immorality thereof, they conveniently agree to such a demand, with the added benefit of crippling their SMME competitors, as a reward for their weakness.

The most bizarre arrangement within the entire concept of a Seifsa/NUMSA agreement and the extension thereof, is the fact that the employer-parties to that agreement can opt out of that agreement (by means of the exemption process) and then, simultaneously, extend the agreement to non-parties. 

All of this boils down to the following ridiculous arrangement: a Seifsa member mandates the signing of an agreement:

  • which it cannot afford;
  • under the presumption that it will be exempted therefrom; and
  • simultaneously agrees to the extension thereof to non-signatories.  

What an outrageous arrangement. It also explains why Seifsa, on behalf of its self-serving constituency, so easily agrees to these unaffordable wage deals; the signatories, while happily extending these SMME hostile agreements to non-parties, simply opt out from their own obligations if they cannot afford it. Although outrageous, it is an essential element of this sham.

Through the extension of their agreements, big business buys for themselves short-term safety. However, undermining the interests of SMMEs, the backbone of the economy, with the long-term instability it causes, will bring widespread socio-economic instability which will not be managed through little backroom deals.

This extension arrangement, which is rejected by 90% of employers in the Steel Industry, and contributes to the gradual erosion of the Industry, simply has to be terminated. However: 

  • trade unions will cling to it because it secures their continued existence;
  • big business will not bring an end to it because, not only do they benefit from it, they are also too weak to stand up against the unions; 
  • Government will not bring about the necessary change by means of legislative relief; the trade unions will not allow them to do it; therefore
  • change can only be accomplished by SMMEs. However, since SMMEs are severely marginalised in terms of their voting power, there lies a difficult path ahead.

By Gerhard Papenfus is the Chief Executive of the National Employers'Association of South Africa (NEASA).