Strikes as the last resort

The recent strike by about 170 000 workers in the metal and engineering industry is set to have an impact going considerably beyond merely wage increases – also affecting jobs, training and skills development, among others. And while its exact impact on the economy has yet to be established, it promises to be severe.

Annual wage negotiations in the sector opened in May between the employers, represented by the Steel and Engineering Industries Federation of South Africa (Seifsa), the National Union of Metalworkers of South Africa (Numsa) and five smaller labour unions under the auspices of the Metal and Engineering Industries Bargaining Council.

Numsa, as by far the largest union in the sector, was seeking an across-the-board wage increase of 20%, a ban on labour brokers, a one-year agreement only, and union training during working hours, among others.

Seifsa responded with a 4.1% increase and sought a five-year agreement, among others.

Negotiations soon broke down, and a strike was declared and started on 4 July. It ended on 17 July when Numsa and the other unions agreed to a wage increase of 10%, with an extra 8% per year over the next two years, and the phasing out of the use of labour brokers, among others.

According to Numsa’s general-secretary Irvin Jim, Numsa has more than 250 000 members in the engineering, metal, white goods, packaging and automotive industries, among others. Most media reports, however, gave the figure of striking Numsa members to be around 120 000. In total, it appears some 170 000 workers were on strike – the 120 000 Numsa members plus about 50 000 other workers represented by five other labour unions.

The sector, however, covers around 9 000 companies employing more than 348 000 workers in a broad industry that is as varied as it is vital – affecting, among many others, manufacturers of motor vehicles, electrical cables, electronics, telecommunications, fasteners, conductors, pressure vessels and valves, plastic converters, pumps, air-conditioning plants, radios and television sets, electrical appliances, gates and fences, hand tools, non-ferrous and sheet metal industries, ferro alloys industry, construction and general engineering industries, light engineering concerns, refrigeration manufacturers, and electro-plating industries.

While the emphasis throughout was heavily on wages and other benefits, job creation, training and skills development received scant attention in the negotiated settlement – issues that are critical to the well-being of the sector.

A sector education and training authority (Seta) for the industry was established in 2000 in the form of the Manufacturing, Engineering and Related Services Seta (merSETA). At the time of its establishment, the five sub-sectors together were represented by around 44 000 companies with a workforce of about 600 000 people, and a total levy income for the sector at the time of about R600 000 million.

Various other skills development initiatives have been launched, such as Transnet’s recently announced purchase of 100 new General Electric locomotives, which Minister of Public Enterprises Malusi Gigaba says will help to develop skills due to the local manufacturing of the majority of the locomotives.

In addition, a number of private skills development and training initiatives have been launched in the industry.

However, the skills shortage being experienced in the engineering manufacturing sector remains high and critical.

According to a recent survey, the 10 scarcest skills in this sector are in the areas of technology skills, engineering skills, metal manufacturing machine setter and minders, mechatronics technicians, automotive motor mechanics, small business managers, rubber production machine operators, fitters and turners, plastics production machine operators, and reinforced plastics and composite trades workers.

According to figures released in May by South African employment and research group, Adcorp, there are as many as 829 800 unfilled positions in high-skilled occupations in South Africa in senior management; professionals in the medicine, engineering, accounting and law fields; technical occupations requiring artisans and technicians; and occupations in the agriculture industry.

Adcorp’s May survey results showed contraction in employment in the mining (-7.59%), manufacturing (-1.69%), electricity, gas and water (-13.48%) and construction (-6.65%) sectors.

In 2008, the government, organised labour and business committed themselves to developing and growing the metals and engineering sector in South Africa by signing the Metals and Engineering Sector Summit Agreement.

At the time, Numsa representative Ben Khoza said the challenges facing South Africa and the industry included the then imminent global recession, rising food prices, petrol hikes, increasing interest rates, and power cuts; and that time was of the essence in achieving the objectives of the agreement.

Since then, however, little has changed in the skills picture affecting the engineering manufacturing sector, with a direct correlation being evident between the level of unemployment in the sector and the development of skills. It would appear from recently released research findings that, in turn, the high level of strikes in South Africa might have adversely affected the employment picture.

During the strike, Seifsa pointed out the heavy toll and devastating effects of the global recession on its industry members, coupled to escalating domestic input costs, the high costs of employment in the sector, limited available capital, a weak skills base, unreliable and expensive logistics, and the high price of power.

David Carson, Seifsa executive director, said in a statement that a large section of its employer membership had not yet recovered from the recession; many production facilities had closed down or were contemplating doing so; extensive import substitution had become commonplace; and the number of employees affected by retrenchments in the sector had increased sharply since February.

The industry was losing jobs and factories to international competitors and was facing a struggle for survival, he added, while employers in the industry were faced with uncompetitive business and labour costs.

According to Carson, employment in the metal industry peaked at 399 000 jobs in February 2009, but within a year the industry had, at the end of the global economic recession, shed almost 78 000 jobs. Of these 78 000 retrenched workers, only 27 000 have since been re-employed in the sector – leaving 51 000 former metal industry employees without jobs or income.

He said Seifsa was concerned as to how these retrenched workers could return to employment in the sector, indicating that the unions’ high wage increase demands would not facilitate this.

The impact on overall economic growth of the annual strike season is significant.

In June, Statistics South Africa released figures showing that the country’s economy grew by 4.8% in the first quarter of the year, up from the 4.4% in the final quarter of 2010. This growth was boosted by strong manufacturing growth that contributed 2.2 percentage points to gross domestic product.

The strong show by manufacturing was attributed to the annual strike season having ended by then, whereas the previous quarter saw a strike-induced contraction of 4.9% – clear evidence of the enormous harm the annual strike season does to the South African economy.

As the country is now again experiencing a strike season, a decline in growth can be expected for this period when the figures become available later this year and early next year.

The Adcorp Employment Index for June, released in July, recorded a repeat of the May picture with ongoing job losses. It noted that in June, some 127 100 permanent and 5 712 temporary jobs had been lost.

Economists and investment analysts have been warning that the high wage increase demands were eroding the South African economy’s global competitiveness and are driving up labour costs that are already more expensive and less efficient than those in rival emerging markets.

Labour economist Andrew Levy was reported by the Mail & Guardian as saying the current strikes “are much more serious and intense than usual”.

He reportedly said it seemed “largely that the difficulty lies in the inflexibility of the unions around the bargaining tables”, and that the economy could not carry the high cost of settlements.

The most recent employment statistics by Statistics SA at the end of July added more gloom to the overall labour picture, showing a further rise in unemployment of 0.7% to a rate of 25.7% – the worst in seven years.

The expanded definition of unemployment – including people who have stopped looking for work – was 36.9%, up from 36.5% in the last quarter.

The most recent employment survey released by Adcorp showed employment dropping for the third consecutive month during July. It predicted that the South African economy would shed a massive 468 192 jobs in the remaining months of 2011 and in 2012 – half as much again as was shed during the recent recession.

Adcorp’s Employment Index for July showed that employment fell by 0.4%, or 270 504 permanent and 79 380 temporary workers being lost, while government employment continued going up (+1.4%), while unofficial employment grew by 191 124 jobs during July.

The sharpest declines in employment was in mining (7.7% down) and manufacturing (8.6% down) despite sharply rising export prices for commodities and basic beneficiated manufactured products. Both sectors were, at the time, being hard hit by strikes and large wage increase settlements.

Adcorp found that the greatest falls in both permanent and temporary employment was in the unskilled and semi-skilled categories.

At the time, the National Youth Development Agency issued a statement, expressing its concern about the impact that the petroleum and metal and engineering strikes could have on businesses “because of the key role that they play in alleviating South Africa’s high unemployment levels which predominantly affect young people.”

Stef Terblanche