Working together: On the heels of major strikes, reforms are being made

The second half of 2012 witnessed some of the most damaging tensions between organised labour, employers and government in over a decade. With political overtones and tragic loss of life, the success of wildcat (unauthorised) strikes at key mines in 2012 secured well-above-inflation wage increases, spurring protests in other sectors such as agriculture. This has led to what many employers and the largest trade union federations have seen as a breakdown in South Africa’s social contract, with the proliferation of wildcat strikes and upstart unions endangering the overall framework for structured wage bargaining. Indeed, the World Economic Forum’s Global Competitiveness Index for 2013 ranks South Africa last of 144 in terms of labour-employer relations, 143rd in hiring and firing practices, 140th in flexibility of wage negotiations and 134th in pay and productivity. Alongside wage increases, the government passed a revision to the Labour Law in mid-2012 to improve contract terms and standards. Yet more structural reforms are needed – such as further incentives for hiring young staff – to make significant inroads into the country’s structurally high unemployment and lagging productivity growth. The key in 2013 will be to keep all parties at some form of a negotiating table.

Structurally Tight

Mirroring the dichotomy in the wider economy, the labour market remains highly divided between a small but well-paid segment of white-collar staff and a much larger market of less qualified employees. The Hay Group, a management consultancy that tracks labour market practices globally, found in mid-2012 that South African salaries for senior management had risen significantly, from $44,000 a year to $151,000 between 2002 and 2012. This rise was similar to hikes in Turkey, from $65,000 to $190,000, and Brazil, from $58,000 to $163,000 in the same period. Yet alongside such conditions in the upper echelons of employment, South Africa’s unemployment rate has remained high, averaging 25.5% in the 12 years from 2000, according to Statistics South Africa. The use of contractors, particularly for seasonal work like agriculture or mining, has spread significantly since 1994, alongside a segment of labour brokers with varying levels of scruples supplying short-term employees. Official unemployment figures do not include the under-employed or those dropping out of the labour market. Meanwhile, figures for the growth of real wages are buoyed by the rise in welfare payments in the last decade. While unemployment fluctuated around its historical average in 2012, from 25.2% in early 2012 to 24.9% by the year’s end (compared to a low of 21.9% in December 2008 and a high of 31.2% in March 2003), much of the job creation was government-led.

The government ran a more targeted labour market policy in 2012, through temporary work programmes applauded by the IMF. However, while the public sector created 121,000 jobs in the second quarter of 2012 alone, for instance, sectors like trade and manufacturing shed 139,000 and 59,000, respectively, in the year, according to Statistics South Africa. Meanwhile, large miners like Anglo American have sought to retrench staff at their loss-making mines by the tens of thousands, but were blocked by government in early 2013.

Wage Changes

The state’s wage bill, accounting for 34% of consolidated spending, has continued to outpace wider inflation. In the 2013 budget the government curbed public sector wage inflation to 7.1% for 2013/14, down from 9.5% for 2012/13, according to Nedbank, before bringing it to an average of 6.5% a year from 2014 to 2017. With implications for the state’s medium-term fiscal outlook given the much stronger growth in government job creation than the private sector, the move also added to general upward pressure on wage demands. By comparison, car manufacturer Toyota raised wages at its Durban plant by 5.7% in August 2012, roughly at consumer price index levels.

Representing Labour

Three main union federations have emerged as the primary key dialogue partners for business for South Africa, although they are increasingly challenged by the fragmentation of labour representation. The main players are the Congress of South African Trade Unions (COSATU), the National Council of Trade Unions (NACTU) and the Federation of Unions of South Africa (FEDUSA). The oldest and largest of these, COSATU, was created in 1985 and has over 1.8m members, and is part of the governing tripartite coalition with the African National Congress (ANC) and the Communist Party. NACTU, formed in 1986, and FEDUSA, in 1997, each have memberships of around 500,000. Business representation has also been spread among a number of players, with the South African Chamber of Commerce and Industry, the Business Unity South Africa and the Black Business Council, all representing different segments since 2012.

While the three union federations cooperate through such forums as the National Economic Development and Labour Council, established in 2004, and in joint lobbying, they also compete for members. “We see COSATU coming under increasing pressure from upstart unions encouraged by the success of Association of Mineworkers and Construction Union (AMCU) in 2012,” Konrad Reuss, managing director for South Africa and sub-Saharan Africa at Standard & Poor’s, told OBG.

Wildcats Spread

The research firm Municipal IQ counted some 173 wildcat protests nationwide in 2012, but while the number of lost workdays was less than half of the 6.2m total from 2011, the associated violence was unprecedented in post-apartheid South Africa. Confrontations reached a tragic peak at the Lonmin-operated mine in Marikana (in North-West province) where strikes led to clashes with police.

Wildcat strikes beyond the control of the COSATU-affiliated National Union of Mineworkers (NUM) spread from platinum mines in Impala from January 2012, where workers asked for a tripling of monthly salaries to R9000 ($1097). While NUM counts some 300,000 members across the mining sector, it has faced growing competition from the breakaway AMCU, with roughly 50,000 members and growing. Focusing on platinum in particular, the smaller union organised wildcat strikes supported by opponents of President Jacob Zuma’s bid for re-election at the ANC’s December 2012 leadership conference. The country, which accounts for over 80% of global platinum supply, saw the loss of an estimated 500,000 troy ounces of the metal due to the shut-ins, according to the Association of Mine Managers.

As the Marikana strike turned violent in August 2012, resulting in some 47 deaths and 78 injuries, public officials were criticised for a slow response, while COSATU was attacked for its association in government. “We are very worried about the growing number of wildcat strikes,” Jonas Mosia, the industrial policy coordinator at COSATU, told OBG. “These strikes are a wake-up call to many of our unions to improve service to members and create a better life for them.”

Wage Pressure

The success of unlawful strikes by mineworkers in the platinum sector has disrupted and decentralised wage demands and negotiations. “This fragmentation of negotiating partners points to a breakdown in the social compact,” said Reuss.

Lonmin workers won wage rises of up to 22% – above the previous average rate of R4000 ($489) to R5000 ($610) a month, alongside a one-off payment of R2000 ($244) to cover wages lost to the strikes. Protests quickly spread to gold mines like AngloGold Ashanti’s Kopanang mine and Gold Fields’ KDC site, as well as Xstrata’s Kroondal chrome mine, with workers across these mines demanding a more than tripling of their salaries to some R6000 ($731) a month. “While we remain committed to the idea of one union per industry and one umbrella federation for South Africa, we do not want to be seen to be fighting upstart unions outside of COSATU,” Mosia told OBG. “We should rather ask ourselves why workers are leaving COSATU unions and develop strategies to address any weaknesses that may be causing this situation.”

Reform

The rapid development of labour brokering in the last two decades to provide outsourced casual labour to third parties, alongside more frequent wildcat strikes, have prompted the government to table a number of reforms to labour legislation in parliament.

Broad-Based Black Economic Empowerment legislation in 2003 includes provisions for staff training and recruitment practices, although the use of labour brokers to circumvent requirements minimised the impact of this policy. Further amendments to the 1997 Basic Conditions of Employment Act as well as the 1995 Labour Relations Act were introduced to parliament in 2012, to address and improve various labour issues. All sides of the social dialogue will be paying close attention to both employment equity as well as the country’s economic competitiveness as the future unfolds.