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SEIFSA-NUMSA wage agreement will be devastating for small firms - FMF

Herman Mashaba says LRA section 32 extensions reflect an unholy alliance between big business and organised labour

Minister of Small Business must intervene to save small business in the Metal and Engineering sector 

The settlement reached by the MEIBC, Numsa and Seifsa this week demonstrates the staggering hypocrisy that dominates current discourse about the importance of small business to South Africa's economy and is at the heart of the FMF's legal challenge to Section 32 of the Labour Relations Act (LRA). Unions, government, employers, the media, analysts, commentators, everyone, it seems, believes passionately in nurturing small business. How, then, can this settlement have been welcomed with such relief by anyone who says they care about small business? The reality is that this agreement sounds the death knell to thousands of smaller companies in the sector.

Only the employers' organisation NEASA is holding out on the side of small business by refusing to sign because it sees through the agreement to the devastating impact it will have on smaller firms and employment prospects for the current and soon to be unemployed workers. NEASA sees the emperor's clothes for what they are, yet it is being slated for its pains and stands accused of struggling for power with Seifsa.

As an entrepreneur and businessman, I know first hand the risks of employing even one extra worker and I implore the new Minister of Small Business to immerse herself in the detail and consequence of this - and similar - bargaining council agreements and to act to stop this agreement being extended by the Minister of Labour who, tragically hamstrung by S 32, has no say in the matter.

The recent developments in the MEIBC negotiations reflect the unholy alliance between unions and large business. Big business (represented by Seifsa) has agreed to increases for the next three years without being concerned about the impact on small business. NEASA, representing small businesses, has refused to sign the agreement because it will put many small players out of the industry.

Numsa and Seifsa appear to have adopted the stance that the views of NEASA (i.e. small businesses) do not matter presumably because they believe they will get the agreement extended in terms of S 32 to non-parties to the agreement i.e. small businesses who were not at the bargaining table.

If the MEIBC is able to establish the necessary degree of representivity (of those who agree to settle), then, under S 32, the Minister of Labour will have no option but to extend the terms of the agreement to non-members, including small businesses.  The Minister will not have the discretion to decide whether or not it is in the best interests of the greater economy to extend the agreement to non-parties, but will simply be compelled to extend.

How can this be in 2014, in South Africa, with over 8 million unemployed citizens with no real prospect of ever working in their lives under our current labour regime and with economic growth so low?

It is baffling that, while all appear to agree that this current agreement will do nothing to stem the job losses in the metal and engineering sector, it is still being welcomed as a good result. 

The impact on current and future jobs is the very point that the FMF believes must be taken into account by the Minister of Labour when exercising her discretion and the reason why the case was launched.

It is unlikely that big business would have agreed to the high increases if they believed that agreements would not be extended to non-parties and that their smaller and struggling competitors would not be compelled to pay the high wages by means of a section 32 extension. This, after all, is a means of their maintaining dominant power in the industry.

If big business (Seifsa) knew that the agreement would not be extended, they might have held out for a more realistic and market related increase.  This is because they would know that small businesses, through NEASA, would have held out for market related increases and hence would reduce the competitive disadvantage they experience now vis à vis big employers. 

In its current form, without ministerial discretion, LRA section 32 extensions serve as a catalyst for the unholy alliance I have described and is driving up cost of production (wages) with a view to creating barriers to entry and making small business unprofitable.

Minister Lindiwe Zulu, please make this your first priority: act to save small firms in the metal and engineering industry by intervening to prevent this agreement being extended to non- parties.

Statement issued by Herman Mashaba, Businessman and leader of the Free Market Foundation's legal challenge to LRA S32, July 30 2014

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