When a new, small-business government department was created this year, one of the first statements made by its minister, Lindiwe Zulu, was that small businesses should be exempt from the labour regulation crafted for large companies.

Although Zulu’s department is unlikely to have much power in that regard, it is startling that this would be one of her first pronouncements. She was braving automatic opprobrium from Cosatu, but also giving a rare government boost to the one of the private sector’s most long-lived hobby horses at a time when rival employer groups are practically at each others’ – never mind unions’ – throats about this issue.

There is some confusion about the definition of ‘small business’. In the long run it is not just about wages but, in particular, the regulation of hiring and firing. For the time being the fight for a ‘two-tier’ labour market is already being fought in courts, bargaining councils and through brinkmanship during wage disputes.

At issue is bargaining councils’ ability to have the Minister of Labour ‘extend’ wage agreements to all other employers in their sectors. Without this ability, bargaining councils are more or less pointless.

At the moment the battle is centred on the Metal and Engineering Industries Bargaining Council (MEIBC) where smaller employer groups, particularly the National Employers Association of South Africa (Neasa) have been chiselling away at the institution’s legitimacy for years, from the inside. The MEIBC is by far the largest private-sector bargaining council and its legitimacy is tantamount to the whole system’s legitimacy.

Things may finally come to a head this year as a new membership audit has revealed that the council’s major parties are fast losing their all-important representivity. The Department of Labour completed the membership verification exercise with the MEIBC in August, following the acrimonious month-long Numsa-led strike in the sector during July. The point was precisely to have numbers that, according to MEIBC general-secretary Thulani Mthiyane, ‘would stand up in court’.

It is almost a foregone conclusion that the MEIBC will ask the minister to extend the wage deal – and that Neasa will challenge that decision legally.

The Department of Labour and the MEIBC are trying to ensure that they do not ‘compromise’ the minister with numbers that do not stand up to the scrutiny Neasa will almost certainly bring to bear.

At issue is bargaining councils’ ability to have the Minister of Labour ‘extend’ wage agreements to all other Employers in their sectors

Neasa had caused Labour Minister Mildred Oliphant serious embarrassment by temporarily overturning her previous extension of a MEIBC deal in 2013 – and has vowed to do the same this year.

The audit presents valuable ammunition. Almost all six unions in the MEIBC lost thousands of members, which could not be sufficiently verified. Unions, and the MEIBC itself, are challenging these numbers but for the time being these represent their government-recognised memberships in the sector. Conveniently, they add up to precisely 50% of representivity.

On the employer side, however, the Steel and Engineering Industries Federation of South Africa (Seifsa) is said to represent 34% of the employment affected by the wage agreement. Seifsa is the one that signed this year’s wage deal while Neasa boycotted it. The MEIBC will have to approach Oliphant with these figures.

According to labour registrar Johan Crouse, they would need ‘a very good reason for extension’ if the numbers are in this range. During and after the strike Neasa has waged a war of words and actions, refusing to sign the ultimate deal and instead encouraging its members to lock out workers after the strike was formally over. ‘The moment you give Neasa and SMMEs in the industry an undertaking that you will not extend your agreement to us, our attack will stop,’ Neasa’s CEO Gerhard Papenfus said in an open letter to Seifsa. The federation’s CEO Kaizer Nyatsumba for his part accuses Neasa of ‘strident propaganda’.

The membership numbers are very fluid and indeterminate. In the past two years different verification attempts have thrown up wildly different numbers. Seifsa claims that its members employ 220 000 of the sector’s workers. That may be true, but in the new audit they only have 110 000 of the relevant workers to extend the wage deal. Numsa often asserts that it also has 200 000 or more members in the sector, but according to the audit it has 136 000 relevant ones.

The bargaining council system, and the battle against it, is in the manufacturing sectors

According to Numsa’s head in the metals sector Steve Nhlapo, the new numbers verified by the Department of Labour were ‘shocking’. The union is scrambling to prove the existence of thousands more members falling under the wage deal.

There are roughly 40 different bargaining councils and the largest ones by far are the public-sector ones covering teachers, police officers and so on. Then there are the state-owned companies such as Transnet that have their own internal arrangements, the same as most very large companies.

The bargaining council system, and the battle against it, is concentrated in the manufacturing sectors. The largest one by far is the MEIBC, which sets wages for some 320 000 workers.

Other major councils are for the motor, chemical, road freight and clothing sectors, which are all small, in comparison to the MEIBC. Apart from the MEIBC, the council that has seen the most intense fighting between insiders and outsiders has been in the clothing sector, which has survived a very well-resourced court challenge funded by Capitec chairman Michiel le Roux.

But what would happen if the MEIBC or any other council was prevented from extending its wage deals? The automatic fallback position if a bargaining council falters would probably not be company-level bargaining.

The manufacturing sector is massively fragmented with thousands of small companies. Outsourcing negotiations to a central council is really the only practical expedient, given that legally no employer can simply refuse to bargain.

As far as wage setting goes, most working people in SA have their minimum wage determined through sectoral determinations, not bargaining councils.

A bargaining council could also have its scope amended to exclude less organised parts of its sector, hence becoming representative of a smaller sector. If the current battle at the MEIBC does result in major change, it would most likely be by forcing Seifsa and Numsa into some or the other concession in their actual deals.

By Dewald van Rensburg
Image: Fredrik Broden/reneerhyner.com