Speed bumps ahead for SA’s motor sector
The motor sector’s multiyear wage agreement has come to an end. It’s unclear yet what will replace it – but bruising employer-union talks look likely, with the possibility of grim consequences for the economy
President Cyril Ramaphosa is drawing inspiration from the automotive industry in his bid to grow SA’s economy. But the sector is facing problems of its own. Against a backdrop of dwindling vehicle sales, a multiyear wage agreement came to an end last weekend.
Employers and labour are braced for potentially bruising talks — and the economy may suffer if they fail to find common ground.
In his June state of the nation address, Ramaphosa said SA has to revitalise and expand its productive sectors if it is to meet its GDP growth targets of 1.3% in 2019 and 1.7% in 2020 — from just 0.8% in 2018. Beyond simply exporting raw materials, he said, SA should become a manufacturing hub for key components in electronics, computers and vehicles.
"Drawing on our successes in the automotive sector, we will implement master plans, developed with business and labour, in industries like clothing and textiles, gas … and the steel and metals fabrication sectors," he said.
But the automotive sector, which contributes more than 7% to GDP, is expecting "a very flat year", says Michael Mabasa, executive director and CEO of the National Association of Automobile Manufacturers of SA.
Aggregate domestic sales fell an annualised 5.7%, to 40,506 vehicles, in May, after growing only 0.7% in April. Export sales fell 8.8% against the previous year.
Going on a strike is encouraging the manufacturer to mechanise — that’s all it’s doingMichael Bagraim
Now, as the National Union of Metalworkers of SA (Numsa) and the Automobile Manufacturers Employers Organisation (AMEO) prepare to face off in wage negotiations, the economy could become collateral damage.
In 2016, Numsa — one of SA’s biggest unions, with 450,000 members — emerged from protracted wage talks with a three-year agreement of a 10% increase for the first year, and 8% for each subsequent year.
What will follow, with that agreement having lapsed on June 30, is not yet clear — though employers favour the stability a new multiyear agreement would bring to the sector.
But the preliminary talks got off to a bad start, with the AMEO refusing to accept a precondition that workers will receive back pay in the event that negotiations are protracted. The employers’ association wanted the matter to be tabled as a demand, while Numsa said this has never previously been an issue in the industry.
The FM understands that Numsa tabled its wage demands last week, but later withdrew them, before retabling a new version on Friday. In that version, the union is demanding a one-year, 20% wage increase across the board. Other demands include morning-, afternoon-and night-shift allowances of 10%, 20% and 30% each; an annual bonus increase from 8.33% to 12%; six months’ paid maternity leave and 10 days’ paid paternity leave; and a transport allowance of R5,000 a month.
Numsa also wants clerks, welders, spray painters and metal-finish workers to be paid an extra allowance equal to 20% of their salary, among other demands.
On Sunday, AMEO spokesperson Andile Dlamini said: "The formal negotiations with our labour partner Numsa will start in July. Until the parties have met and shared their demands at the negotiation table, AMEO will not be in a position to comment."
Numsa national treasurer Mphumzi Maqungo says the wage talks are likely to be difficult. And while the union is not overzealous about downing tools — it doesn’t want to be seen as unsympathetic to SA’s economic woes — it has not ruled out strike action.
What it means
Numsa doesn’t want to be seen as unaware of SA’s economic woes, but has not ruled out strike action
Labour analyst Michael Bagraim says a strike will be devastating for the sector, and may backfire.
"The industry is on its knees because no-one is buying new cars," he says. "That’s the one problem. The other is that this industry is slowly but surely mechanising. Going on a strike is encouraging the manufacturer to mechanise — that’s all it’s doing."
Bagraim says SA needs to encourage investment — but much international investment is already going into mechanised production.
If Numsa strikes, "it will be using its members as cannon fodder and forcing employers to say: ‘It’s better for us in the long term not to have employees, let’s mechanise’", says Bagraim. "But we have 10-million unemployed people; we need jobs."
He’s also concerned about how destructive a strike would be for the economy — particularly for the Eastern Cape. The province is home to Volkswagen and Ford manufacturing plants in Nelson Mandela Bay, and the Mercedes-Benz plant in East London.
There’s no doubt the Eastern Cape will come to a standstill in the event of a strike, says Bagraim. "The car industry is the lifeblood of the [province]."
Econometrix chief economist Azar Jammine echoes his concerns.
He believes Numsa — which was expelled from labour federation Cosatu in 2014, and has since become an affiliate of the SA Federation of Trade Unions — is damaging SA’s growth rate.
He says: "It looks like its leadership is involved in a power game — not only against business, but against the rest of the trade union movement."