SHIRLEY DE VILLIERS: New law the final nail in restaurants’ coffin?

At lunchtime on Monday, Stats SA released its latest figures for SA’s beleaguered food and beverages sector. It was, as you can well imagine, a horror show.

Between the lockdown, a curfew, reduced seating due to social distancing, and a general climate of fear that has kept people home, the sector was down 36.3% in November against the same month last year.

The main contributor to that drop came from restaurants and coffee shops – down 51.3% on 2019.

(For the brave of heart, the full release is available here; the graphs alone tell a tale of woe.)

Since then, of course, restaurateurs have had to contend with a new round of load-shedding and government’s ban on the sale of alcohol.

It has put the screws to an industry that was already on the rack.

Ironically, Monday was also the day that a raft of new bargaining council rules came into effect for the restaurant sector. If the alcohol ban doesn’t do in those restaurateurs still standing, the new regulations may well.

As of this week, restaurants and fast-food outlets will be required, by law, to add the following monthly costs to their overheads:

• R5 per employee for bargaining council expenses;
• A R3 dispute resolution levy;
• R25 general fee;
• R12.50 funeral benefit;
• Provident fund contribution of 5% of each employee’s wages;
• R17.50 for each employee where workers are required to wash their own uniforms; and
• An annual bonus equivalent to a week’s wages

And that is all in addition to new mandatory hourly wages – with an increase of 1.5% above inflation from May.

Employees, for their part, will have an equivalent amount deducted from their pay for bargaining council expenses, dispute resolution, a funeral benefit and a provident fund contribution.

(Labourwise director Jan Truter offers a useful roundup of the agreement here.)

Quite what the bargaining council plans to get up to with R10 a month from literally hundreds of thousands of workers is unfathomable. But, all told, the new regulations are reported to add about 16% to restaurant overheads – an additional burden they can ill afford in the current climate.

As Joburg staple The Local Grill noted in court papers this week – filed in support of SAB’s legal action against the alcohol ban – it was barely breaking even in December. The reintroduction of the alcohol ban on December 29 has all but pushed it over the edge. With turnover down 30%, it’s unlikely to keep its doors open beyond the month end.

And that was before the government so nonchalantly slapped on these new costs.

Not going down without a fight

Of course, it doesn’t seem to matter that most of the affected establishments are not party to this agreement.

See, on January 8, labour minister Thulas Nxesi extended the agreement of a new bargaining council – the council for fast food, restaurants, catering & allied trades, which registered last year – to the sector as a whole (barring Gauteng, where employers are already subject to similar agreements).

Why that has been allowed, though, is now the subject of legal action.

This week, hospitality trade association Fedhasa launched an urgent interdict against the regulations – in a strange twist, seemingly with the blessing of the labour department, as Luke Daniel writes for Business Insider.

According to Fedhasa, the two employers’ organisations that are party to the agreement – the Catering & Tearoom Association and Guardian Employers’ Organisation – each claim just 5,000 members, most of them in Gauteng, Daniel writes.

By law, bargaining agreements only become binding on the broader sector if the parties represent an industry majority, as determined by the labour registrar. Given that the sector reportedly employs more than 300,000 workers – and that Gauteng is excluded from the agreement – the two employers’ associations would seem to be missing that majority by a country mile.

So why exactly the labour registrar deemed them “representative” is anyone’s guess – and it will now be for the courts to find an answer to this puzzle.

It’s not necessarily that restaurateurs are outright opposed to the regulations (though the existing sectoral framework seemed to work just fine). It’s that the timing simply couldn’t be worse.

As Restaurant Association of SA CEO Wendy Alberts told The Citizen: “They can’t issue new regulations in the time of disaster; it’s unfavourable for the industry”.

Especially when it’s an industry that, Alberts points out, has recently shed tens of thousands of jobs.

It also didn’t help that the decision came like a bolt from the blue. Chefs Warehouse owner Liam Tomlin, for example – who runs seven restaurants in the Western Cape, employing about 250 people – reportedly found out about it on social media.

It has, it seems, become de rigueur for the sector to be left in the dark – and not just by Eskom.  It not only makes a mockery of the government’s pretensions towards social compacts; it also gives the lie to its much-touted “support for small business and entrepreneurs”, of which there are many in the sector.

A cautionary tale

In February last year, FM economics editor Claire Bisseker painted a devastating picture of just how detrimental blanket bargaining council regulations can be to small businesses.

At the centre of her article was craftsman Stuart Douglas, who spent years building up a high-end furniture-making company in the Western Cape, only to have it strangled in 10 weeks by sectoral bargaining council rules.

It wasn’t just the cost of implementation that was onerous. The administrative burden of the council’s reporting requirements meant he would have had to hire a full-time assistant just to fill out the forms.

To comply with the new rules, Douglas had to consider introducing an automated clock-in system that would cost R15,000 and introduce a rigidity in the workplace that was to the detriment of his staff. And his employees themselves were loath to have deductions taken off their salaries – not just because they preferred cash, but also because they didn’t trust the council provident fund.

It’s a cautionary tale of everything that can go wrong when an overly bureaucratic system slaps blanket rules on big and small business alike. And it’s further evidence of the heavy hand of state.

As the adage goes: when all you have is a hammer, you’ll treat everything as if it were a nail.

*De Villiers is the features editor of the FM​