Labour 

More challenging wage negotiations in key sectors this year

(Published in The Monday Briefing 2015 )

By Stef Terblanche

Having just emerged from one of its toughest years ever in labour relations terms, South Africa seems headed for another challenging year on this front. Wage negotiations will be taking place in, among others, the key public and mining sectors. Each of these sectors could produce two separate sets of crippling strikes and/or other developments if disputes develop.

In the public sector existing wage agreements expire this year in the national and provincial public services, as well as separately in the municipal sector. Wage negotiations in the public sector have already commenced in the Public Service Coordinating Bargaining Council  (PSCBC), while separate wage negotiations for municipal workers will take place in the SA Local Government Bargaining Council (SALGBC) at a later date.

In the mining industry separate existing wage agreements this year expire in the coal and gold sectors. New ones will be negotiated in their separate centralised bargaining forums, unlike in the platinum sector where no central bargaining structure exists.

Background - Troubled outlook

Linked to issues such as the constrained economic environment, the ongoing Eskom power crisis, and the build-up to municipal elections next year, the outlook becomes rather troubled. A negative turn in both the public and mining sector negotiations could, for instance, impact directly on Eskom and push it further into crisis territory with devastating consequences for the economy.

Economists, the International Monetary Fund and others seem to agree that average growth for 2014 may barely have reached 1.4% and there seems little hope, if any, of much improvement in the near term. Achieving the average 2.3% growth predicted for this year is conditionally subjected to a number of big risks. Right at the top of the list is wage negotiations and labour instability.

And apart from government departments announcing early in 2014 what they intended doing in respect of implementing the National Development Plan (NDP), there has been very little or no further movement on that front – so no help there. And government’s infrastructure programme is also coming along at a far slower pace than was hoped for or is needed.  

Then there is the threat of more downgrades for South Africa by ratings agencies in 2015 if Finance Minister Nhlanhla Nene’s Budget on February 25 fails to persuade them otherwise. Thus the spectre of devastating junk status also still looms.

Metals prices are already depressed and the World Bank believes that any further decline will severely  affect a large number of countries in sub-Saharan Africa, including South Africa. The Bank also warned that lower growth in emerging economies to which sub-Saharan African countries export, is a major external risk for these African countries.

South Africa’s mining sector already finds itself in injury time fighting for survival following labour relations turmoil, electricity constraints, high labour costs, devastating strikes and violence, negative market conditions and weak commodity prices, and political and regulatory uncertainty, among others. Restructuring and job losses – which will invite further negative labour and political reaction – seem to be inevitable in a number of instances, while disinvestment by multinationals is becoming more of an option.

Commenting on BHP Billiton’s plans to reduce its presence in South Africa, the Financial Times of London says “South Africa has been falling out of favour as a place for global mining companies to invest amid labour unrest, rising power costs and ageing mineral deposits”.

With mining stakeholders and other interested parties from all over the world converging on Africa’s premier mining event, the 2015 Investing in African Mining Indaba in Cape Town early in February, there will be intense scrutiny of the South African mining industry’s prospects by its global peers.

It is against this very discouraging background that the high risk, potentially disruptive wage negotiations in the public, municipal, coal and gold sectors loom. All of the above listed conditions and factors could be further adversely affected if the wage negotiations end in disputes resulting in strikes.

Gold and coal sector negotiations

A 2-year wage increase agreement negotiated between employers and unions in the gold sector in 2013, expires in June this year. It is therefore anticipated that new wage negotiations will commence in this sector any time from about April onwards. If strike action should arise, it will most likely be around June/July.

In the coal sector a two-year wage agreement signed between employers and unions expires at the end of September. Negotiations for a new wage deal are likely to start around July or August. If it goes that way, strike action is possible around September/October.

Wage negotiations in both the gold and coal sectors are unlikely to escape the impact of intense ongoing turf battles among competing unions.

Unions represented in the gold sector include the National Union of Mineworkers (NUM), which is aligned to the Congress of SA Trade Unions (COSATU) and politically to the African National Congress (ANC); the previously independent NUM-breakaway Association of Mineworkers and Construction Union (AMCU), now affiliated to the National Council of Trade Unions (NACTU) which comes from an Africanist/Black Consciousness political background; the previously largely white Solidarity union; and the 72,000 member general union United Association of South Africa (UASA) which is affiliated to the Federation of Trade Unions of South Africa (FEDUSA) which in turn represents approximately 500,000 members across various sectors. Union representation in the coal sector is similar.

While not officially represented in either sector as a union, the National Union of Metalworkers of South Africa (NUMSA) which was last year expelled from COSATU following the union’s withdrawal of support for the ANC, is also increasingly recruiting and organising in the mining sector. This ideologically far left and historically militant union could in future therefore also become more of a factor in the mining sector.

It is anticipated that wage negotiations in the gold sector this year will seek to address wage inequality between different categories of workers. This year’s wage increase demand is likely to come in at a double digit figure well above inflation. Over the past decade the average basic wage increases in this sector were always above the consumer price index (CPI), one of South Africa’s two primary measures of inflation.

The issue of a national minimum wage may also come to the negotiating table after being raised at the national labour relations indaba held in November last year. The mining industry is not in favour of a single minimum wage across all industries or even across all mining sectors as it believes there are too many differences and variables at play. But the government has in recent times on various occasions promised to take further the issue of a national minimum wage.

This year is effectively going to be an election year in the build-up to next year’s municipal elections in which the ANC will be determined to stem or reverse the losses its suffered in last year’s national and provincial elections. In this it will rely heavily on the help of its trade union allies. Therefore these are factors that could influence government’s stance on a national minimum wage.

Labour relations in the mining sector will this year also be affected by the possibility of restructuring of mining companies and accompanying job losses as mines try to contain costs in a difficult operating environment. At least three major companies – AngloGold Ashanti, ArcelorMittal and Anglo American Platinum – have indicated that they may restructure and scale down their workforce. BHP Billiton meanwhile is substantially reducing its South African presence as part of a spin-off strategy announced in July last year, with the major impact going to be in the coal sector. It is believed some of BHP Billiton’s plans are being blocked as the company finds itself entangled in the “strategic coal” battles between Eskom, government and coal mines.

One union leader has described the year ahead as “the year of bloodbath for job losses”, while both the NUM and AMCU have indicated they will strongly oppose restructuring that leads to job losses.

It is too early to tell what the full list of demands will be that the unions will bring to the wage negotiations table, or if these issues will or can in any way be directly tied in to them. But these issues could heighten tensions in labour relations in general and could therefore also influence the level of aggressiveness unions may display in the wage negotiations.

On the upside, following the protracted AMCU strike in the platinum sector and the damage done to both workers and mining companies, the parties to the wage negotiations in the coal and gold sectors will most likely be sensitive to try and avoid a repetition of that strike. And with the new mineral resources minister Ngoako Ramatlhodi’s style of getting involved up front, government will also do everything possible to avoid another platinum type strike.

Public sector wage negotiations

The public sector wage negotiations kicked off on 30 September last year and were set to resume in the second week of January this year after unions rejected the state’s last offer in December. Unions are currently awaiting a new offer from the state, but for now their positions remain far apart as the following shows:

Unions

State

·         Want single year wage deal ·         Want 15% wage increase ·         Want housing allowance increased from R900 to R3000 ·         Employees to select a once-off payment date for 13th cheques ·         Government Employees Medical Aid Scheme to be increased by 28.5% ·         Salary levels 1 to 3 to be compressed and level 4 to be an entry level ·         Unions want 10 extra days of family responsibility leave for parents with children who have "severe special needs" ·         6 months paid maternity leave (additional 2 months), and 2 weeks paid paternity leave

·         Wants multi-year wage deal ·         Offers 5.8% this year with subsequent years based on the average projected CPI rate ·         No offer ·         Agreed ·         The medical aid contribution would be adjusted by 17.6% ·         No offer ·         State offers additional 2 days of family responsibility leave ·         No offer

Among the parties to the negotiations are the employer being the Department of Public Service and Administration (DPSA), and 16 public sector unions, but the main COSATU unions involved are the key “pro-alliance” unions. Among the main unions participating in the negotiations are the Public Servants Association (PSA), South African Policing Union (SAPU), the National Education, Health and Allied Workers Union (NEHAWU), the Police and Prisons Civil Rights Union (POPCRU), the National Professional Teachers Organisation of SA (NAPTOSA), the SA Democratic Teachers Union (SADTU), the Democratic Nursing Organisation of SA (DENOSA) and the Health and Other Service Personnel Trade Union of SA (HOSPERSA).

Together the unions claim to represent 1.3-million public servants but this is not a verified figure relating only to public servants whose unions are involved in these negotiations. Nonetheless, of these 746,000 belong to unions affiliated to COSATU. The total membership figure for all public sector unions in COSATU currently stands at 922,600 out of a membership total of 1.82-million. The COSATU-affiliated SA Municipal Workers Union (SAMWU), which will be negotiating its wage demands separately in the SALGBC , has a current membership of around 154,000.

The public sector unions have adopted a tough, non-compromising stance. How much is just bluster remains to be seen. But it will be the first big public sector wage negotiations to take place since NUMSA was expelled and the public sector unions together became the dominant bloc in COSATU. It remains to be seen if they will flex this muscle in ways that could bring COSATU into a direct confrontation with the ANC and government.

There might well be an expectation that government will have to pay a price for their support in the forthcoming municipal election campaign and also as payback for their support of COSATU and the ANC when some 8 other unions sided with NUMSA after its expulsion. It is especially NEHAWU and SADTU – two of the bigger unions – that were very vocal in their support for the ANC-backing leadership of COSATU and campaigned for the expulsion of NUMSA. But with COSATU settling into a more limited role with the Alliance after NUMSA’s departure these unions, remaining firmly in the ANC political fold, could just as easily prove in the longer run to be more compliant. But that is a long shot.

At R440-billion for the year ending March 2014 the public sector wage bill is the largest single expenditure item that the government has to meet and has long been a key concern for the Treasury. In 2013/14 the public sector salaries made up 39.5% of the government's consolidated non-interest expenditure. Former Finance Minister Pravin Gordhan’s last Budget tabled in 2014 allowed for annual growth of the wage bill of an average of 6.4% over the next three years. Later in 2014 new Finance Minister Nene, in his first Medium Term Budget Policy Statement (MTBPS) warned public service unions there was no money for higher than inflation wage demands and that if they fight for such they will put the country’s economic future at risk and leave government no choice but to retrench staff or cut back on government services. In his MTBPS Nene allowed for a 6.6% increase annually over the next three years…a huge gulf away from the 15% being demanded.

In September Outgoing Reserve Bank Governor Gill Marcus also voiced concern of over the high wage increase demand. And should government accede to the current high demand by the unions, or anything well above the consumer price index (CPI), there will most likely be a negative reaction from ratings agencies with all the knock-on effects coming into play.

During a presentation in Parliament COSATU strongly criticised Nene and said he could not unilaterally decide in advance of wage negotiations what the size of the wage increase would be. Should a dispute seem likely to be declared the unions may, however, want to wait for this year’s Budget on 25 February before making any strike moves in the hope of a better offer.

There are also a number of other issues being negotiated between the unions and the state employer at present not tied specifically to the wage negotiations, but which could possibly impact on them or be drawn into the fray, and which are also supposed to be taken further in January, such as a revised draft remuneration policy and Performance Management and Development System (PMDS). It therefore seems likely that negotiations will continue between now and March, and if a strike is to be called, it will be set for late March, or April. But anything remains possible at this stage.

As always the public sector wage negotiations will be pretty much a loaded political issue where spending restraints have to be weighed against potential political costs. In 2012 the government caved in to the public sector unions just before the ANC’s national elective conference where their support for the Zuma camp would be critical. In the end Finance Minister Gordhan and the Treasury had to scratch around for money to cover these higher than budgeted-for increases. Nene lacks a strong political power base and it is questionable whether he will receive much political support for his plans to cut R25-billion off government expenditure if it means going up against the dominant unions in COSATU so short before key municipal elections.

Although direct comparisons are difficult to draw between countries because of a variety of factors, a cursory comparison between South Africa and some other countries is  interesting. In Jamaica, for example, wage negotiations are scheduled for later this year after public sector workers previously accepted a wage freeze due to the then prevailing economic conditions. In Israel, which also will be having public sector wage negotiations later this year, the average public sector wage increase last year was 2.75% above that country’s inflation rate. Australia also starts public sector wage negotiations later in the year after  median public service wage rises outstripped CPI increases by 14 per cent over the past decade.

SAMWU negotiations

The public sector wage negotiations may perhaps not even be over and settled by the time SAMWU and its municipal workers also go into battle. The union will be holding a bargaining conference in late January to get a mandate of demands to take to the employer. Negotiations could be opened shortly after the conference. A three-year wage deal signed in July 2012 expires mid-year.

Again this will be a politically charged bargaining session, with SAMWU being a vital component in the ANC’s 2015 local elections prospects. SAMWU also has a specific political axe to grind with government over the enactment of the Public Administration Management Act by President Jacob Zuma in December 2014 which SAMWU has rejected as being unconstitutional and anti-workers.

The union has in the past been one of the most militant and aggressive unions during strike action, its members partaking freely in trashing cities, violence and destruction of property. There is no reason to believe that should negotiations deadlock in dispute, things will not again go the same route and bring cities and towns to a standstill.

Conclusion

Thus, in the final analysis it seems South Africa is in for another tough year on the labour relations front. On top of the four key sectors discussed above haing a high potential for strike action, there are of course a number of other issues, developments and possible labour action in other sectors also to consider, among these the ongoing political ructions in COSATU, NUMSA’s plans on the far left, and the release of the Farlam Commission’s Marikana report.

After the enormous damage done all-round by the prolonged platinum strike last year, two more mining sectors are at serious risk, with the obvious negative impacts it could have on the overall economy. And on the public sector front South Africa is running the risk that governance, administration and service delivery on  all three levels of government could be brought to a standstill this year if wage negotiations become deadlocked. Again the serious implications for the country are pretty obvious.