Its time to rebuild trust
In my last note I put a challenge to our employer colleagues on the Metals and Engineering Industries Bargaining Council (MEIBC) that given that our economy is on its knees – now would be a good time to rise above the rhetoric and play a more constructive role in the affairs of the Council. After all, I said, employers represented by the Employer Organizations on the MEIBC have far more in common than what they think.
If we are going to survive this current crisis, we know that government is pinning its hopes of an economic revival on the private sector. The President is well aware that he cannot solve the country’s problems alone. The state needs the private sector to step up in a big way.
For South Africa, our economy and the metals and engineering industries to dig itself out of the current crisis, business has to take the lead.
Whilst it is up to employers to keep the wheels of industry turning, the job of all role players on the MEIBC is to create a predictable, stable policy environment and for this to succeed requires trust.
Over the last ten years, trust between employer organizations on the bargaining council has all but been eroded. This has severely hampered the work of the bargaining council, has almost led to its liquidation and created a toxic and dysfunctional operating environment that has made it impossible to even begin addressing the real challenges facing our sector.
The MEIBC, once the benchmark, for all Bargaining Councils, is today a shadow of its former self, lurching from one crisis to the next. Staff are demoralized, many have left and it’s a miracle that they have been able to keep the doors open, given that their existence depends solely on two income streams, the administration and dispute levy, both of which were last reviewed in 2011.
Bargaining Council are created by the parties that sit-on them, to provide a platform to conclude agreements covering terms and conditions of employment, including social security benefit fund agreements. More importantly, the platform created by a bargaining council, in bringing organized business and labour around a single table, in an atmosphere of collaboration and joint problem solving ideally should be aimed at highlighting, debating and addressing the many obstacles standing in the way of meaningful interventions in moving the needle forward on job retention, creation and economic prosperity.
This sadly, has not been the case on our Bargaining Council for many years. It serves no purpose to allocate who is mainly, partly or not at all to blame for this sorry state of affairs. As participants and I refer specifically to the employer representatives on the Council, are all culpable, in varying degrees.
The point here is that trust needs to be rebuilt, not so much as between the trade unions themselves or in the engagement process between trade unions and employers but instead amongst the different employer groupings on the Council.
This is where the relationship, dynamic and mind-set to move forward has completely broken down. It’s a tragedy that more often than not unions on the MEIBC are able to find a single unified voice as opposed to the differing and bickering voices that make up the employer bloc.
Trust is built over time and requires a level of transparency that has not been forthcoming from within the employer bloc. Rebuilding trust is difficult, but is vital if the MEIBC is to play a pivotal role in facilitating meaningful and constructive dialogue between all social partners.
The stakes are higher than they have ever been. Our economy is under siege as it battles a job, growth and hunger crisis. A devastating 63.9% of South Africans under the age of 24 are unemployed, consumer inflation is at a 13 year high and one in four people live below the food poverty line.
Employer representatives, duly elected by their respective constituencies, simply cannot afford to play fast and loose with the trust members have invested.
It’s high time employer representatives elected to serve on the Council bury the hatchet and take a step forward and ask: how can we make a meaningful contribution to the crisis facing our sector, how can we pull together and build the MEIBC that we are supposed to serve and finally, how can we move beyond our narrow and fixed paradigms.
I believe we have no choice; we can continue to quibble, disagree and look to score points off one another or we can wipe the slate clean and start afresh. The choice is quite simple, change the paradigm or continue on the path to eventual insignificance.
Who is prepared to lay down their arms (figuratively speaking) and take a seat at the table with a view on focusing on what unites us as opposed to what keeps us apart?
Lucio Trentini
SEIFSA Chief Executive
The economy cannot afford a strike at Transnet
SEIFSA understand all too well the consequences of industrial action in the context of wage bargaining. A four-week strike in 2014 followed by a three-week strike last year left many an employer on the brink of contemplating closure.
Arguing that the right to strike is enshrined in our constitution and strike action is a functioning mechanism of collective bargaining is ignoring the obvious and avoiding reality. South Africa is on its knees. The stakes are higher than they have ever been. Our economy is under siege as it battles a job, growth and hunger crisis. A devastating 63.9% of South Africans under the age of 24 are unemployed, consumer inflation is at a 13 year high and one in four people live below the food poverty line.
A full-blown strike at Transnet, which seems unavoidable, will have a serious effect on the economy, it will halt exports and put thousands of jobs on the line. Under the current harsh economic climate, Transnet as with Eskom, is crucial to the country’s economy. Transnet’s rail and port facilities are key to exporting the country’s bulk commodity exports such as coal, iron ore, chrome and manganese.
Exporters rely heavily on efficient rail networks and ports, but as we know, Transnet has been operating below capacity for years as it grapples with a shortage of locomotives, cable theft, vandalism, poor maintenance and outdated and slow port infrastructure. This substandard service has had a significant impact on the local steel industry and its ability to manufacture steel to meet its customers’ demands. In some instances, primary steel producers have had to shut down operating plants due to the unavailability of raw materials, at great cost to their businesses and the economy.
A full-blown strike at Transnet, will add to the damage suffered by the South African economy. This will be as bad as load-shedding in terms of economic impact. For an economy battling to maintain momentum this could well be the final nail in the coffin.
With load-shedding being reintroduced as from today, workers threating to paralyze Transnet and Transnet having already declared force majeure, we appeal for a constructive approach that seeks to advance the interests of our country.We know that it will not be easy to make compromises, but we appeal nevertheless for a win-win approach to the negotiations, as opposed to a winner-takes-all approach. Our plea to all the negotiators, and to those from whom they obtain their mandates, is that you rise above your narrow interests and put the interests of the South African economy first, and look to settle quickly.
Lucio Trentini
SEIFSA Chief Executive Officer
Business Unity SA (BUSA) statement on Eskom loadshedding
Business Unity SA (BUSA) is extremely concerned by the recent spate of loadshedding, which has, yet again, reached stage 6 We recognise and appreciate that good progress has been made in implementing the Energy Plan announced by the President a few weeks ago, but the economic damage of the ongoing loadshedding is severe and there must be an immediate intervention to deal with the crisis to at least manage loadshedding better. Stage 6 load shedding is a major blow to an economy that is already battling to achieve growth, because of some global headwinds, but primarily because government is still not taking the tough decisions on structural reforms and priority interventions to increase investment and stimulate growth.
BUSA has been urging government to urgently implement identified priority interventions. The second quarter's 0.7% decline in the economy was mostly caused by the continued blackouts, which have made this year the worst on record.
The government needs to move urgently on the following:
• A short-term plan to urgently enable ESKOM to purchase power from all available resources and to step up repairs to plants.
• Fill vacancies on the ESKOM board, with relevant expertise urgently needed on the board. This will instil confidence that government is, at least, addressing this critical governance matter.
• Be more granular and detailed on exactly what is causing the current spate of loadshedding. Are there instances of sabotage? If so, what is being done about this? Are there shortcomings in management or implementation? If so, what is being done about that?
• Identify any critical shortage of technical expertise at ESKOM and fill these. The private sector has consistently indicated its willingness to assist with this, through initiatives like TAMDEV, which has a database of broad experts and is already deploying these into parts of government.
Estimations are that the current loadshedding is costing SA around R 4 billion a day! The country cannot afford this, and it is exacerbating an already strained socioeconomic situation. Small and medium businesses are experiencing severe difficulties, and many may not be able to recover from this. Also, the disruption to the day-to-day lives of ordinary citizens is severe.
Business is assisting government with the President’s Energy Plan, and we are ready to support immediate interventions to address the immediate crisis, or at least ameliorate it. We await government’s lead!
Labour court dismisses NEASA and SAEFA challenge against extension of the Main Agreement with costs
Let’s be clear. Our constitution guarantees NEASA, and for that matter SAEFA, the freedom to challenge collective bargaining any way they see fit. The constitution guarantees NEASA and SAEFA the right to pick and choose and interpret as they wish. What is deeply disappointing, however, is that NEASA and SAEFA are hell-bent on favouring their narrow agendas above the big-picture consequences of their actions.
Thanks principally to the efforts of NEASA (and SAEFA lately), all efforts since about 2011 to extend the main agreement of the MEIBC to non-parties has been scuppered. This has left the untenable situation that non-parties to the metal and engineering industry, being the industry over which the MEIBC presides, are not bound by what had been negotiated and agreed to at industry level for the whole industry.
This not only makes proper enforcement of minimum conditions of employment for the industry virtually impossible, but leads to a disparity of conditions of employment in the industry. It makes it possible for individual employers to gain a competitive advantage over others in the same industry off the back of the remuneration and conditions of employment of employees, which is not acceptable. This in part explains the extensive efforts since 2011 to finally get a binding main agreement in place for the whole industry.
It is simply irrefutable that employee parties to the MEIBC stand to suffer a whole lot more than any prejudice NEASA and SAEFA members stand to suffer. As NEASA and
SAEFA are the only parties out of 19 parties to the Main Agreement, it is only their members that would benefit. This is unduly prejudicial and unfair to the industry as a whole and in particular the objectives all bargaining councils are designed to achieve.
The Court unequivocally concluded that NEASA and the SAEFA simply failed to make out a proper case and accordingly Judge Snyman had no hesitation but to find the awarding of cost against NEASA and SAEFA wholly appropriate and justified.
In the eyes of the Court, this application should never have been brought in the first place. This matter, the Court concluded, was nothing more than an ill-fated attempt at an artificial construct to get out of the Main Agreement.
The most stinging remarks appear in the closing paragraphs of the Judgment where Judge Snyman concludes that “this kind of conduct is not in the interest of an orderly and effective bargaining council whose very purpose it is to take care of an industry. It is tantamount to eroding the MEIBC from within.”
The matter was dismissed in its entirety, and NEASA and SAEFA are ordered to pay the costs of the respondents.
To read the full judgment click here
SEIFSA calls on M&E sector to celebrate greatness at Awards for Excellence
The Steel and Engineering Industries Federation of South Africa (SEIFSA) will celebrate companies in the Metal and Engineering (M&E) sector that have displayed innovation, competitiveness and excellence at the 2022 SEIFSA Awards for Excellence.
“SEIFSA is calling on employers in the sector – including those that are not SEIFSA members – to speak up and have their voices heard by entering the Awards for Excellence, which provide a platform to celebrate your achievements,” says SEIFSA CEO Lucio Trentini.
The awards were launched in 2015, at a time when the sector faced turbulent economic conditions as slow growth, rising input costs and unreliable energy supply took their toll. Seven years later, in the wake of the Covid-19 pandemic and amid the fallout from Russia’s invasion of Ukraine, the need to celebrate companies that have prevailed and even strived despite the challenges remains.
Companies keen to share their achievements can enter online, entries close on September 30 and the ceremony will take place on 18 November 2022.
There are ten primary award categories, with entrants assessed according to their performance during the year under review:
- Most Digitally Innovative Company Award recognises the enterprise using new technologies and showing innovation in their approach to projects and/or their business.
- Most Transformed Company Award for the company that is most transformed in terms of ownership and the composition of its board of directors, executive management and managerial team, as well as skills development and enterprise development initiatives.
- The Best Customer Service Award for the company that receives the best/highest rating from its customers for its customer service.
- The Workplace Health and Safety Award acknowledges a company's best-practice approaches and achievement in workplace health and safety.
- The Company Artisan Training Award for the company that has the highest activity in artisan training.
- The Corporate Social Responsibility Award for the company whose CSI project makes the biggest impact on the lives of its beneficiaries.
- The Environment Stewardship Award recognises a project in the M&E sector that exemplifies the practices of environmental stewardship.
- The Business Resilience (Covid) Award for the company that showed resilience, agility and adaptability in 2020 during the Covid-19 pandemic.
- The Young Entrepreneur Award for a business owned by a person 35 years or younger that has demonstrated growth for over two years and contributed to job creation in the industry.
- The Businesswoman of the Year Award recognises a woman who runs a successful business in the M&E sector and who has contributed significantly to the development of sector.
There are three internal SEIFSA awards:
- The Association of the Year for the most active SEIFSA-affiliated association.
- The Bursar of the Year for the bursar with the highest final academic average in 2021 and who passed all their modules/subjects.
- Recognition of the Graduate Class of 2021 Award for the beneficiaries of the SEIFSA bursary in 2021, who graduated in 2022.
“By acknowledging past entrants and celebrating winners, we also continue to encourage players in the metals and engineering sector to continue to work hard and to strive for excellence in all that they do,” says Trentini.
Click here to enter SEIFSA AWARDS FOR EXCELLENCE
Extension of a Bargaining Council Agreement is a Key Ingredient in Ensuring Labour Market Peace, Stability and Certainty
A lot has been written about the extension of collective agreements and particularly those covering terms and condition of employment in the metals and engineering industries.
The starting point in responding to these criticisms is to acknowledge that the extension of a bargaining council’s collective agreement is not unconstitutional. This view was upheld by Judge John Murphy on behalf of a full bench of the North Gauteng (Pretoria) High Court in the 2016 Free Market Foundation (FMF) v Minister of Labour & Others Judgment.
The argument that collective agreements adversely affect non-party employers by requiring them to pay higher wages than they would otherwise have done may well be correct, but the question is whether our critics can take the same narrow view.
Labour law is derived from our Constitution, which is dedicated to the achievement of social justice. Fundamental to this, as Marikana reminded us, is the reduction of inequality.
Collective bargaining is a cornerstone of the system and the reduction of disproportionate income differentials is one of its purposes. Add to this the right to strike, which is constitutionally entrenched, for the very purpose of allowing workers to exercise economic pressure – in other words, forcing employers to pay higher wages than they would otherwise have done – and it becomes less obvious why collective bargaining aimed at achieving the same outcomes should be regarded as being reprehensible.
The point is that Section 32 of the Labour Relations Act (LRA) expressly empowers – indeed, requires – Bargaining Councils and the Minister of Employment and Labour to follow a specific procedure for extending bargaining council agreements. This procedure was agreed upon in 1995 by the parties to NEDLAC, including the representatives of business. Twenty-seven years on, the system stands accused as being unfair. In reality, arguments supportive of this view are, at best, inconclusive or, at worst, speculative.
No less contentious is the belief that the extension of bargaining council agreements is a significant barrier to job creation and that the millions of unemployed South Africans stand to gain employment if collective bargaining – and, implicitly, the extension of collective agreements – was done away with. Interestingly, less than a third of South Africa’s workforce is subject to bargaining council agreements and less than 5% is affected by extended agreements, thus leaving the greater part of the economy free from this real or imagined evil.
Collective bargaining at industry level, as the Court put it in the Free Market Foundation (FMF) v Minister of Labour & Others, “will be undermined if bargaining agents in a majoritarian setting were uncertain at the outset of negotiations about whether or not their agreements would be extended.” That is precisely what Parliament, in enacting Section 32 of the LRA, set out to achieve: in essence, to oblige the Minister to extend a bargaining council agreement at the behest of the parties (i.e., employers and trade unions), provided the formal requirements set out in Section 32 are met.
In particular, these requirements are that: one or more registered trade union/s whose members constitute the majority of the members of the trade unions that are party to the bargaining council vote in favour of the extension, and one or more registered employers’ organisations, whose members employ the majority of the employees employed by the members of the employers’ organisations that are party to or a registered with the bargaining council, vote in favour of the extension.
According to the latest Department of Employment and Labour determination of the representativeness of the Metals and Engineering Industries Bargaining Council, issued in terms of Section 49 of the LRA, the following Representative Determination is made:
- the trade unions party to or registered with the Bargaining Council represent 153 873 (32,81%) out of 468 874 employees engaged in the industry;
- of the 468 874 employees in the industry, a total of 308 605 (65,81%) of them are employed by the members of the employers’ organisations that are party to or registered with the Bargaining Council;
- the SEIFSA-affiliated employer Associations alone represent 56,15%, the National Employers Association of South Africa (NEASA) represents 19,15%, the Plastics Converters Association of South Africa (PCA-SA) represents 10,81%, the South African Engineers and Founders Association (SAEFA) represents 6,0%, the Confederation of Employers Organisation (CEO) represents 4,60%, the South African United Commercial and Allied Employers Organisation (SAUEO) represents 2.56% and the Federated Employers Organisation of SA (FEOSA) represents 0,73% of these employees.
After a bruising round of collective barraging last year culminating in a three-week strike that cost the industry in excess of R300m in lost wages per week and well over R600m in lost revenue, all five trade unions, who sit on the Bargaining Council, signed the 2021-2024 Settlement Agreement supporting its extension to non-party employers and employees.
In terms of current law and in-line with a Section 32 of the LRA, where an agreement is negotiated and concluded by bargaining agents who represent and employ the majority of employees falling within the bargaining council’s coverage, the extension of a bargaining council agreement is seen as a reasonable and necessary mechanism of collective bargaining and is a key ingredient in ensuring labour market peace, stability and certainty.
After all, this is the legislative model the social partners agreed on in 1995 and which Parliament duly enacted. Preventing, delaying and/or litigating against extension may delay the implementation of higher wage increases for non-parties, but the indirect effects are no less important. For the affected workers and their unemployed family members, this would almost certainly translate into greater distress. It is hard to reconcile this with the goal of social justice.
Lucio Trentini is the Chief Executive Officer of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).
The Main Agreement guarantees certainty, stability and peace
In an uncertain economic environment such as ours, businesses often strive to ensure that they maintain stability in as many aspects of their operations as possible. This time last year, employers and labour unions were in the thick of negotiations doing their utmost to construct a deal that would find favour with each-others respective constituencies. Regrettable we were unable to avoid a bruising strike but eventually we signed a three-year wage deal which laid the foundation for a settlement agreement widely known as the Main Agreement.
The Main Agreement is the only agreement that has been signed-off by and continues to enjoy the support of all the trade unions in the Metal and Engineering Industries Bargaining Council (MEIBC). It is unique in that aside from the eighteen SEIFSA affiliated Employer Organisations and the Consolidated Employers Organisation (an independent Employer Organisation representing 671 employers, employing 14 222 employees) who is also a signatory to the Main Agreement - no other employer organisation has an agreement covering the comprehensive terms and conditions of employment within the sector that is signed-off by all the trade unions.
Whilst critics bemoan, criticise and threaten never ending legal action against the Main Agreement and its signatories, over the last two decades they have failed spectacularly to come up with a better deal - blaming SEIFSA, the unions, the bargaining council, fellow employer organisations, who now apparently have stabbed them in the back and a litany of other feeble excuses for nothing short of their own lack of imagination and foresight.
Collective bargaining in South Africa and particularly in our sector, where we deal with some of the largest unions in the country is no easy feat – it’s tough!
Negotiations in the metals and engineering industry is a terrain for deeply contested ideas, creative thinking and eventually the crafting of unique and unparalleled deals not seen anywhere else in SA. In 2020 SEIFSA concluded a one-year wage freeze or stand-still agreement - a feat that remains unmatched in the South African collective bargaining landscape.
SEIFSA for years has pioneered long term agreements, wage modelling, defending to the hilt the right of labour brokers to practice their chosen profession no different to any other employer in our sector and a host of employer friendly terms and conditions of employment. Concluding deals requires a deep commitment to building respect, trust and relationships not only with one’s own constituency but more importantly with ones negotiating partners. Ultimately, collective bargaining is about relationships not power, possibly a lesson lost on our critics.
Any employer conducting business in the iron, steel, engineering and metallurgical industry, whether or not the employer is a member of an employer organisation, is legally obliged to register with the MEIBC. However, only employers who are members of an employers’ organisation that is a signatory to the collective agreement may make use of the various terms and conditions of employment contained in the Main Agreement.
Critics point to the wage rates contained in the Main Agreement as the key disadvantage of the agreement, but in doing so, they overlook the certainty, stability and peace that is guarantees.
We acknowledge that the wage rates contained in the Main Agreement particularly for employers who have been operating outside of the scope of the agreement for the last ten plus years are high, at least when compared to the national minimum wage of R 23.19 per hour. Last year’s settlement agreement seeks to address this in three ways, namely:
- Providing for a special phase-in dispensation to allow employers to gradually move from the national minimum wage to sixty-percent of the 2019/ 2020 minimum Main Agreement rate (i.e., R 29,73 at Rate H) by 30 June 2024;
- Reverting to the practice for all affiliated member companies to award wage increases calculated on minimum rates of pay (i.e., on Rands and cents) as opposed to a percentage increase on actual rates of pay - for last year, this year and next year. This is a significant break in practice that we’ve last seen almost 30 years ago; and
- Recognising that companies who elect to be covered by the Main Agreement through the special phase-in dispensation, will be permitted to award the rand and cents increases on what they are actually paying on the shop floor.
Wages, leave pay and leave enhancement pay aside, the Main Agreement offers a number of significant advantages for employers, for example:
- Simple guideline for the job grading of employees.
- Many terms and conditions of employment that employers take for granted and observe on a daily basis, such as hours of work, intervals and breaks, overtime rates, shift allowances, payment for working on Sunday and Public Holidays, to name a few, are all located in the Main Agreement.
- The Main Agreement contains three key provisions not found in either the Basic Conditions of Employment Act or the Labour Relations Act that allow employers to immediately respond to dips in their operating cycle caused by circumstances beyond their immediate control and implement short time, lay-off and/or being entitled to send employees home due to, for example, planned and/ or unplanned outages, load shedding and/or service delivery failures.
- The Main Agreement contains an important peace clause that protects employers from being approached to engage in plant-level bargaining, any form of industrial action during the currency of an agreement related to terms and conditions of employment and once gazetted this protection is extended to cover any trade union who may not be a signatory to the Main Agreement or registered with the bargaining council but has managed to recruit members on an employers’ shop floor.
- Over and above the special phase-in dispensation referred to above, the Main Agreement also contains a generic exemptions clause that allows any party employers to apply for exemption from any provision of the Main Agreement.
- The Main Agreement also contains an alternative working time provision that allows employers and their employees to reach agreement on a variety of alternative working time arrangements, ranging from averaging of working hours, working over week-ends at normal rates of pay, banking hours etc. to the extent that this provision refers to any alternative working time arrangement agreed between workers and management.
- In such instances, any working time agreement would trump the terms and conditions contained in the Main Agreement, with the employer retaining all the rights and protections contained in the Main Agreement.
Last year’s Settlement Agreement provides a unique opportunity for employers who have in the past opted to go it alone to align themselves with the Main Agreement with little disruption.
In an environment where service delivery is increasingly under strain and we are seeing a proliferation of trade unions across our sector compounded by the latest phenomenon of political parties beginning to venture onto the shop floor – the role of employer organisations to provide professional, mature and expert industrial relations advice and assistance is now, more than ever before, of utmost importance.
The choice for employers is whether the expert assistance that is so vital is done against a legal framework built on compliance, regulation and protection or a framework that will need to be negotiated at individual shop floor level in an environment and atmosphere that is becoming increasingly ladened with tension and anxiety. The Main Agreement provides that foundation and legal framework.
Lucio Trentini is the Chief Executive Officer of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).
Wage and Wage Related Exemptions and Special Phase-in Dispensation for the period 1 July 2022 - 30 June 2023
APPLYING FOR EXEMPTION FROM THE MAIN AGREEMENT WAGE INCREASES AND SPECIAL PHASE-IN DISPENSATION EFFECTIVE 1 JULY 2022
Introduction
SEIFSA, on behalf of the 18 affiliated Employer Associations, signed an agreement with all the trade unions in our industry on 21 October 2021 on the terms and conditions of employment for a three-year period ending 30 June 2024.
Exemptions Procedure
SEIFSA is aware that the current economic environment may pose severe constraints on certain member companies’ ability to implement the increases (see Appendix A) and these members are advised that the industry’s current wage exemption procedure continues to apply.
Furthermore, the parties have taken note that there are many employers who for one or other reason have been operating outside of the terms and conditions of the Main Agreement, particularly when it comes to rates of pay. The parties have agreed that encouraging these employers to come on board in one-step may not be feasible nor practical and will not assist in achieving the end-goal of parity on wages across the sector.
The parties have therefore agreed that in order to reach parity, phase-in will need to be approached in a stepped-phased approach and will form part of a broader project aimed at achieving parity with the Main Agreement in a managed manner over agreed time spans. Phase one of the project will focus on moving employers who may elect to be covered by the Main Agreement and/or have been operating outside of the Main Agreement to achieve 60% of the 2019/2020 Main Agreement minimum wage rates (see Appendix B).
The parties have agreed that 60% of the 2019/2020 Main Agreement minimum wage rates will be fixed for the duration of the 2021/ 2024 Main Agreement. Phase one of the project will end on 30 June 2024. The parties have agreed that during the currency of 2021/2024 Main Agreement the parties will agree on the modalities, goals, time-frames, and objectives informing phase two of the project.
Download the full management Brief on the procedure to apply for a Wage Increase Exemption
SEIFSA delegation meets with Eskom
As part of SEIFSA’s lobbying and advocacy initiatives a delegation from SEIFSA comprising Senior Executives, CEOs and the Office (L Trentini and T Chibanguza, SEIFSA CEO and COO respectively), met with the Group Chief Executive Officer of Eskom, Mr Andre de Ruyter on the 25th of April 2022. In attendance from Eskom were Mr Monde Bala: Group Executive Distribution and Nkosana Ntlekeni: Key Accounts Executive Manager.
The objectives for requesting the meeting towards the end of 2021 had been to open a channel of communication and on-going dialogue with Eskom with a view to identifying strategic initiatives that SEIFSA on behalf of its affiliated membership and Eskom, can work on collaboratively in contributing to resolving the challenges experienced in the energy supply industry (ESI).
To this end, the following agenda points were submitted to Eskom in advance of the meeting in order to guide the discussion:
- Discussion on Eskom’s long term strategic vision and plans on the following:
- Maintenance (preventative and unplanned outages);
- Staff costs; and
- Cost of electricity (price path).
- Discussion on Eskom’s long-term plans on accelerating alternative energy sources onto the national grid.
- Discussion on the feasibility of by-passing municipalities and companies paying their electricity bill direct to Eskom.
- Ongoing and further collaboration between Eskom and SEIFSA
This brief note highlights some of the key aspects that emerged out of the meeting
- Eskom outlined the precarious state of the national grid and the origins of the current challenges, which include a lack of historic maintenance and delays to building new generation capacity. While building the Medupi and Kusile power stations, the organisation ran its generation capacity very hard, measured by the energy utilisation factor, while simultaneously neglecting maintenance. This, we were advised, has resulted in the long-term deterioration of the existing generation fleet. In addition, Eskom is struggling with on-going technical build problems at Medupi and Kusile, resulting in a situation where the power stations that were meant to relieve supply shortages cannot be fully relied on as yet, to ease the supply deficit.
- Maintenance is currently at 12%-13%, much lower than what Eskom would want it to be. However, a careful balance needs to be struck between planned maintenance and supplying electricity to the economy, against the backdrop of the poor state of the national grid.
- The limitations to resolving the challenges include, a lack of:
- money: to adequately finance the maintenance program to the extent that it is required;
- time: a lack of head-room from a generation capacity perspective to remove units from production while at the same time supplying electricity to the economy; and
- skills: which have been lost over the years constraining the ability for Eskom to resolve the challenges facing the organisation.
- Persistent and endemic corruption, which continues to plagues the organisation. This in itself was framed as one of the key constraints to resolving the challenges of the organisation.
Outlook
- Greater private sector investment into electricity generation capacity was identified as a key enabler to resolving the electricity supply challenge. Eskom does not see its future role as being one where it will be the primary source of new large scale generation capacity (its balance sheet simply does not permit this).
- The unbundling of Eskom with a dedicated transmission company that will act as a system market operator, to facilitate buying and selling of electricity between electricity producers and end customers is seen as a key enabler to bringing on private sector investment. Eskom indicated that it is in the process of setting up the electricity trading platform.
- It was mentioned that the electricity tariffs that could potentially be achieved through this trading platform could be market determined, which would go a long-way towards controlling the pace and extent of tariff increases into the future.
- Eskom indicated that these unfolding processes will open business opportunities in the economy. Eskom intends to retire 22 GW of coal fired generation capacity by 2035. This, it was stressed, will presents opportunities to convert this capacity to gas, an important enabler toward a just energy transition. Greater solar and wind capacity will also need to be developed to compensate for retired coal capacity. The metals and engineering sector it was mentioned could set to benefit from these developments, along with other sectors of the economy.
- Eskom will be embarking on an 8000 km build program to strengthen and grow the transmission network to allow independent power producers access to the grid, would again presents opportunities for the sector and the economy.
Areas of collaboration between Eskom and SEIFSA
- On the opportunities that are unfolding from the developments in the electricity supply industry, a significant amount of effort needs to be invested in policy formulation on how the country can take full advantage of these opportunities. Localisation, local content, industry development incentives, designation, etc., will need to be explored further to determine decisions that are in the best interest of the sector and the greater economy.
- Eskom indicated a clear willingness to work with SEIFSA, representing its affiliated membership on these and other matters. This is an important development due to the potential cost implications for Eskom, whilst presenting opportunities to develop nascent industries within the sector and the country.
- Municipal debt was identified as a massive problem for Eskom (currently growing at R 7.3 billion per annum). Eskom has indicated that organised business organisations should be more involved in aspects relating to municipalities. SEIFSA on behalf of its affiliated membership, Eskom stressed, could play an important role in this regard, given the vast geographical spread of its members across the country’s multiple municipalities.
- Eskom indicated a willingness to further explore models of direct supply and payment between Eskom and end customers, however, Eskom stressed that any considerations in this regard need to take into account the sustainability of the municipalities. Eskom highlighted that every geographical area of the country is covered by a municipality, and therefore it would be ill-advised to pursue decisions that undermine the sustainability of the municipalities.
- Grid Access Unit (GAU): Eskom has set up a unit that manages aspects relating to accessing the national electricity grid. Regulated bids, which are facilitated through the Renewable Independent Power Producer Programme (REIPPP), we were advised are now much easier to manage. The challenge faced by the GAU is with unregulated bids, where companies build capacity behind the meter or on a bilateral basis between a customer and IPP. Eskom. Indicated its willingness to work with SEIFSA in consolidating the unregulated bids within the metals and engineering sector.
- Theft and vandalism of Eskom’s infrastructure was highlighted as amounting to a major problematic area that Eskom continues to dealing with. Eskom suggested that SEIFSA and its membership should consider working with Eskom in the following areas:
- the development of the specifications of electricity cables to make them less attractive to cable theft; and/or
- advocating for improving scrap metal regulations to eliminate unscrupulous operators while allowing legitimate businesses to continue to operate.
In closing, the president has been emphasising the importance of attracting investment to SA to boost economic growth. The crisis at Eskom can only diminish the confidence of potential external investors in our economy if they cannot be guaranteed a stable and predictable supply of power.
The parting impression gleamed from today’s session is that the Eskom Group CEO and his Team appear to have the determination to continue to do what must be done, no matter how unpopular. This will unfortunately result in more not less rotational power cuts in the short term hopefully resulting in noticeable improvements in the medium term.
What is not in dispute is Eskom’s position within the SA economy, it is so pivotal that it cannot be allowed to collapse. Power stations will be taken down and maintained for longer than has been the case in the past, new renewable energy capacity must be brought on stream quicker and those responsible for corruption must be rooted out.
SEIFSA on behalf of the affiliated membership looks forward to playing its part.
Steel Master Plan needs industry’s commitment to take flight
Almost a year after the launch of the Steel Master Plan (SMP), Scaw Metals CEO Doron Barnes acknowledges the frustration many in the industry feel about the Plan, but he also believes it has the potential to rejuvenate upstream and downstream industries.
Much of the criticism of the plan is a result of a misunderstanding of its role, he said.
The Plan — which was launched on June 11 2021 and signed by representatives of Government, Business and Labour — provides a series of practical steps for the steel and engineering industry to follow in order to reinvigorate itself.
The Steel and Engineering Federation of Southern Africa (SEIFSA) will give everyone a chance to discuss their frustration, praise and ask questions about the Plan at the Mainstreaming the Steel Master Plan Conference on May 19 and 20.
Like Barnes, Macsteel CEO Mike Benfield also has strong views about the Plan. “We need to re-energise it, we need to prioritise and we need to get workstreams going around those priorities,” he says. He is concerned that it will not become a reality without a whole-hearted commitment to a list of prioritised infrastructure projects, specifically in the areas of rail, ports and power.
Barnes, in a recent interview with Creamer Media Engineering News & Mining Weekly, is adamant that industry must take the lead. “It is up to industry to take leadership by dedicating time, energy and resources to make it work, rather than sitting back and moaning about all the problems.”
SEIFSA CEO Lucio Trentini agrees with this, saying: “This industry stands ready to make its contribution to translating the government’s vision of reindustrialising the metals and engineering (M&E) sector, and to start translating visions, promises and policy into action and deliverables.”
“We need government to roll-out its promised infrastructure spend, which is absolutely central to the reigniting of industrial capacity in the sector.”
SEIFSA is eager to see many small business owners at the conference. “We urge SMEs to attend the conference so their important voices can also be heard. It is crucial that they too are well represented at the conference” says Trentini.
Large corporates, SMEs, company executives, public servants and anyone keen to find out more can visit the conference website (https://www.seifsa.co.za/product/steel-master-plan-conference/) for all the details of the Mainstreaming the Steel Master Plan conference.
The conference will play host to senior Department of Trade, Industry and Competition officials, representatives from the Steel Oversight Committee, Business and Labour leaders who will analyse the progress of the plans as well as the commitments that will lay the foundations for the development and growth of the M&E sector in the years ahead.
Minister of Trade, Industry and Competition Ebrahim Patel will deliver the keynote address, after an opening address from Elias Monage, SEIFSA President. Other speakers include Irvin Jim, the General Secretary of National Union of Metalworkers of South Africa (NUMSA), and Marius Croukamp, Deputy General Secretary of Solidarity.
There will also be a series of panel discussions looking at supply-side measures, demand-side measures, transformation, resource mobilisation and the African Continental Free Trade Agreement.
Trentini said: “The big gains will be made by moving our infrastructure programme from shallow waters to deep waters and to get it moving on a bigger scale and then introducing a localisation requirement not only on primary steel, but also downstream steel.”
The Mainstreaming the Steel Master Plan conference will be held on May 19 and 20 at Industrial Development Corporation, Sandton.
The conference will be organised and hosted by SEIFSA in partnership with the Industrial Development Corporation and the Department of Trade, Industry and Competition.