Industry Wage Increases effective 1 July 2023

The implementation of industry increases effective 1 July 2023 to 30 June 2024 marks the end of the three-year deal struck in 2021. The three-year deal concluded in 2021 was a watershed agreement that saw the reintroducing of the awarding of increases on rands and cents, an introduction of a special phase-in dispensation, primarily aimed at companies who have been operating outside of the scope of the main agreement since 2010 (although this arrangement is available to all employers in the industry) and finally, the gazettal and extension of the main agreement to all employers and their employees.

Wages Increases

As was the case in 2021 and 2022 wage increase in 2023 are awarded as a rand and cents amount. The rand and cent amounts are calculated on the industry’s minimum gazetted rates of pay and awarded to workers actually rate of pay per hour (e.g., the minimum rate of pay for a Rate A worker is R 93.44, the agreed percentage increase is 5%, this equates to a R 4.67 adjustment, which is awarded to a Rate A worker’s actual hourly rate).      

Special Phase-in dispensation

This phase-in dispensation is available, on application, to all employers in the industry and was specifically designed to cater for employers who have were operating outside of the scope of the agreement since 2010 (i.e., the last time the Main Agreement was gazetted).   This dispensation sets a target for employers to achieve 60% of the 2020 rate by 30 June 2024. At Rate H this amounts to R 29.73 per hour.

Wage Exemptions

 The industry’s current wage exemption procedure continues to apply. Any company which is unable to implement the agreed wage increase, leave enhancement pay obligations and/or any other relief sought from the main agreement, is entitled to lodge an exemption with the Regional Bargaining Council with which the company is registered.

Any company requiring any clarification, information, wage tables etc., on the above is invited to call me direct or email me at lucio@seifsa.co.za

Lucio Trentini
Chief Executive Officer


The Organisation of the future will be Federal

The Steel and Engineering Industries of Southern Africa (SEIFSA) celebrates its 80th Anniversary this year and despite the many difficulties and successes experienced by our membership over this period, we remain the most authoritative voice of the metals and engineering industry.

We have, and will continue to be vocal in articulating the concerns of the sector, both publicly in the media as well as in meetings with various influential stakeholders, including in Government. Whenever Government Departments and other stakeholders are keen to solicit the input of the sector or hear its views on various matters, they approach SEIFSA.

SEIFSA is a National Employer Federation representing the views of its 18 independent Employer Associations in the metal and engineering industries, with a combined membership of over a 1000 companies’ employing over 170 000 employees. Through its affiliated Employer Associations, SEIFSA has a presence in the Western Cape, Eastern Cape, KwaZulu-Natal and Gauteng. Individual companies do not join SEIFSA directly. SEIFSA is a Federation of affiliated Employer Associations which, in turn represent individual member companies in the various sub-sectors of the industry.

I believe organisation of the future will be federal. Federalism is a means of linking independent bodies together in a common cause. In federal organisations there is a centre but not a headquarters. The centre does not direct or command but co-ordinates and operates on the basis of subsidiarity, which means that responsibility and mandating is pushed as far out and down the organisation as possible.

Federal organisations bring their skill, knowledge and wisdom together from around the sector to agree on strategy and aims. They do not issue edicts from the top. Individual members of Associations enjoy access to a range of professional SEIFSA product and services, and have a direct line of communication into SEIFSA to ensure that individual views and concerns are heard.

As we approach the next round of industry negotiations in 2024, individual member companies which are members of one of the Employer Associations federated to SEIFSA will once again bear the responsibility for delivering an agreement that strikes a balance between the interests of both employers and employees in the industry.

Speed, flexibility and transparency of communication will once again feature strongly on how we collectively navigate the process. What matters is that we deliver on time and within mandate. Above all, we must ensure that we are not only seen as doing things right, but more importantly doing right things that matter.

Lucio Trentini
Chief Executive Officer


Deputy President Paul Mashatile

Deputy President Paul Mashatile meets Metals Industry Top CEOs

Deputy President Paul Mashatile met the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Board and Executives as well as the sectors top CEOs at a breakfast roundtable at the Radisson Hotel & Convention Centre at OR Tambo on Friday, 14 July 2023 with the aim of opening the channels of dialogue between the Deputy President’s Office and this strategic sector of the economy.

The event gave CEOs the opportunity to engage government on working together in partnership to removing obstacles to economic growth and job creation. In addresses from the Deputy President Mashatile, SEIFSA CEO Lucio Trentini and Federation President Elias Monage, as well as during an open question-and-answer session, the dominant theme of the event was the dire need for greater collaboration between government and business in removing obstacles to growth and job creation.

Mashatile, who took over as Deputy President in March 2023, stressed the importance of restoring business and investor confidence in the industry, as well as the wider economy. He said government is committed to implementation and to creating strong ties with industry. The breakfast roundtable was the beginning of a process of engagement between the two parties, he said.

Monage said SEIFSA has made real headway in developing an integrated approach to dealing with the country’s many challenges. He emphasised the need for government and business to co-operate in order to properly address issues such as low economic growth, stubborn unemployment and to be open to new collaborative efforts. "We need to be doing things differently to get different results," he said.

In his welcoming address to the roundtable, Trentini said South Africa was not close to meeting its potential, so "there is no time to waste in jumpstarting economic growth.”

“The stark reality is that three decades into our young democracy – the overriding story of the South African economy remains one of a country that is not reaching, let alone fulfilling, its potential in many areas – in short, the country’s current economic growth, job creation prospects and industrial development efforts are less than encouraging,” he said.

This initiative builds on the success of the meeting held with President Ramaphosa on 18 April 2023 where SEIFSA and Government agreed on the need for an urgent collaborative solution-based approach aimed at reigniting economic growth and securing the metals and engineering sectors future sustainability. Immediately following this meeting three priority workstreams were established focusing on demand creation, increasing exports into Africa and skills development.

The meeting with the Deputy President, as the leader of Government-Business relations, is aimed at strengthening and deepening this collaborative partnership and facilitating movement beyond policy formulation to project implementation.

To read the full government press release click here.

ENDS 


SEIFSA responds to the draft Employment Equity sector targets

In response to a call for public comment the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), representing 18 Employer Organisations, who collectively represent in excess of 1 300 companies, employing approximately 173 000 employees, submitted the following.

The metals and engineering sector is an integral part of the global and domestic economy. It constitutes 26% of the manufacturing and contributes 2.6% directly to the country’s gross domestic product (GDP).  SEIFSA’s affiliated members in the sector constitute the entire metals value chain from metal production, merchants, metal fabrication, heavy and light engineering. The sub-industries that make up the sector are contained in the table below.

 

 

 

The sector is a crucial supplier of inputs into major sectors such as agriculture, mining, the automotive sector, construction and other manufacturing sub-industries.

The sector is also a strategic avenue through which the country converts its vast mineral endowment to final engineered products, domestically.

 

Economic Variable 2020 2021 2022
M&E GDP (Rand billion) R115.7 R130.6 R131.1
Share of GDP 2.5% 2.6% 2.5%
Capacity Utilisation 66.6% 75.5% 75.8%
Employment (number) 371955 371390 374496
Total Sales (Rand billion) R638.5 R809.4 R914.2
Export Sales (Rand billion) R256.1 R323.5 R342.9

Source: Statistics South Africa, SARS, MIBFA

Despite the potential of the sector, the graphs hereunder are the most effective way of communicating the distress that the sector has experienced over the last 15 years.

Production trends have been on a structural downward trajectory since the 2008/ 2009 global financial crisis, from which the sector has never fully recovered. The sector for all intense and purposes has been in a structural recession since 2008.

As is to be expected, the sector was not spared from the economic disruption of Covid-19. Whilst a sharp recovery has been noted, production levels are still 5% below pre-covid levels.

On the employment front, the sector has lost 205 926 jobs from the 2008 peak of 577 502 to the current employment count of 374 496. As the global economic environment deteriorates, more intense head-winds are anticipated for the sector.

With the official unemployment rate edging above 33% there seems little prospect for improvement in the near future, especially with loadshedding continuing to wreak havoc on our sector and the broader economy as a whole.  The electricity crisis, resulting in up to 16 hours of electricity cuts for some industrial areas, eats into everything that powers an economy that has hardly grown for more than a decade. The number of unemployed people should instil a sense of urgency into fixing the economy. Failing that, we run the risk of entrenching the kind of poverty that can upend the social compact that underpins our democracy.

The metals and engineering sector is therefore in structural decline, both in terms of economic performance and employment. This presents a structurally constrained environment, one where opportunities for new employment creation is limited.

In setting the context, we refer to the graph on the previous page. You will note that not only has production in the sector averaged 15% below its 2008/9 peak, but it has also has recorded a multi-year contraction of - 1.3% (CAGR), over this period.

In 2023, SEIFSA estimates that production in the sector could contract by a further 5.3% if the impact of load-shedding is factored in. Moreover, production of the metals and engineering sectors is a function of economic activity and infrastructure spend, both of which have disappointed over the last 10-15 years.

The table below depicts the trends of both variables (GDP and gross fixed capital formation) over these periods. It is evident that the trends are deteriorating when the decade is compared to the 15-year period.

 

Variable

10 years 15 years
GDP Growth 1.1% 1.3%
Gross Fixed Capital Formation Total - 0.9 0.8%
Gross Fixed Capital Formation General Government -1.5% 1.2%
Gross Fixed Capital Formation Public Corporations -5% 1.8%
Gross Fixed Capital Formation Private Sector 0.2% 0.6%
Construction Sector Activity - 2.1% 0.7%

Source: Statistics South Africa

The above generally explains the resulting trends noted in the metals and engineering sector.

Another important point to highlight is the evident decoupling between production and employment trends. This relationship has continued to widen over the last 15 years. The current estimates indicate that it takes a five percent increase in production to induce a one percent increase in employment. Therefore, the context of declining production as already presented earlier, does not bode well for employment prospects.

SEIFSA’s submission is that in such an environment of structural decline and a limited market that is also shrinking, the sector is unlikely to attract new entrants and the transformation consideration has to be considered through this lens.

The economy is expected to flatline barely above recessionary territory on a medium-term basis, which will undoubtedly lead to the upending of businesses (large, medium and small) and prospects of employment opportunities. The combination of high inflation in a weak demand environment - which has a negative carry-on profit margins - and high interest rates – which are inversely related to new investment – the outlook for the sector is bleak.

The net effects, certainly in the short-medium term, will be that companies will simply be unable to meet the proposed sectoral targets, human capital and skills development will be severally hampered and so will the valuable and positive investments that companies have in community work, supplier development initiatives etc., with companies simply opting to closing shop.

The proposed sectoral targets have come as a surprise as the Amendment Act, although assented to earlier this year, is not yet in effect. The Regulations are therefore premature and, if challenged, may be considered ultra virus.

We are firmly of the view that the Department erred in halting the consultation processes it was busy following with the different Sub-Sectors and Sectors as provided for in the Act and publishing only Sector Targets for the main sectors in an attempt to hopefully achieve implementation of Sector Targets on 1 September 2023. By doing so, it has opened itself up to legal challenges, which will inevitably lead to this implementation date not being achieved and the process that the Department had quite rightly embarked upon, being further halted until the exhaustion of the ensuing legal proceedings.

This will, in all likelihood, result in the implementation of Sector Targets being delayed for far longer than it would have been, had the Department continued with its consultation processes and not tried to fast-track the implementation of Sector Targets on 1 September 2023.

The Department is therefore urged to reconsider this course of action and to firstly conclude the engagements and processes that started with the different Employer Organizations in the different Sectors and Sub-Sectors, before re-issuing Sector Targets.


SEIFSA’s Collective Bargaining Summit to get to grips with labour issues in Metal Industries

SEIFSA’s Collective Bargaining Summit to get to grips with labour issues in Metal Industries

The steel and engineering sector will have a chance to analyse and constructively debate the pros and cons of current collective bargaining practices that have dominated the manner in which employers and trade unions have engaged one another in the sector over the past 60 years at the Metal Industries Collective Bargaining Summit at Emperors Palace on May 24 and 25 2023.

The summit, organised by the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), will see captains of industry, union leaders, senior government ministers and expert analysts discuss the many challenges facing the sector, including crucial debates around conditions of employment and labour costs. Employee costs make up 20% of total costs in the metals and engineering sector.

“A well-functioning economy needs business, labour and government to be in agreement in terms of policy. Our economy has been under enormous pressure since the global financial crisis; we are dealing with crippling youth unemployment, a sub-investment status, stagnant growth and the lingering effects of the Covid-19 pandemic. We hope the summit will plant the seed amongst all stakeholders that in order to begin addressing our many challenges, we need to find a better way of working together,” says SEIFSA CEO Lucio Trentini.

Speakers and panellists across the business, labour and government divide will debate a wide range of issues that underpin the current collective bargaining model, the importance of labour market stability in unlocking economic growth and developing a shared vision on how together we potentially can move forward; topics to be covered include the following:

  • Very tough times ahead if we do not turn this ship around — and fast by Dr David Masondo, Deputy Minister of Finance;
  • The implications of declining union representation in bargaining councils by Thulas W Nxesi, the Minister of Employment;
  • The relevance of the current form of central wage bargaining by Afzul Soobedaar, Director at Perispec Consulting;
  • Democratisation of the workplace and the strategic importance of what transformation means in the industry and economy by NUMSA General Secretary Irvin Jim;
  • Opportunity for unions to re-emerge as a united force? by Gideon du Plessis, General Secretary of Solidarity; and
  • What is the future of trade unions and collective bargaining in a reimagined industrial relations framework? by Jonathan Goldberg, Chief Executive Officer of Global Business Solutions.

Macsteel, RMA  and Cachalia Capital have put their weight behind the Metal Industries Collective Bargaining Summit as partners, with Engineering Weekly the Summit’s official media partner.

“If we are to put our economy back on track, it is crucial that decision makers from business, labour and government discuss these issues with a view to addressing the many challenges that face us; the Metal Industries Collective Bargaining Summit offers the opportunity to do this,” says Trentini.


TESD urges members to observe incoming NLMP legislation

“In my mind we are facing three main disruptors in the labour market that are going to result in the displacement of I think between one and 1.5 million people in the next few months and years.”

These were the words of Joint Chief Executive Officer of Global Business Solutions John Botha at the Temporary Employment Services Division webinar discussing the National Labour Migration Policy.

Botha identified the major disruptors with a particular focus on the intricacies surrounding the pertinent National Labour Migration Policy(NLMP).

The disruptors outlined by Botha were the following:

  1. The National Labour Migration Policy
  2. Employment Equity ministerial targets and
  3. Platform workers

The above mentioned were categorised as a “wonderful opportunity” for employers to build their business in alignment with South African labour law.

In the South African political landscape, foreign nationals are an easy target. Operation Dudula and the national stay away hosted by the Economic Freedom Front on 20 March 2023 illustrated the politicisation of job (in)security and its effects on South Africans. The NLMP is “an attempt by the government to create direction on how to manage the complexities of our economy,” stated Natalie Singer, Executive Consultant and Human Capital Specialist at Global Business Solutions .

Skilled labour shortages in the South African economy have ensured the war on talent continues, but what does that mean for employers and how do they remain compliant with incoming legislation? The NLMP serves as a regulatory measure which extends South Africa’s obligation to uphold standards as a member of the International Labour Organisation(ILO).

As the NLMP is introduced, it affects other facets of national legislation such as the Employment Services Act (of 2014) which must be amended to take it into account. The amendment to the bill is over one year behind schedule, however with the looming election period, it is presumed that it will be prioritised as it serves as a point of political contention.

The priorities of the NLMP are as follows:

  1. Attracting and retaining skills (in)to the country to meet the economy’s long and short-term goals
  2. Imposing quotas to limit the number of foreigners
  3. Prioritising certain sectors in urgent need of critical skills
  4. Improving conditions for all migrant workers
  5. Improving the conditions of social protection of migrant workers in South Africa and upon return to their country of origin
  6. Creating legal labour migration pathways through strong bi- and multilateral partnerships with SADC Member States and beyond

2022 transformation numbers reported that 3-3.5% of the South African labour force consists of foreign nationals. This is with the exception of skilled labour or Artisans who were represented by a percentage of 1.7% foreign nationals.

The Zimbabwean Exemption Permit’s (ZEP) imminent expiration date is something which employers across South African industries must pay close attention to. Meant to expire in April of 2021 the ZEP was extended to 30 June 2023. This grace period is mandated by the Department of Home Affairs as a concession for Zimbabwean foreign nationals to re-apply for their relevant South African visas or return to Zimbabwe.

Although it is illegal for foreign nationals to hold occupations without the relevant legal requirements being met, liability falls on employers to enforce the law within correct due diligence processes.

Employers have very specific obligations, as per the Immigration Act and associated regulations, including and ensuring that:

  • Foreign national employees hold a valid passport/ID and visa
  • Employment is consistent with the conditions of the employee’s visa
  • Home Affairs is notified when a foreign national leaves their employment
  • All documentation is retained for at least two (3) years after the foreign national has exited

It is also mandated by the government that employers prioritise hiring South Africans before foreign nationals. The Critical Skills List serves as an indication of skills which are lacking nationally where the government recognises the need to hire foreign nationals, more than in other circumstances.

Some of these roles which speak to TESD members in the technical and engineering sectors are the following:

  • Architect
  • Civil Engineer
  • Geologist
  • Industrial Engineer
  • Mechanical Engineer
  • Metallurgist
  • Quantity Surveyor

The Critical Skills List has other concessions which form part and parcel of the list such as tertiary qualifications being in line with the South African Qualifications Authority.

All South African employers are encouraged to audit their employees regularly to remain compliant with South African Labour Law. The fast-approaching expiry of the ZEP will have legal consequences for employers. Businesses must also take note of the Lesotho Exemption Permit expiry in June 2024.


President Ramaphosa welcomes constructive engagement with steel sector

President Cyril Ramaphosa met with business leaders in the steel and engineering industries on 18 April 2023 to discuss measures that government, the industry and other social partners  will take together to grow the sector and ensure its future sustainability.

President Ramaphosa met with the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) led by Chairperson, Mr Elias Monage, at the Union Buildings in Tshwane. The purpose of the meeting was to deepen engagement between government and this strategic sector of the economy. The meeting was the first direct engagement between a South African Head of State and the sector since SEIFSA’s formation almost 80 years ago.

In the first State of the Nation Address of the 6th Administration, in 2019, President Ramaphosa directed that the sector be given specific focus through the development of a steel and metal fabrication master plan. In June 2021 the Department of Trade, Industry and Competition signed the sector master plan, which provides a blueprint for the industry to revitalise and expand production.

The master plan is a key part of the reimagined industrial strategy which President Ramaphosa has championed to unleash private investment and support inclusive growth.

“The steel sector is at the heart of our economy, as it has a significant multiplier effect and is one of largest job creators in the manufacturing sector. Our infrastructure drive should be the catalyst that propels its recovery and growth. We are determined to build a local steel sector that is strong, competitive and well positioned for the future”, said President Ramaphosa.

The President outlined the actions being taken to achieve energy security, improve the performance of the freight logistics system and tackle corruption and crime, which have received strong support from business leaders. Government and industry representatives discussed opportunities for local steel in the effort to rehabilitate the rail network, expand the national transmission grid and build water infrastructure, as well as the need to invest in skills development.

The SEIFSA leadership expressed its support in working with government and other social partners to address the country’s challenges and unlock investment in the sector.


The lack of qualified Artisans is a constraint to Economic Growth

A functioning economy must have a sufficient number of artisans if it is to fulfill its economic potential. From energy and water to transport and logistics, all key sectors of the economy are dependent on a ready supply of artisans.

Although South Africa remains woefully short of artisan skills, this reality is no stranger to the South African government. In November 2022, the Minister of Higher Education, Science and Innovation Dr. Blade Nzimande warned that South Africa needs at least 60% of school leavers to pursue training in a trade to meet the country’s demand for scarce skills.

Dr. Nzimande at the 2022 Centres of Specialisation (COS) Artisan Graduation Ceremony, stated: “We honestly need to do more to encourage school leavers to pursue technical trades, as government expands technical and vocational education. This is amongst the reasons why there is a continuous need for suitably qualified artisans to sustain industries and support economic growth in South Africa,”

The Department of Home Affairs has also made a concerted effort to attract critical skills to the country by adding seven trades to the latest critical skills list, which was released in August 2022. The inclusion of trades in the critical skills list highlights the shortage of these skills and affords foreign nationals with these skills an opportunity to apply for critical skills work visas.

This may appear contradictory, when considering the country’s unacceptably high levels of unemployment, however, the issue is that these are skills the economy urgently needs and are not readily available locally

The President in the State of the Nation Address in February 2023 sated: “One of the key ingredients for economic growth and competitiveness is the ability to attract skills which the economy needs. Having completed a comprehensive review of the work visa system, we will move quickly to implement the recommendations put forward.”

According to the requirements of the government’s National Development Plan (NDP) and White Paper for Post-School Education and Training, South Africa should be producing 30,000 qualified artisans per year by 2030. This will remain a pipe dream if there is no synergy, strategy and agreed action plan between the main role players to see the Decade of the Artisancampaign being achieved.

South Africa faces two main problems when it comes to the shortage of artisans. Firstly, older experienced artisans who are over the age of 55 are retiring, while those in their 30s and 40s are taking advantage of the global portability and demand for their skills and immigrating. In addition, the 36.5% decline in the total number of learners who enter artisanal learning programmes during the 2020/21 financial year is also a major concern.

Secondly, and compounding the problem further, is that younger newly qualified artisans lack the experience to substitute to the leavers. Moreover, the appalling formal education system produces matriculants who lack the maths and science literacy required to get to grips with the demands of many trade programmes.

This leaves the country with a gap in the market of about 20 years and no pipeline of younger suitably qualified artisans ready to join the workforce, build their careers and contribute to economic growth.

For the country to produce what the National Artisan and Apprenticeship Development Strategy 2030 dubbed as the 21st Century Artisan (A21), there needs to be: a functional system that ensures exposure for learners in artisanal programmes to the theoretical aspect of their trade; simulation (practical) and experiential learning (on-the-job training); and a clear acknowledgment that one or two parts of these components is simply inadequate – all artisans in training need immersion in all these aspects to eventually become A21 Artisans.

For this process to succeed, a strong ongoing partnership between three crucial role players must be mapped, implemented and monitored on an ongoing basis:

  • Industry/workplaces;
  • Sector Education and Training Authorities (SETAs); and
  • Skills Development Providers and reputable Training Centres, such as the SEIFSA Training Centre.

The Government also plays a major overarching role - it needs to be the glue that binds these three important stakeholders together by providing the necessary regulatory and enabling framework.

Zizile Lushaba is Human Capital & Skills Development Executive at the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).


Temporary Employment Services (TES)

The Metal Industry Main Agreement (MA) was gazetted by the Minister of Employment and Labour on 7 October and became legally binding on all employers, including Temporary Employment Service (TES) providers, in the metals and engineering (M&E) sector on 17 October 2022.

A key and unique feature of the MA is that it does not differentiate between an employer owning and/or overseeing a factory and a TES provider providing labour and related services to employers in the sector. The MA treats both exactly the same and apart from the provisions related to joint and several liability contained in the Labour Relations Act (LRA), TES providers in a post gazettal operating environment are legally obliged to adhere to all the terms and conditions of engagement, employment and deployment contained in the MA.

Over and above what the LRA prescribes for TES providers, the MA sets out a comprehensive set of terms and conditions related to how TES providers should operate in the M&E sector. In a post gazettal environment, should must be read as shall and whilst some TES providers may be tempted to cut corners and claim ignorance when it comes to various legal compliance obligations contained in the MA, the Bargaining Council i.e., the industry’s compliance and enforcement agency, will not be swayed by arguments of ‘’I did not know” or “I wasn’t aware”.

Clients of TES providers who knowingly or unknowingly enter into commercial agreements containing provisions in conflict with the MA will be found wanting. The Bargaining Council will have no hesitation in following up on such complaints, will site the TES provider and the client in any ensuing dispute and should the client and/or the TES provider be found wanting, joint and several liability will come into play.

In a business environment where legal compliance is becoming increasingly complicated, it’s imperative when considering making use of a TES provider, you do so knowing you are contracting with an agency that is reputable, compliant and most importantly, has been vetted by a body that was instrumental in getting TES providers recognized as being no different to any other employer operating in the M&E sector – the CEA (TESD).

The Temporary Employment Services Division of the CEA is the only reputable voluntary professional body of TES providers in the M&E sector. The body speaks for and on behalf of TES providers and ensures that TES providers are treated no different to any other employer in the sector, are recognized for the important service they provide and are acknowledged for the many thousands of pathways they have created for employees who have been provided to clients and over time find permanent employment.

The CEA (TESD), as a condition of accredited membership, will require that a TES provider seeking affiliation subject itself to an accreditation audit , conducted by an independent auditor, appointed by the CEA (TESD) in order to verify and validate legal compliance with provisions contained in the MA, LRA, MEIBC, MIBFA etc. Having passed the audit, the TES provider will be issued with a certificate of compliance and will be loaded to the industry data base of compliant TES providers. This process enjoys the full support of the Bargaining Council, the Department of Employment and Labour, industry trade unions and for employers or clients amounts to a resounding vote of confidence and peace of mind.

Should you be interested in joining a body of reputable and professional TES providers and in the process network and be part of the on-going discussions related to the future of TES providers in the metals and engineering industry, no more than ever would be a good time to do so.

To join the CEA (TESD) or to get more information on the benefits of being a member email Christa Smith at christa@associationadministrator.co.za or visit the TESD website at www.tesd.org.za.


SEIFSA load shedding impact assessment on the Metals and Engineering Sector

The energy crisis that is gripping South Africa presents the most significant risk and binding constraint to the economic prospects of the country. The crisis not only has implications on the immediate survival of companies but also on the long-term implications regarding the investment prospects of the country. The crisis has been particularly damaging on the metals and engineering sector, a sector which is the backbone of industrialisation and to which electricity, particularly baseload electricity, is fundamental to its survival.

SEIFSA represents 18 Employer Associations, who collectively represent in excess of 1 300 companies and employ in excess of 170 000 employees in the metals and engineering (M&E) sector. The M&E sector constitutes 26.5% of the manufacturing sector, based on output, and 2.6% the country’s gross domestic product (GDP) on a value-add basis. As at December 2022 the sector employed 374 496 (of which 217 618 are factory workers) who are employed in approximately 10 00 companies.

It is important to highlight, in brief, the historic context in which this survey is conducted. The M&E sector has been in a structural recession since the global financial crisis of 2008/9, with production recording a 1.2% contraction on a compound annual basis over this 15-year period. Given the less supportive global economic environment and the impact of domestic rigidities, chiefly the energy crisis, production in the sector is expected to contract further by 2.2% in 2023. Unfortunately, employment in the sector has also mirrored the production trends contracting at -1.1% (CAGR) and contributing to the country’s unemployment crisis. These trends are contained in the graph below. The Covid-19 induced lockdowns presented a major economic shock to the sector and although the production levels recovered (still 1% below pre-covid levels), employment trends have not (4.6% below pre-covid levels). Increasingly the sector has observed a weakening relationship between production and employment, meaning improving production outcomes are no longer a necessary condition for employment creation.


Source: SEIFSA, Statistics South Africa

The intensifying electricity crisis now presents the most prevalent economic risk to the sector:
It is in this context that SEIFSA undertook to survey its affiliated membership and developed this load-shedding impact assessment. This survey measures the impact of the energy crisis over a 12-month period (February 2022 to February 2023) across four main parameters, namely:

1. Employment;
2. Production;
3. Investment;
4. An analysis of the alternative energy investments made by the sector; and
5. Impact to Input costs.

The survey garnered a positive response, with 206 companies responding. The survey parameters are included below:

Category Survey Sample
Number of respondents (companies) 206
Total Employee Count (from responding companies) 37 284
Average number of employees (proxy for company size) 184
% of sample to total SEIFSA member employee headcount 26.5%
% of sample to total M&E Sector employee headcount 9.9%

The employee headcount is the pivot variable for the purposes of consolidating the statistics, particularly the weighted outcomes. The companies that responded to the survey vary in head count from 2 employees to 2600 employees.
The straight average headcount across the sample is 184 employees yielding a good mix between large, medium and small companies. The definition of small to medium companies in the sector, based on headcount, is 50 employees or less. These companies represent 41.3% of the sample. The histogram below indicates the distribution of the company sizes relative to employment:

The consolidated results of the survey are contained in the table on the next page.

It is necessary to bear in mind that these results are from a sample representing 10% of the sector (measured on an employment metric).

Theoretically, the outcomes, particularly the absolute numbers, could be multiplied by 10 to get the full impact on the sector.

Consolidated results of the survey:

Employment:
• The employment losses, mostly attributable to companies responding to the energy crisis over the reference period, indicate some very concerning trends.
• A quarter of companies indicated that they have had to reduce head count in response to the electricity crisis, by as much as a quarter of their employment, equating to 9 432 people.
• A third of the sample indicated that they are working short-time due to the electricity crisis.
• An even more concerning outcome is the fact that half (16.9%) of those companies that are implementing short time have already reduced head count.
• We assign the status of “vulnerable” to these companies, while the other half (17.3%) have not reduced head count, however, short time is a good leading indicator to track for potential future job losses.

Production:
• The respondents to the survey indicated production declines as much as 34.2% (weighted) as a result of the electricity crisis.
• Based on the model in the table below, SEIFSA has calculated that production in the sector is estimated to contract by 2.2% in 2023.
• However, factoring in the results from this survey, the forecast for the 2023 year deteriorates to – 5.3% for the 2023 year.

Investment:
• The long-term implications of this energy crisis to the future prospects of the sector are devastating.
• Over the last 15 years, net-investment into the sector has been on the decline, which has led to the value of fixed capital stock deteriorating at -0.3% (CAGR), threatening the competitiveness of the sector.

• It is therefore concerning that 42.6% of companies have indicated that they have cancelled investment and/or expansion plans owing to the uncertainty presented by the electricity crisis.
• The value of these investments amounts to R2.64 billion with the potential of creating 1 620 new jobs. The split of the nature of investment is included below.

An analysis of the alternative energy investments made by the sector:
• 79.2% of companies indicated that they have had to install alternative electricity sources in the last 12 months to counter the pressing challenge presented by the electricity crisis.
• The combined value of this investment is R985 million. This number if considerable when considering that it accounts for 37% of the value of investments cancelled. This again highlights the point that SEIFSA has repeatedly stressed that companies are sacrificing scarce long-term capital to fulfil an immediate survival, presenting long-term adverse implications regarding the sustainability of the sector.
• The breakdown of the alternative technology source invested into is contained in the pie chart below. It is not surprising that given the relatively intense electricity consumption nature of the sector, the most practical alternative energy sources are generators representing 67%.
• Solar accounts for 20% of the investment made. It should however be borne in mind that this survey was done prior to the announcement of the 125% tax incentive afforded to companies in the February 2023 National Budget. This incentive should result in an increase in the up-take of solar an alternative source, however, the electricity consumption profile of the sector remains a limitation to solar being a full-scale option.
• On aggregate the companies have a generator installed capacity of 116MW, while that of solar is 36.2%.
• The respondents have registered very limited ability to feed-in any excess electricity generated from their solar installations, largely because of the fact that the solar installations have been put in as a marginal hedge or top-up to their baseload needs. This picture may well change given the 125% tax incentive, although to a limited degree, because the sectors electricity consumption pattern is the main determinant for the technology deployed.

Input Costs:
• On a weighted average basis, companies have indicated increases to monthly operating costs to the extent of 24.9% from the extensive use of generators.
• This does not bode well for a sector whose input costs are running at 17.6% (y o y - February 2023).
• Factoring in the results of the survey to the input cost model results in input costs increasing by 1.7 percentage points to 19.3% for the sector.
• The less supportive demand environment means that these companies cannot easily pass on these costs, thereby resulting in considerable margin squeeze and ultimately long-term sustainability.


We would like to thank the SEIFSA affiliated membership who have taken the time to complete this load shedding impact assessment survey.
The results of the survey are extremely valuable in providing tangible and quantifiable results which are necessary in various engagements SEIFSA will be having with key stakeholders responsible for resolving South Africa’s gripping electricity crisis.