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Disciplinary Policy

What You Need To Know About Company Disciplinary Policy and Code in the Metals and Engineering Sector

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A Management Guide to Disciplinary Policy

It is management’s responsibility to maintain discipline within the workplace. The disciplinary policy must apply to and form part of the contract of employment of all employees up to a level determined by individual companies. SEIFSA understands that this arena of management can cause consternation for all parties, and may have legal repercussions. Thankfully, the SEIFSA Industrial Relations and Legal Services Division has the requisite expertise to advise and represent member and non-member companies in the intricacies of implementing company policies relating to Discipline in the work place.

The first area to be clarified should be Disciplinary warnings. Any warning issued should be kept in the personal file of the employee for the duration of the warning. Should the employee commit no further breach of the disciplinary code within that period, the warning will become null and void and should be removed from the employee’s personal file. Expired warnings should play no role in any subsequent disciplinary action.

The time periods relating to the expiry of warnings are generally as follows:

  • Verbal warnings…………………. three months
  • Written warnings………………… nine months
  • Final written warnings……………. Twelve months

The above-mentioned time periods may vary from organisation to organisation, depending on the individual organisation’s disciplinary policy.

Relevant factors and circumstances should be taken into account in determining the appropriate disciplinary action. These includes length of service, previous offences, the period since the last offence, status and any mitigating circumstances.

Nature of disciplinary measures

There are four types of disciplinary measures which may be applied, namely:

  • Verbal warning;
  • Written warning;
  • Final written warning; and
  • Formal enquiry and dismissal.

All disciplinary warnings are cumulative in nature. An employee who is already in receipt of a verbal warning for a particular offence and who commits any other offence of a similar nature within the prescribed time period will be subject to the next step in the disciplinary procedure, i.e. written warning, final warning or dismissal, depending on the nature and severity of the second offence.

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Disciplinary procedures

Level One: verbal warning

If the immediate supervisor is of the opinion that the behaviour or performance of an employee is unsatisfactory, but does not warrant a written warning, final written warning or dismissal, then a verbal warning will be given.

The verbal warning shall be given to the employee in the presence of a shop steward or employee representative and the reason for issuing the warning should be explained to the employee and representative. A record of the warning should be placed in the employee’s personal file. A verbal warning shall remain valid for three months.

Level Two: written warning

If, subsequent to issuing a verbal warning, the supervisor or manager is still not satisfied with the performance or behaviour of the employee, or if the employee commits another offence which requires a written warning, the supervisor and the immediate superior shall discuss the nature of the transgression, the corrective action and the disciplinary steps with the employee in the presence of a shop steward or employee representative and a management witness.

The supervisor must complete a Disciplinary Report Form. The employee and the shop steward or employee representative must sign the form to acknowledge receipt of the written warning, even though the employee may not necessarily agree with the disciplinary action applied. If the employee refuses to sign the warning, then the supervisor should merely note that fact on the form.

The disciplinary warning should be placed in the employee’s personal file and a copy of the warning should be given to the employee. This written warning shall remain valid for nine months from the date of issue.

Level three: final written warning

If, subsequent to issuing a written warning, the supervisor is still not satisfied with the performance or behaviour of the employee or if the employee commits another offence within the prescribed period of nine months or commits any offence which warrants a final written warning, then the same procedure as detailed in level two shall be followed – except that a final written warning shall be issued. The final written warning shall remain valid for 12 months from the date of issue.

The supervisor shall ensure that the employee and the shop steward or employee representative are made aware that should the employee commit a further offence within the 12-month period following the issuing of the final written warning, then that offence may result in dismissal, pending a final decision at a formal disciplinary enquiry.

Level four: formal disciplinary enquiry

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If, subsequent to issuing a final written warning, the supervisor is still not satisfied with the performance or behaviour of the employee or if the employee commits a further offence within the prescribed 12-month period or commits any offence which may justify dismissal, then the supervisor shall request a formal disciplinary enquiry.

The supervisor shall complete the Disciplinary Report Form stating the grounds for the enquiry. The supervisor will report the matter to the Human Resources Manager and hand over the disciplinary report. In the absence of a Human Resources Manager in the department concerned, the supervisor may hand the disciplinary report to any Designated Manager.

The Manager shall inform the employee and the shop steward or employee representative in writing, by way of the Formal Disciplinary Enquiry Notification Form, of the following:

 

  • The reason for the enquiry;
  • The date, time and venue of the enquiry;
  • The rights of the employee at the enquiry, namely:
  • the right to timeous notification of the intention to convene the disciplinary enquiry and the grounds for enquiry;
  • the right to be represented by a shop steward or employee representative;
  • the right to translation, if required;
  • the right to call and cross-examine witnesses;
  • the right to a fair and proper hearing.

The employee shall be given 48 hours’ notice to appear before an independent Chairperson of the enquiry to conduct a formal disciplinary enquiry.

The enquiry is held in the presence of the employee, the shop steward or employee representative and the supervisor.

The independent Chairperson shall:

  • Ensure that a record of the proceeding is kept;
  • Ensure that the enquiry is conducted in a fair and proper manner;
  • Give a decision on the matter, wherever possible, within two working days of the enquiry. The decision shall be recorded on the disciplinary report and a copy, signed by all parties, shall be made available to the employee and the shop steward or employee representative.
  • Ensure that the employee and the shop steward or representative are made aware of the right of the employee to appeal against any disciplinary action so implemented.

Level Five: appeal hearing

Any employee disciplined in terms of this procedure, but not dismissed, may appeal, in writing, to the next level of management, i.e. to the more senior supervisor or Manager than the one who implemented the disciplinary action.

In terms of the disciplinary procedure, any employee shall have the right of appeal to the company Director or his duly nominated representative.

The grounds of appeal against dismissal or disciplinary action shall be submitted in writing to the Manager or Director concerned within three clear working days of the disciplinary action.

The Manager concerned shall, as soon as possible, but within three working days of receipt of the appeal application, appoint a Chairperson to conduct a formal appeal hearing. The appeal hearing shall be conducted along similar lines to the disciplinary enquiry. The Chairperson shall, wherever possible within one working day of the appeal hearing, give a decision which will be final.

The disciplinary procedure and the grievance procedures fulfil different functions. Therefore, employee grievances against disciplinary action taken in terms of the disciplinary procedure cannot be channelled through the grievance procedure. Employees who have any enquires regarding the content of this procedure should approach their immediate supervisors or any senior Manager for advice and assistance.

These are complicated procedures to remember, and if companies do not have a specialised Human Resources or Legal representative, the company might find itself on the wrong end of the law and open itself up to legal action. A simple call to the SEIFSA Industrial Relations & Legal Services Division – which has the relevant expertise and experience – can resolve this situation.

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Unfair Dismissal Thumbnail

SEIFSA Legal Services Protecting Companies from the repercussions of unfair dismissals

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SEIFSA Legal Services Protecting Companies from the repercussions of unfair dismissals.

One of the most important changes introduced by the Labour Relation Act 66 of 1995 relates to procedural fairness in dismissal. The unfair dismissal provision of the Act (Chapter VIII) and the code of Good Practice on Dismissal found in Schedule 8 to the Act (the Code) has attempted to provide greater clarity on unfair dismissals and has provided employers with a clear set of guidelines on procedural fairness.

The aim of this blog is to highlight the pre-dismissal procedure in the Code and showcase how SEIFSA assists employers to comply with these pre-dismissal disciplinary procedures when conducting disciplinary enquiries.

Labour Relations Act 66 of 1995: Unfair Dismissal

Section 185 in chapter VIII of the Act states that “every employee has the right not to be unfairly dismissed.”

The right not to be unfairly dismissed is supported by section 23(1) of the Constitution of South Africa. A dismissal will be unfair (section 188 of the Act) if the employer cannot prove that the reason for the dismissal was a fair reason and “that the dismissal was effected in accordance with fair procedure.”

Certain dismissals (section 187) are deemed by the Act to be automatically unfair, and should an employer dismiss an employee for any one of these reasons, the employee will not have to prove that the dismissal was unfair and the employer will not be provided the opportunity to prove that the dismissal was, in fact, fair. These would include an employee participating in a protected strike, reasons related to pregnancy and unfair discrimination.

Although Chapter VIII requires a dismissal to be effected in accordance with a fair procedure, it does not provide any definition of what constitutes a fair procedure and ultimately this is left to the guidance in the Code.

The Code of Good Practice: Dismissal

In an intentionally general manner, the Code of Good Practice on Dismissals provides a set of guidelines that requires employers to “take it [the Code] into account” (section 188[2] of the Act) rather than prescriptively to apply it. This has created the mistaken impression that there is no duty to follow these guidelines.  Management must exercise caution before departing from the norms set out in the Code and be prepared to justify fully any deviation.

Section 188 (2) of the Act clearly states that “any person considering whether or not the reason for dismissal is a fair reason or whether or not the dismissal was effected in accordance with a fair procedure must take into account any relevant code of practice issued in terms of this Act.” This means that an arbitrator will be required to determine the procedural fairness of a dismissal against the norms provided by the Code.

In any dispute arising from an alleged unfair dismissal, the onus will always rest with management to prove the fairness of any procedure that has been followed.

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Pre-dismissal disciplinary procedure

The Code of Good Practice on Dismissal (paragraph 4[1]) requires that under normal circumstances an investigation should be conducted to determine whether there are grounds for dismissal, and that this “does not need to be a formal enquiry.” What the Code envisages is an investigatory fact-finding – rather than an adjudicatory –  process.

The purpose of this process is two-fold. Firstly, it aims to ensure that employers make their decisions with the best possible information at hand. Secondly, it gives affected parties the opportunity to participate in the process, thus legitimising the outcome. Unlike an adjudicative process, it does not guarantee a correct decision, but what it does do is ensure a fair decision,  one made upon an objective consideration of all the information at management’s disposal.

Conducting a disciplinary investigation

According to paragraph 4(1) of the Code, management is required to conduct an investigation to determine whether or not there are grounds for disciplinary action.

This preliminary investigation is not the disciplinary enquiry. The investigative stage of the disciplinary process is an opportunity for management to determine what misconduct, if any, has been committed. If the investigation reveals a breach of rules, the next step is to compile a list of objective facts and evidence that will be presented at the enquiry.

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It is recommended that management conduct a PRE-DISMISSAL INVESTIGATION along the following lines:

  • Determine if there are any witnesses to the alleged misconduct;
  • Question each witness separately to obtain as much information as possible;
  • Request witnesses to make signed written statements;
  • Differentiate between factual evidence and evidence based on opinion or hearsay;
  • Decide whether sufficient factual evidence has been collected to proceed with a disciplinary enquiry; and

NOTE: This is not tantamount to finding the employee guilty. It simply enables management to make a decision on whether to convene a disciplinary enquiry or not.

  • Decide whether or not to proceed with a disciplinary enquiry.

This is a technical procedure, and that is why SEIFSA has two Admitted Attorneys to guide companies through this difficult process.

Management is required to notify the employee of the allegation using a form and language that the employee can reasonably understand. Employees are entitled to sufficient particulars to enable them to answer the case against them. Fairness requires that an employee be informed of the facts supporting the allegation, the alleged offence with which they are being charged and, importantly, the sanction that might be imposed.

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How to use Labour Brokers – risk free for companies in the metals and engineering industry

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How to use Labour Brokers – risk free for companies in the metals and engineering industry

The following guidelines have been prepared by SEIFSA in an attempt to assist management to avoid potential risks.

Income Tax Liability

The Income Tax Act places the responsibility and onus on the client company to make the necessary income tax deductions from the earnings paid to the workers supplied by a labour broker. However, in terms of paragraph 2(5) of the Fourth Schedule, the Act permits the Receiver of Revenue to issue an exemption to a labour broker, thereby removing this obligation from Client Company and placing the onus for the income tax deductions on the labour broker.

The tax exemption certificate is commonly referred to as an IRP 30 certificate and is only valid from date of issue to the labour broker until the end of the year of assessment, after which time the broker must apply for another exemption certificate.

The IRP 30 exemption certificate will only remain valid if:

  • It has not expired;
  • It bears a labour broker reference number beginning with a 7;
  • It has been computer printed;
  • The labour broker is able to produce the original certificate; and
  • It has not been altered in any way.

When contracting with a labour broker, management should ensure that the broker is in possession of a valid IRP 30 tax exemption certificate. Under these circumstances, no liability whatsoever is incurred by the client company, should the broker subsequently fail to deduct income tax from the earnings of the persons supplied to the company.

Where a company chooses to utilise the services of a labour broker who is not in possession of an IRP 30 tax exemption certificate or the certificate does not meet all the criteria detailed above, then the client company must deduct employee tax from the earnings of the persons supplied by the broker.

Professional Indemnity Insurance

The Labour Relations Act (LRA) prescribes that the client company and the broker may be held jointly and severally liable for any contravention of the collective agreements of  Metal and Engineering Industries Bargaining Council (hereafter called the “Bargaining Council” or the “Council”). This means, for example, that if the broker has not made the necessary contributions to the industry provident fund, then the Bargaining Council may claim the outstanding amounts from either the broker or the client company, whichever option is easier to pursue. This, obviously, has serious potential financial obligations for the client company since it has no knowledge or control over what payments or deductions are being made by the broker from employees’ earnings.

A way of dealing appropriately with this potential financial liability is for companies to:

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  • Seek a guarantee from the labour broker that it is observing all the provisions of the bargaining council agreements; and
  • Ensure that the broker has adequate professional indemnity insurance cover to protect the client against any subsequent claims from the bargaining council.

Professional indemnity insurance is available to the labour broker who meets certain qualification standards and this, in itself, is an important safeguard to client companies.

The Main Agreement Employer Obligations

The MEIBC Main Agreement imposes the following obligations on companies’ intent on utilising the services of labour brokers.

No employer should utilise the services of workers supplied by a labour broker unless the broker provides proof of:

  • Registration with the Unemployment Insurance Fund;.
  • Registration with the Compensation Commissioner in terms of the Compensation for Occupational Injuries and Diseases Act; and
  • Registration with the bargaining council.

The employer is required to complete a form to notify the Bargaining Council of the business name and physical address of the labour broker within seven days from the date on which the services of the broker are utilised.

 

The employer is required to complete a form in respect of each person supplied by the broker, detailing the following particulars:

  • The name, telephone number, residential address and identity number of the worker;
  • The business name, telephone number and business address of the labour broker;
  • The date from which the services of the worker will be utilised and the expected termination date;
  • The site or workshop address where the worker will be located;
  • The anticipated normal hours and overtime to be worked by the worker;
  • Whether the worker will be engaged on Rate A work; and
  • The scheduled occupation applicable to the worker.

Management should also ensure that employees supplied by the broker are members and contributors to either the Engineering Industries Pension Fund or the Metal Industries Provident Fund. A special dispensation is available to a labour broker’s employees permitting coverage only in respect of the death and disability components of these Funds. Management should request adequate proof of the existence of an appropriate exemption issued by the Bargaining Council where this arrangement is observed by the broker.

Bargaining Council Accreditation of Labour Brokers

The Bargaining Council has in place an accreditation process to enable individual labour broker companies, on a voluntary basis, to request a six-monthly audit and inspection to certify their compliance with the council’s agreements. The Bargaining Council, SEIFSA and the industry trade unions recognise and promote those broker companies which have been accredited.

The objectives of this comprehensive labour broker accreditation system are to:

  • Provide some protection to client companies against financial risks associated with the use of labour brokers who fail to comply with bargaining council agreements;
  • Ensure that employees of labour brokers benefit from all the negotiated provisions of the council’s agreement;
  • Promote the utilisation of accredited labour broker companies in the industry; and
  • Attempt to regulate the labour broker sector in more a positive and effective manner.

Management should utilise the services of these accredited broker companies. SEIFSA will keep members informed of the names of these accredited companies.

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Recommended Management Action

SEIFSA believes that proper use of the Federation’s services will help to ensure that:

  • Management satisfies itself that the labour broker is in possession of a valid tax exemption certificate;
  • The client company does not become liable for arrear income tax deductions;
  • The broker is in possession of appropriate professional indemnity insurance cover; and
  • Management has ensured that the broker has complied with the requirements of the Main Agreement, including, but not limited to, proof that the broker is registered with the bargaining council and is observing its various agreements.

Casual Employment

Casual employees are generally employed on a daily basis or for a very limited number of days per week. The Basic Conditions of Employment Act (BCEA) defines a casual employee as “…employees who work for less than 24 hour a month.” Previously this was three days per week.

As this is the only definition of a casual employee in our labour legislation, a great deal of emphasis will be placed on this definition in making a distinction between a casual employee who works less than 24 hours per month and a temporary employee whose contract is terminated on a specific date or upon completion of a specific task.

Nevertheless, management should be aware that casual employees are covered by the definition of employee in the Labour Relations Act (LRA) and are thus entitled to all the protections and rights under it. This is a point often overlooked by management who believe that employees employed on a casual basis may be treated differently in terms of the laws of equity and fairness. Management should be aware that casual workers may join unions, go on strikes, are protected against being unfairly dismissed and may approach the Council, the CCMA or the Labour Court for relief on the same basis as any other employee.

In a manufacturing environment where activities are governed by the MEIBC, management must ensure that all work being performed is in terms of the minimum rates of pay as set out in the Main Agreement.  On the other hand, where casuals are employed to perform work falling outside of the scope of jurisdiction of the Bargaining Council and the Main Agreement, management is free to free to pay casuals any amount mutually agreed upon.

In summary, then, casual workers should not be employed for more than 24 hours per month and their employment must automatically terminate when a particular job or task has been completed. In cases where management has employed the same casual worker every month, the casual worker may, after a reasonable period of time, have an expectation of continued casual employment. In other words, the casual may argue that he/she has become a permanent temporary employee.

Recommended Management Action

Where management needs to terminate the services of casual employees who have worked for a reasonably long period, it would be advisable not to do so unilaterally, but to follow the procedures as would be the case for any other employee.

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Conclusion

The use of temporary or fixed-term contracts of employment, casuals and persons provided by labour brokers to regulate the relationship between employer and employee in order to maximise flexible working arrangements is not unique to South-Africa.

With the increased reliance by management on non-standard forms of employment, the workforce of the future consists of two distinct categories of employees, all of whom will fall under the ambit and protection of the LRA, the BCEA and/or the Main Agreement.

At one level, there will be a core group of employees, employed for an indefinite period of time on a traditional and full-time basis fully integrated into the company. At the next level will be persons employed on a casual or temporary basis or via a labour broker who enjoy the protection of our labour system, but are not fully integrated into the organisation.

Non-standard or temporary forms of employment, when utilised correctly as a means of cost-effective manning in an attempt to keep wages and the costs of doing business in line with increasingly competitive markets, is an entirely acceptable and beneficial arrangement for both parties.

From a management point of view, the importance of observing the provisions relating to different employment relationships correctly cannot be overstressed.

It is strongly recommended that all contracts of employment –  be they permanent, temporary, casual or on the basis of persons provided by labour brokers – must be in writing, setting out the terms and conditions of employment, no matter how short the employment period may be. There is far more certainly when the contract has been recorded in writing, is compliant with relevant laws, rules and regulations and has been entered into knowingly and willingly by the parties.

Ends

SA Reserve Bank

SEIFSA Welcomes Reserve Bank’s Repo Rate Cut

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Johannesburg – 18 July 2019, The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the South African Reserve Bank’s decision to reduce both the repo and prime lending rates by 25 basis points, and said the decision has the potential of stimulating local consumer demand and boosting production towards reviving the stuttering economy.

Speaking after the Governor’s announcement, SEIFSA Chief Economist Michael  Ade said the decision provides some relief for businesses, which continue to operate in a tough economic environment characterized by low domestic growth, subdued demand, high unemployment, volatile output, high unit labour costs and poor business activity levels.

Moreover, Gross Domestic Product (GDP) growth has consistently deteriorated since quarter three of last year, despite the rebound from a technical recession, reflecting a continuing period of strain for businesses in 2019, with first-quarter growth results having shown a 3.2% annualised contraction.

“The performance of high-frequency data since the beginning of the year is also worrisome. The manufacturing Purchasing Managers’ Index, a proxy for business activity, has been trending in the contractionary zone from January 2019, reflecting generally poor inventory levels amid challenging supply chain management,” Dr Ade said.

He added that manufacturing firms, including those in the diverse metals and engineering (M&E) cluster of industries, are wary, as indices of business confidence and business expectations are gradually constricting, with the undesired potential of negatively impacting on competitiveness, investment, production and employment.

Dr Ade said the Reserve Bank’s decision to ease monetary policy is welcome, given the need to stimulate consumer demand further and improve on an ever-gloomy domestic outlook in the medium term.

“The timing, against the backdrop of moderate official inflation numbers, is apt, given the need also to stimulate spending by over-indebted consumers with restrained purchasing power. Correspondingly, the dovish stance of the US Federal Reserve ank, which has signalled possible rate cuts of as much as half a percentage point later this year, must have partly influenced the outcome by the Monetary Policy Committee members,” he said.

In conclusion, Dr Ade said the lowered interest rates will reduce borrowing costs of direct investors and domestic companies within the M&E cluster, thus benefitting key industries which are drivers of its domestic demand and supply patterns, and boosting overall demand for its intermediate products, towards better production levels. Moreover, it will help struggling companies to mitigate production costs, offset rising petrol prices and losses arising from pricey intermediate imports, and provide a basis for an improved differential for businesses faced with ever-fluctuating selling price inflation.

Ollie Madlala
Communications Manager
Tel: (011) 298 9411 / 082 602 1725
Email: ollie@seifsa.co.za
Web: www.seifsa.co.za

SEIFSA is a National Federation representing 21 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.

An Opportunity To Represent The Metals And Engineering Sector On The RMA Board Of Directors

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The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) invites applications from individuals interested in being nominated for appointment to the Board of Directors of The Rand Mutual Assurance Company Limited (RMA).

Until recently, former SEIFSA Industrial Relations and Legal Services Executive Bridgette Mokoetle represented the sector on the RMA Board of Directors. Following Ms Mokoetle’s resignation, the RMA has asked SEIFSA to nominate “black, female individuals, preferably with a finance-related background and who have operated at Non-Executive Director level”, for consideration for appointment onto its Board of Directors.

According to the RMA, its Board Nominations Committee will consider nominees against the following criteria:

  • “The transformation requirements imposed by the COIDA licence issued by the Minister of [Employment and] Labour;
  • “The applicable BBBEE Codes;
  • “The over-arching requirements that all Board Members of RMA meet the fit and proper requirements imposed by the Prudential Standards applicable to insurers;
  • “The skills gap that exists on the RMA Board and its Committees”.

Individuals meeting the criteria stipulated by the RMA and keen to be nominated by SEIFSA should please send their CVs to Ms Lerato Lebeko, Executive Personal Assistant to the CEO, on the address Lerato@seifsa.co.za. They must themselves be employed within the metals and engineering sector.

Kaizer M. Nyatsumba

Chief Executive Officer

Purchasing Managers’ Index Still Volatile Despite Rebound In June 2019, Says SEIFSA

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Johannesburg, 1 July 2019 – While the increase in overall business activity in the broader manufacturing sector – as reflected in the latest ABSA Purchasing Managers’ Index (PMI) data – is encouraging, nevertheless the trend remains volatile, highlighting the underlying constraints faced by business, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Economist Marique Kruger said this morning.

Based on a survey of purchasing executives, the composite PMI data for June 2019 shows that industrial activity improved to 46.2 points, up from the 45.4 points recorded in May 2019. A reading above the benchmark level of 50 indicates an expansion when compared with the previous months, while the reverse is true for a reading below 50.

Speaking after the release of the data today, Ms Kruger said it is encouraging to note that the majority of the five seasonally-adjusted sub-components correspondingly registered increases in June 2019 when compared to May 2019. Of the five sub-components, the new sales orders and the inventories sub-indices increased the most, surging from 44.4 points in May 2019 to 46.2 points and from 41.6 points to 43.4 points respectively in June 2019, while the worst-performing sub-index was the employment sub-index (41.9 points).

Despite the improvement, Ms Kruger said the PMI trend is still very volatile, highlighting the underlying constraints faced by business.

“Against the backdrop of low domestic demand, companies still have to deal with fluctuating input costs, increasing fuel and energy costs, carbon tax and volatility in the exchange rate. These are very challenging,” concluded Ms Kruger.

SEIFSA is a National Federation representing 21 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.
SEIFSA Employment equity

Increase In The Number Of People Formally Employed Is Encouraging, Says SEIFSA

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Johannesburg, 25 June 2019 – The Steel and Engineering Industries Federation of Southern African (SEIFSA) is encouraged by the Quarterly Employment Statistics (QES) data, reflecting an increase in the number of people formally employed in South Africa, Economist Marique Kruger said today.

According to the data released by Statistics South Africa this morning, formal employment in the local economy increased from 10 152 000 in December 2018 to 10 174 000 in March 2019, an increase of 22 000 jobs
quarter on quarter. The largest contributor to the quarterly increase in job numbers was the community services sector, gaining 19 000 jobs in March 2019. Furthermore, there were increases in job numbers in the mining and quarrying sector (6 000 jobs), the manufacturing sector (5 000) and the business services sector (5 000 jobs).

An analysis of the preliminary estimates indicates that the broader manufacturing sector, of which the metals and engineering (M&E) cluster of industries forms an integral part, gained 0.4 percent of total employment (5 000 jobs) in the first quarter of 2019, with employment increasing from 1 222 000 in December 2018 to 1 227 000 in March 2019. Over a longer time frame, between the first quarter of 2018 and the first quarter of 2019, an encouraging total of 9 000 jobs were gained in the manufacturing sector, an increase of 0.7 percent.

“However, the concern is that the increase in formal employment numbers is unsustainable, as underlying industry dynamics and contribution to GDP are deteriorating,” Ms Kruger cautioned.

She said that businesses are under duress, mainly rowing against high tides and headwinds comprising a plethora of challenges, including increasing intermediate input costs, a volatile exchange rate, comparatively high fuel prices, operational costs and the new carbon tax. These constraints leave companies with little room to pass cost increases on to the market, compelling them to lay off workers in order to cut operational costs in the medium to long term.

“Given the prevailing difficulties, it is, therefore, important for captains of industry and policy makers to engage continuously and seek sustainable solutions aimed at addressing the existing challenges which, if ignored, may reverse the gains made and compound the scourge of unemployment,” Ms Kruger concluded.

SEIFSA is a National Federation representing 21 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.
Metal Sparks

Although Q1 Metals And Engineering Sector Performance Was Disappointing, Recovery Is Imminent – SEIFSA

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Johannesburg, 25 June 2019 – Although the performance of the metals and engineering (M&E) sector during the first quarter of 2019 was disappointing, recovery underpinned by stronger regional and international demand appears to be on the horizon, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said this morning.

SEIFSA Chief Economist Michael Ade said although the optimism SEIFSA had anticipated at the beginning of 2019 had waned against the backdrop of the constriction of the sector, which saw its output dropping during the first quarter of 2019 when compared to the first quarter of 2018, the Federation nevertheless remains optimistic that the external environment holds a great deal of potential for the sector’s exports and ultimate recovery.

“The sector’s recovery will be driven by stronger regional demand from the SADC region and the rest of Africa, underpinned by the newly-launched African Continental Free Trade Area, and globally from Europe, Asia and the Americas. In addition, the slowly-improving international commodity prices will also provide a strong basis for the M&E cluster to improve on output,” Dr Ade said.

Dr Ade attributed the sector’s contraction during the first quarter to continued softening of global economic activity, with trade and manufacturing showing signs of marked weakness against the backdrop of heightened trade battles driven by geopolitical dynamics.

Locally, the sector’s growth was choked by a weak domestic environment and load shedding, which also negatively impacted on the growth rate of the mining, transport, electricity, trade and construction sectors.

Despite of the challenging start to 2019, Dr Ade said there is hope that the sector will ultimately recover, albeit at a slower pace and a lower rate than usually forecast.

“Internationally there has been heightened policy uncertainty, including a recent re-escalation of trade tensions between major economies, accompanied by a deceleration in global investments and a decline in confidence, which in turn weighed on the local currency, dragging down emerging markets as capital flows from investors move to the safety of the US dollar in expectation of better returns. Undoubtedly, the downside to the production growth in the M&E sector will be tempered by a generally difficult operating environment, but the expectation is for the comparatively weaker exchange rate to provide leverage over time and perk up export volumes through relatively lower prices, also impacting on production,” he said.

Commenting on the domestic operating environment, Dr Ade said despite the prognosis being less robust, primarily as a result of slowly-improving but volatile supply-side dynamics underpinned by regressing business and consumer confidence, SEIFSA remains positive about the sector’s long-term outlook against the backdrop of the decision by Moody’s to keep South Africa’s investment rating above sub-investment grade.

Although the decision by Moody’s augers well for existing and new investments, Dr Ade cautions that the positive outlook depends on continuous policy reforms and initiatives aimed at promoting real gross fixed capital formation (GFCF) from the general government, public corporations and private business enterprises.

Dr Ade said this was important, given the dismal performance of GFCF in Q1 2019, decreasing by 4.5 percent, its fifth consecutive decline from Q1 2018.

Dr Ade said notwithstanding the decline in real GDP in quarter 1 of 2019, there was a corresponding net growth in production in the broader manufacturing sector, with preliminary data showing the sector cumulatively growing by 2.5 percent, despite the dismal performance of its M&E sub-sectors comprising roughly 45 percent.

“Although the expectation is for the M&E sector to rebound and improve during the course of the year, we are cognisant of the difficult operating environment, hence the moderate forecast of 1.6 percent growth for 2019,” Dr Ade said.

SEIFSA is a National Federation representing 23 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people
Easing Consumer Inflation

Uptick In CPI Amid Low Growth Is Discouraging For Consumers And Businesses

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Johannesburg, 19 June 2019 – The uptick in consumer price index figures for May 2019 amid low growth is discouraging for consumers and businesses and may negatively affect  consumer sentiments and spending, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Chief Economist Michael Ade said this morning.

According to the latest data released by Statistics South Africa today, the annual headline consumer price inflation increased from 4.4 percent in April 2019 to 4.5 percent in May 2019, while the core CPI remained unchanged at 4.1 percent in May 2019. On a month-on-month basis, the headline CPI was 0.3 percent in May 2019.

“This is discouraging for over-indebted consumers who are clearly struggling to cope, as reflected by the dip in final consumption expenditure in Q1 2019, decreasing by 0.8%,” Dr Ade said.

He added that given the low-growth context, the general increase in the prices of goods and services does not augur well for embattled domestic consumers and the South African households in general as higher CPI numbers increase the nominal prices of goods and services, also impacting negatively on over-indebted consumers’ household budgets and reducing the ability to service existing debts or to make extra payments.

Dr Ade said companies in the broader manufacturing sector, including its heterogenous metals and engineering sector, will also not benefit from higher inflation due to a possible decrease in the demand for intermediate and final manufactured goods.

“However, we sound a caveat against reading too much into the current data, which does not constitute a trend, given its high level of volatility. This is because changes in factors affecting supply, including high-frequency data, may also negatively impact on the CPI numbers as businesses pass on cost increases into the market,” Dr Ade concluded.

SEIFSA is a National Federation representing 21 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people
Continuous Positive Growth

Continuous Positive Growth in Manufacturing Output despite a Spluttering Domestic Economy Is Encouraging, Says SEIFSA

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Johannesburg, 11 June 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is encouraged by the continuous positive growth in broader manufacturing sector production, as indicated in manufacturing production figures released by Statistics South Africa (Stats SA) this afternoon.

Speaking after the release of the data, SEIFSA Economist Marique Kruger said despite the struggling economy and continuous headwinds faced by companies in the broader manufacturing sector, in which includes the Metals and Engineering (M&E) cluster of industries, businesses were able to stay resilient.

The latest preliminary seasonally-adjusted production data for the broader manufacturing sector released by Stats SA indicated that output improved to 4.6 percent year-on-year in April 2019, when compared to April 2018. On a continuous three-monthly basis, output in the broader manufacturing sector consecutively trended positively from 0.7 percent in February 2019, to 1.3 percent in March 2019 and to 4.6 percent in April 2019. On a month-on-month basis, the manufacturing sector’s performance was also inspiring – registering 2.8 percent in April 2019 when compared to 0.9 percent March 2019.

Ms Kruger said despite the encouraging production data, there are still concerns regarding various constraints, including volatility in exchange rate, increasing intermediate input costs, operational costs and high fuel and energy costs.

“These variables, no doubt, dropped the value add by manufacturing to the Gross Domestic Product (GDP) in quarter one of 2019, and have the ability to further hinder manufacturing contribution in the second quarter of 2019,” she said.

However, Ms Kruger said, the expectation is for the generally weak exchange rate to boost manufacturing export competitiveness in the mid-term, to the benefit of businesses, in order to stay resilient and build on the positive performance of the last three months, as we collectively seek ways of re-igniting long-term growth and the sector’s value add.

 

Issued by:

Ollie Madlala
Communications Manager
Tel: (011) 298 9411 / 082 602 1725
Email: ollie@seifsa.co.za
Web: www.meindaba. seifsa.co.za

SEIFSA is a National Federation representing 23 independent employer Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people.