The History of SEIFSA

With an illustrious history spanning nearly 80 years the federation has witnessed historic economic and political events that has shaped South Africa and its economy. Throughout this time SEIFSA has played an important role in a foundational sector of the economy – the Metals and Engineering Industry

SAFEMA - born in the heat of war

South Africa’s declaration of war on Hitler’s Germany in September 1939 forged a new unity among employers in the nation’s metal and engineering industry.

Government had appointed a Director-General of War Supplies and a Controller of Industrial Manpower. Five trade unions represented a sometimes restless workforce labouring long hours under a wage freeze. Yet employers, whose industries were crucial to the war effort, could not deal effectively with either government or labour issues. They were regionally organised and had no national voice.

Born out of conferences in Bloemfontein in 1941 and Cape Town in 1942, a national umbrella organisation was formed. Its name: the South African Federation of Engineering and Metallurgical Associations (SAFEMA). Its first president was HC Gearing and first director was former journalist Fred Williams. A regionally structured council was created comprising three delegates and three alternates each from the Cape, Transvaal, Natal, Midlands and Border areas.

The first report of the SAFEMA Council noted that according to available figures the federation represented 440 employers.

In 1947, in view of vigorous growth in the industry, it was decided to revise the federation’s constitution and provide for more effective services for the increasing number of specialist national associations created in the sector. The new structure moved away from regionalism and opened the way for majority representation on the council for registered employer associations. At the same time, provision was made to ensure that regional interests were also represented.

The council was empowered to co-opt as members prominent industrialists whose knowledge and experience would be of value to the federation. And the name was changed to the Steel and Engineering Industries Federation of South Africa – SEIFSA.

At the outbreak of World War II, South Africa’s engineering sector was for the most part concentrated on repair and maintenance work. The urgent demands of war brought massive expansion and technological development in the metal and engineering industry. Behind this revolution was a giant Pretoria steelworks that had started production in 1943 – lscor.

Faced with a cut-off in the overseas supply of production equipment and finished articles, South African industry rose to the challenge with remarkable ingenuity and resourcefulness. Within a few months engineering workshops were converted into efficient munitions factories and began turning out an ever-increasing range of wartime equipment and spares comparable in quality with munitions produced in Britain and the United States.

Between 1940 and 1944 factories across the country delivered:

  • More than 57 000 armoured fighting vehicles and 35 000 military motor vehicles
  • Over 70 000 tons of bombs, 50 000 tons of shells and shell casings and 28 000 tons of mortar bombs, grenades and landmines
  • Nearly 20 000 tons of small arms and ammunition
  • Over 1.5 million steel helmets

Out of these wartime facilities came aircraft hangars, bridges, travelling cranes, barges, rock drills, pumps and valves, electric motors, transformers, field hospital equipment, ships’ stores for the British Admiralty, thousands of kilometres of telephone and telegraph wire for the signal services…the list is almost endless.

The Western Desert pipeline supplying water for Allied troops in North Africa was built largely from South African materials.

Industrial relations were also becoming more organised. In 1944 the National Industrial Council for the Iron, Steel, Engineering and Metallurgical Industries was formed – and the first national wage agreement for the industry was forged.

Peace brought not a feared recession but an explosive increase in South Africa’s metal and engineering industry. In the second half of the 1940s the number of metal and engineering undertakings grew by many hundreds – and employment soared from 76 000 to over 110 000.

Industrial production also became more sophisticated. For the first time domestic appliances and radios were made in South Africa. Brown Boveri Technologies began producing electrical power and control equipment. Significant investments were made in the production of copper and copper alloy and semi-fabricated aIuminium products

The SA Bureau of Standards opened its doors and introduced quality and performance specifications for local manufacture.

On the political front a minority Nationalist government had been voted into power by white voters in 1948, and an ominous new word was introduced to the national vocabulary – apartheid. For more than four decades the Nationalists would battle the world from their latter-day laager. Their stryd in pursuit of apartheid – later euphemistically called ’separate development’ – would play out as a human tragedy of monumental proportions. It would blight the lives of millions of South Africans.

SEIFSA – in the shadow of apartheid

Contrary to expectations the South African economy did not follow post-World War I pattern, and the long-awaited depression anticipated by many economists did not eventuate.

A SEIFSA book recording the evolution of the industry to 1967 notes that thanks to international collaboration, monetary controls, lease lend and financial aid to devastated and underdeveloped regions, and despite the balance of payment problems of various countries, a fairly smooth transition from war to a peace-time economy was experienced.

As the post-war recovery continued, South Africa – with its pent-up purchasing power and the need for new capital equipment and plant and a war-starved consumer market – spent freely. Imports were stepped up without regard to the balance of payments. A drain on foreign exchange reserves developed and it was necessary to introduce drastic exchange control measures.

`The exploitation of the new Free State goldfields deferred during the war was now well under way, and with the addition of income from uranium, the revenue of the mining industry increased, with an eventual easing of the country’s currency situation.’

SEIFSA president JM Russell noted in his 1950 presidential address: `Many existing plants have been expanded, affiliations have been established with overseas interests, and new plants have come into existence to produce a surprisingly wide variety of articles…which hitherto have been imported.’

Industrial relations were `amicable and constructive’. The industrial council system was working well because of `the fair-minded and intelligent perception brought to its administration by the representatives of both employer associations and trade unions.’

Despite an enduring shortage of suitable labour, prices in the metal industry were internationally competitive – and South Africa started looking to export markets.

As in the 1940s, the world in the early 1950s fell under the dark shadow of war. This time the Korean War. The distant conflict led to a shortage of many commodities on world markets and a sharp rise in prices within a few years. But after the Korean War strategic non-ferrous metals were in freer supply. The metal industry continued to expand apace. Several hundred new firms opened for business, and the workforce grew to more than 140 000. Output, measured in quantities, increased significantly.

Two influential developments were the introduction of import restrictions in 1949-50 and the opening of a second Iscor steel works, at Vanderbijlpark, in 1952. Before the end of the decade Iscor’s annual output climbed to two million tons.

Some mining groups diversified by investing in metal and engineering concerns. Local manufacturers and processors engaged in a broad range of activities and signed technical aid, licensing and `know-how’ agreements with international companies.

In the mid Fifties, the industry’s Sick Pay Fund and Group Life and Provident Fund were established, mainly for skilled workers.

Meanwhile the Nationalists had been imposing a stream of laws and regulations designed to keep white and black South Africans apart. The Black Labour Relations Regulation Act of 1953 was aimed at creating a separate labour relations system for black workers. The fundamental difference was that black trade unions could not take part in centralised collective bargaining or make use of the industrial council system. Black workers’ interests would be dealt with through a central board – controlled by whites.

The Industrial Conciliation Act became the core of South Africa’s labour relations. Apart from covering trade union, industrial council and centralised bargaining arrangements, it introduced far-reaching racial discrimination into labour affairs. Notably it prevented black workers from forming registered trade unions and barred `mixed’ unions.

These two laws entrenched racial division in the conduct of labour relationships. They were supported by other separatist legislation such as the Group Areas Act and the Influx Control Act. Before the end of the decade, the Industrial Conciliation Act was amended to introduce `job reservation’, calculated to protect white workers. Employers protested. `Such matters’, they said, `are foreign to a successful system of collective bargaining and are detrimental to the harmonious working of the industrial council system…’

Calamitously, job reservation also denied blacks technical training at a time when the country was crying out for men and women with all kinds of technical skills.

From ` Organisation and Structure of the Metal and Engineering Industries in the Republic of South Africa’, recording developments up to 1967, and published by SEIFSA.

Survival in mounting isolation

The 1960s were the start of the ’isolation years’ as the architects of apartheid systematically painted South Africa into a corner. For industry the Sixties also became years of innovation and resilience.

In this decade, the country experienced a succession of events that divided its people even more deeply, alienated world opinion and led to intensified international pressures.

First came the massacre of 69 blacks by police at a demonstration against the humiliating and detested pass laws in the Vereeniging township of Sharpeville. The world was appalled. Government responded by banning the African National Congress (ANC) and Pan Africanist Congress (PAC).

A year later South Africa withdrew from the Commonwealth and became a republic. In 1963, at the Rivonia Trial, Nelson Mandela was sentenced to life imprisonment. That same year, Transkei became the first `independent Bantustan’.

The following year government walked out of the International Labour Organisation (of which South Africa had been a founder member), and the country’s team was excluded from the Tokyo Olympic Games. Other sports protests and boycotts followed.

All this led to a flight of money. Thousands of whites emigrated, and property prices plummeted. But these events also demonstrated two things: the country still had considerable financial resources to invest in new productive capacity, and its people were extraordinarily resilient and innovative as they sought to survive the increasing isolation.

Fundamental to Fortress SA was government’s support of local industry. State departments gave preference across the board to local manufacturers. High level investigations took place to find ways of replacing imports with local products. The economy boomed, and gross domestic product (GDP) rocketed from R5 billion in 1960 to R13 billion in 1970.

The long-term import replacement and infrastructural development strategies implemented at the time still benefit South Africa today. A good example is the motor industry. Today’s booming automotive vehicle and components manufacturing industry was conceived in 1960 when the Minister of Economic Affairs asked the Board of Trade and Industries to look into ways of stepping up local content.

The `build the economy’ policy brought unprecedented spin-offs for the metal and engineering industry, which forged ahead at an average 12% during the mid-Sixties. The workforce burgeoned to 265 000.

SEIFSA’s growth mirrored the industry’s advances. By 1966 it comprised 41 autonomous employer associations representing more than 1 600 firms. Head office was in Johannesburg, and regional organisations in Durban, Cape Town, Port Elizabeth, East London and Bloemfontein. The associations were charged with negotiating wages and employment conditions with the trade unions.

Industrial progress brought new demands on the federation and, as a result, divisions were set up to deal with labour, economics, education and training, and administration.

In 1965 the Metal Industries Medical Aid Fund was launched mainly for skilled employees, and in the following year the Metal Industries Group Pension Fund was established as a non-contributory scheme mainly for unskilled employees.

The shortage of skilled labour was an abiding problem. With the formation of the National Industrial Council for the industry, control of apprenticeship training became a national function under the National Apprenticeship Board. Trade union and employer representation on the board was bolstered by members with special expertise.

By the end of 1966 some 28 000 artisans and 6 000 apprentices were at work in the industry.

More barriers for black workers.

While government was doing much to protect and advance domestic industry, apartheid legislation was putting all sorts of obstacles in the way of black worker advancement. Year after year SEIFSA campaigned for changes to this legislation.

At the beginning of the Seventies, for example, business concerns began to emerge about the way the Physical Planning and Utilisation of Resources Act was being applied. The aim of this Act was to limit the number of black workers in specified areas without the prior approval of the Minister of Planning. SEIFSA called for the Act to be applied in a more flexible manner as it was placing artificial restraints on the mobility and recruitment of black labour.

Furthermore, the Act inhibited the progress of black workers into more skilled job categories in an industry which had long been inhibited by a shortage of skilled white workers. SEIFSA continued working within the limitations of the law to try to overcome the skills shortage, and screened intending white immigrants applying for skilled jobs in the industry. But the intake was nowhere near enough. In 1972 an agreement was reached with the industry’s trade unions to allow black workers to advance into higher skilled (previously white) operative jobs. This was to become an evolving trend.

At the same time South Africa needed all the skills it could get, and in 1974 SEIFSA – working in terms of the Department of Immigration’s assistance framework – introduced a pilot immigration scheme that it hoped would attract 1 000 artisans. The scheme failed.

Again the industry turned to untapped domestic talent, and in 1976 the small step forward for black workers taken in 1972 was extended to included activities just below artisan level.

In Soweto resentment towards government was rising. After an instruction that half the black school syllabus had to be taught in Afrikaans, the anger exploded. On 16 June 1976, thousands rioted. In Orlando West a police bullet killed 13-year-old Hector Petersen. Government buildings and beerhalls were burned. Rioting spread across the Rand, and to the Western Cape, and by early 1977 more than 500 had died. Government responded with more bannings. Many young blacks went into exile to fight the system – and world hostility mounted.

Towards the end of the Seventies the economic tide was beginning to turn, albeit slowly, against the hard-line proponents of `separate development’. But in the industrial arena a far-reaching development took place in 1977. It was the appointment of a commission of inquiry into labour legislation – the Wiehahn Commission.

One of its commissioners was Errol Drummond, then director of SEIFSA. He told the commission that the dual labour relations system should be scrapped as a matter of urgency and that black trade unions should be permitted to take part in the industrial council collective bargaining system. He was supported by the SEIFSA president Dr JP Kearney, who stressed in his annual address that all discrimination needed to be removed from labour relations.

The federation became a signatory to the Urban Foundation Code of Employment Practice in 1978, and consequently negotiated the removal of all job discrimination and racially based provisions from the industry’s Main Agreement.

This was soon followed by a call to government to translate into law the findings of the first Wiehahn Commission report. Key recommendations were that:

  • Full freedom of association be granted to all employees
  • Trade unions be allowed to register, irrespective of composition
  • Statutory job reservation be phased out

Rising unrest – and writing on the wall

The 1980s were a decade of rising rebellion – and the beginning of the end of apartheid.

Government responded to township unrest and violence, boycotts and burnings, with one state of emergency after another. Media censorship was tightened.

At the same time it sought to bolster the economy by funding ambitious infrastructure development and import replacement projects and through high tariffs and generous export incentives. Many of these projects helped sustain the industry during a stagnant global economy. In the early Eighties the production of the industry was more than R10 billion, or about a third of the country’s manufacturing output.

On the industrial relations front in 1980, two registered black trade unions became fully-fledged members of the industrial council. The next year they were joined by two more. This gave these unions equal rights with the other 10 unions in negotiations with SEIFSA, even though they were not yet fully committed to the industrial council system and saw centralised bargaining as diluting their power base.

The federation kept scoring small victories over the apartheid system by continuously re-evaluating and re-defining jobs and the skills components these required. Member companies did manage to recruit a few hundred black apprentices but this was nowhere near enough.

SEIFSA warned that barriers such as inadequate maths and science teaching and inequalities in training facilities had to be overcome. It also pressed government to expand and expedite housing for black people.

Unemployment remained a serious problem, particularly among blacks in metropolitan areas. And inflation, though lower than in some of South Africa’s trading partners, was still eroding living standards and raising the costs of corporate finance.

By 1983 the recession in the metal industry internationally was being called the worst since the Great Depression half a century earlier. Even South Africa’s distant and isolated industries were caught in the contagion.

Looking back on SEIFSA’s first four decades, its former president Graham Boustred was happy to beat the drum. SEIFSA, he said, had led the country in forward-looking industrial relations. ”We were the first major industry to eliminate completely the concept of race from our agreements and the SEIFSA minimum wage has been a target of achievement for many other industries.”

SEIFSA’s founder members expected that it would make progress in dealings with the trade unions. It had lived up to these expectations.

SEIFSA had provided a stable environment in which the industry would experience `phenomenal growth’. Thanks to a Main Agreement on employment conditions that was `a remarkable instrument’, the time lost to the industry through work stoppages had been minimal.

The federation had steered its industry to significant black advancement. The wage gap between unskilled and skilled workers had been narrowed from a ratio of 5:1 in 1961 to 2,8:1 in the early Eighties.

In the second half of the decade pressures on the Nationalists intensified, within and outside the country. Demonstrations and riots continued to wrack the townships. Troops moved into areas where rampaging youths were burning schools and shops seen as supporting the system.

Government sought to appease an increasingly hostile world by pulling down long-standing pillars of social apartheid. `Mixed marriages’ and sex across the colour line were no longer outlawed. Public amenities were opened to all, and influx controls – the hated pass laws – were abolished. A tricameral Parliament was established, with separate Houses for Whites, Indians and Coloureds.

State President PW Botha declared that these reforms showed that South Africa had `crossed the Rubicon’.

Yet the ANC, PAC and other black resistance organisations remained banned, their leaders in jail or in exile.

South Africa’s key trading partners, the European Economic Community and the United States, introduced formal sanctions. The Comprehensive Anti-Apartheid Act, signed into law in the US in October 1986, was seen by many as the final blow that would break obdurate Nationalist resistance. Yet in Nerves of Steel, his book chronicling the story of the Haggie group, Rex Gibson observed, `As it happened, though, the wound was painful but not mortal’.

Nevertheless, as it had been for communism for some time, the writing was on the wall. Anglo American chairman Gavin Relly led a high-powered business delegation to Lusaka for talks with the ANC. He and his party came home convinced that government had to free Nelson Mandela and negotiate the country’s future.

Industrial unrest and intimidation continued. Reports streamed in of illegal strike action, overtime bans and factory occupations. Union members gave their support to sanctions and disinvestment. In 1988 Numsa triggered the industry’s first national strike by 25 000 members at 120 companies. It lasted three weeks.

President Botha bowed out, to be replaced by a man widely viewed as more enlightened and flexible – FW de Klerk. The path de Klerk was to take would dramatically re-shape the nation’s destiny…

Mandela and the dawn of democracy.

On 2 February 1990 the most famous political prisoner on the planet walked free.

The world and the majority of South Africans rejoiced at Nelson Mandela’s return from Robben Island. His people gave him an ecstatic welcome.

Other prominent detainees were also released. Banned political parties — notably the ANC were unbanned. The state of emergency was lifted and the first moves were made towards a negotiated constitution through Codesa, In 1990, too, SEIFSA and the industry trade unions reported progress in helping black employees to buy houses. The rules of the Metal Industries Group Pension Fund were amended to allow members to pledge pension contributions as security for home loans.

In a climate of tough economic conditions, escalating retrenchments and employer-union confrontation, Numsa held a controversial strike ballot. On 31 July 1992 the industry’s last big national strike of the century began. By the following week, some 80 000 Numsa members were on a strike that would last a month.

Recessionary conditions in the following year saw employment in the industry drop to well below 300 000. But in a significant pointer to better industrial relations, SEIFSA and Numsa agreed to investigate a long-term strategy to promote stability, skills and productivity in the industry — and thus move towards making it world class.

In 1994— the year of South Africa’s democracy — SEIFSA urged managements to promote the election process and a mood of confidence through programmes to educate and register employees as voters. The historic election day turnout swept the ANC and its Cosatu and SA Communist Party allies to an overwhelming victory, and Nelson Mandela to the Presidency. In the ensuing years Mandela’s adroit reconciliation skills were to astonish friend and foe — and he and the man who had ordered his release, former President FW de Klerk, shared the Nobel Peace Prize.

Through David Carson, director of SEIFSA’s industrial relations division, the federation submitted a report to the Truth and Reconciliation Commission, covering events and developments affecting the industry and the organisation from 1960 to 1994.

The world had been through tumultuous times with Gorbachev and perestroika and glasnost — and had witnessed the crumbling of communism and the Soviet Union, and the rise of Yeltsin. Now, also freed of apartheid and sanctions, South African business began to look outward. Those entrusted by government with driving the economy forsook the short-term populist path of socialism for the richer rewards of free market pragmatism.

Fundamental changes took place in business, labour and skills development. A new national employer confederation, Business South Africa, was formed with SEIFSA as a founder member. The National Economic Forum and the National Manpower Commission were merged to create the National Economic, Development and Labour Council (Nedlac). The New Labour Relations Act transforming labour law and industrial relations was implemented. The South African Qualifications Act introducing a National Qualifications Framework was followed in 1998 by the Skills Development Act and a system of sectoral education and training authorities known as Setas.

Since 1994 the industry unions have had equal representation with employers on the Board of Trustees of the Metal Industries Benefit Funds Administrators (Mibfa), a Section 21company controlling the industry’s pension, provident, sick pay and permanent disability funds. The combined market value of the funds is around R25 billion.

After five years of indefatigable nation-building Mandela stepped aside for Thabo Mbeki. Despite controversy over HIV/Aids and Zimbabwe, Mbeki has stayed the economic course. He has also steadfastly promoted black empowerment and the New Partnership for Africa’s Development (Nepad). A disquieting trend for many business leaders has been increasing State intervention and an outpouring of regulatory legislation across a broad spectrum of business activity. SEIFSA executive director, Brian Angus, who warned in 1999 of serious economic consequences if government did not act to halt the interventionist trend, has repeated SEIFSA’s concern in 2003.The rising cost of compliance, he warns, is making South Africa less competitive — and hampering growth and job creation.

An industrial relations New Deal between employers and unions gave the new century a bright beginning. Out went the confrontational style of bargaining, to be replaced by greater mutual understanding and a more conciliatory bargaining approach. The new focus was on speedier resolution of problems and the achievement of longer term gains across a broader range of issues.

Looking ahead, Angus says SEIFSA must continue to expand its services to members on all fronts.

The following article is also an excerpt from SEIFSA’s 60th Anniversary publication entitled STRENGTH IN DIVERSITY published in October 2003.
Quality service is crucial

Brian Angus, SEIFSA Executive Director (1987 – present)

The future of SEIFSA will depend more and more on offering members totally professional, multi-faceted business services, says its executive director Brian Angus.

In addition to the broad range of services it already provides SEIFSA expects to phase in a number of valuable new services over the next few years.

Over the longer term, says Angus, SEIFSA will have to continue extending its assistance to members. In Europe, for example, some employer organisations offer members a wealth of information on business conditions and opportunities in other countries. ”It’s an area we will be going into as soon as we can, and it will be particularly valuable to smaller businesses with limited access to that kind of information.”

Looking back on his tenure as executive director of SEIFSA, Angus identifies four particularly significant developments:

  • A new style of negotiations between employer and trade union representatives on wages, conditions of employment and other issues. The New Deal initiated in 1999 has moved away from the drawn out, confrontational approach that bedevilled relations between the parties for more than 50 years.
  • The emphasis in education and training has moved from only artisan apprenticeships to the development of skills across a far broader range of activities.
  • The funds division of SEIFSA was transformed in 1994 into the Metal Industries Benefit Funds Administrators (Mibfa), a Section 21 company with equal employer and trade union representation on its Board of Management.
  • The substantial expansion of SEIFSA products and services from a hitherto limited range of services in industrial relations and an even more restricted range in education and training.

When Angus became executive director in 1987, virtually none of SEIFSA’s income came from direct services to member companies. ”It became clear to me early on that we were on a one-way street to nowhere. Every year the number of employees in the industry was getting less and less yet we could only increase our membership levies on a per capita basis, and at about the rate of inflation. So our income in real terms was diminishing every year.”

The challenge for SEIFSA was to improve and expand its industrial relations, skills development and economic and commercial services. At the same time it was having to cut back severely on administration costs and staff.

”The only way out,” says Angus, ”was to become more professional and to charge for some services. Members responded positively and that not only helped SEIFSA survive difficult years in the Nineties but strengthened it as an organisation.”

He argues that an industry-wide collective bargaining levy introduced in May 2003 was fully justified. Until then, the member companies affiliated to the industrial associations under the SEIFSA umbrella were bearing the full cost of negotiating agreements that benefited all the 8 000 plus employers in the industry. The ”very modest” levy of R150 per month, payable to SEIFSA, will spread the cost burden more equitably among all those who benefit.

The levy is already proving a spur to SEIFSA membership. Non-member companies are saying: ”We don’t want to pay a levy and get nothing for it. If we join SEIFSA what services can you offer us?” Angus says the more fee-paying members SEIFSA can recruit, the more it can build up its already extensive array of services. Enhanced services, in turn, will make membership more attractive.

In years to come the industry may need to consider some changes in approach to bargaining on matters such as wages and other employment conditions. ”Internationally there is undoubtedly a shift away from centralised collective bargaining on such matters. Britain has moved away from it, and Australia is in the process of doing so. Even in Germany, which is in a sense the home of centralised collective bargaining, they are having a re-think.”

Given a fast-changing global environment, the trend is to have more matters dealt with at plant level, fewer at industry level. However Angus also believes that industry level agreements on matters such as pension and provident funds as well as training and development programmes will continue to be beneficial to both employers and unions.

Business as a whole, he adds, must work harder at improving its relationship with government. From the moment the ANC came to power its leaders have surprised many by the active way in which they have embraced free enterprise. ”They have been a lot friendlier to business than we could have expected.” But among rank and file Parliamentarians – many of them steeped in socialism – antagonism to the business establishment still runs deep.

Parliament continues to bombard business with more and more legislation. This is causing mounting concern among business leaders he notes. The cost of compliance not only makes South African products and services less competitive; it also sends out disturbing signals to potential foreign investors.

Legislators need to be reminded that in countries where central planning has been tried it has failed dismally. In countries where the State has supported and encouraged business in a hands-off way, the economy and living standards have advanced most rapidly.

At a Department of Labour strategy session in mid-2003, business representatives urged that before more legislation was contemplated the numerous recent laws should be ”bedded down”. Everything possible should first be done to get South Africans to understand and abide by the existing laws.

”Many Parliamentarians seem to think their main function is to keep changing laws and passing new ones. Solving problems comes from enforcing laws, not passing them.

”We at SEIFSA are trying to improve understanding through Business South Africa and other forums”

A Difficult and uncertain period

The years between 2014 and 2022 have been dominated by increasing unemployment, industrial action, load-shedding, state capture and the Zondo Commission, and, in the final two years of the nine, a total game-changer in the form of the Covid-19 global pandemic.

Even before the economic disaster the pandemic wreaked, the economy was not in good shape, with a deteriorating socioeconomic environment and a generally unfavourable business landscape.

South Africa began the period with lacklustre economic growth, languishing not far from 1% in 2014, plummeting to a negative 6.4% in 2020 due to the stringent lockdown measures imposed by government to prevent the spread of Covid-19. By 2022 economic growth had recovered with the economy projected to grow by 2.2% in that year. Over the review period, economic growth averaged 1.2%, which is much slower than the country’s population growth rate of 1.6%, meaning that the country became poorer on a per capita basis.

A toxic combination of state capture and poor management of state-owned entities left the country reeling from deteriorating services provided by these entities This had widespread and severe economic consequences, with economic growth being severely hampered by these failures. In the final quarter of 2019 stage 6 load-shedding resulted in a 1.4% contraction in GDP. Stage 6 load-shedding returned in June 2022 and had the same ravaging effect on the economy.  The energy crisis will continue to dominate South Africa’s economic fortunes and only an extraordinary combination of private, public partnership will help to resolve the ongoing crisis.

During the period under review, what become painfully evident is that the dominance of the state in various areas through state-owned entities created binding constraint on the economy. This held true in the energy sector, logistics – where inefficient and costly services manifested – and at local government level where service delivery continued to deteriorate. All of which contributed to a challenging operating environment for domestic manufacturers. It is estimated that input costs to local manufacturers as a result of these inefficiencies, increased by as much as 18% to 20%. This in turn eroded the competitiveness and sustainability of domestic manufacturers. Though there has been progressive realisation on the part of the state, that allowing greater private sector participation in all these areas will be key to unlocking efficiencies and reducing costs through competition, the progress to reform in this direction has been disappointedly slow.

During the period a growing number of companies in the metals and engineering sector were forced to lay-off workers with many going into business rescue and other having no alternative but to close.

The metal and engineering sector remains a strategic sector of the general South African economy given its capital intensity while also having strong employment multiplier effects. The sector, a microcosm of the broader economy, has also had to deal with imports flooding the market, while local manufacturers battle to become internationally competitive.

During the 2014 round of industry wage and conditions of employment negotiations the industry was faced with a violent, four-week strike by metalworkers. Eventually, SEIFSA on behalf of all of the affiliated Employer Associations reached an agreement with the industry’s trade unions for a three-year wage deal ending 30 June 2017. Fortunately, the next round of industry wage negotiations was resolved, on mandate, without a single day being lost to strike action. This three-year agreement took industry to 30 June 2020 right at the point where the country was getting to grips with the advent of Covid-19 and its unprecedented impact on society, the economy and the entire population.

In response to the global pandemic, SEIFSA and the industry trade unions concluded a historic and unprecedented standstill agreement, effectively freezing wages and terms and conditions of employment for the next twelve months to 30 June 2021.

To this day, this standstill agreement remains the only agreement concluded for an industry where social partners in the face of unprecedented conditions set aside their personal agendas in the interest of the greater good. Whilst the closure of companies and the loss of jobs in response to the pandemic continued unabated, there is no doubt that the situation could have been far worse had the negotiating partners at industry level not concluded a standstill agreement.

The Metal and Engineering Industries Bargaining Council (MEIBC) began the period in a precarious position, and came dangerously close to collapse before being placed under administration. In February 2020 the court-appointed administrator ended his tenure and with the appointment of a new General Secretary steps began to slowly rebuild the institution in an effort to return it to solvency and functionality. The Bargaining Council remains a strategic institution for the metals and engineering industries and all social partners want to see it returned to the institution it once was.

Regrettably, the next round of industry wage and conditions of employment negotiations in 2021 did not proceed smoothly. Negotiations deadlocked, strike and lock-out action followed and the industry was again forced to endure a three-week stoppage at great cost. Eventually a deal was struck but this deal unlike others changed the methodology on which wage increases were to be awarded, moving away from the practice of awarding increases as a percentage increase on actual earnings, to awarding increases on a Rand/cents basis as calculated on the minimum rates of pay contained in the Main Agreement – a practice last observed in 1991. This Agreement, not dissimilar to the historic standstill agreement concluded in 2020, fundamentally changed the face of collective bargaining in the sector. The Main Agreement was adopted by the parties to the MEIBC as a collective agreement concluded in a bargaining council and on 8 October the Main Agreement was gazetted and on 17 October 2022 it was extended to all non-party employers and non-party trade unions in the industry – an event last witnessed in 2010

The 2013 KPMG annual survey on transformation confirmed that the metals and engineering sector remained the second least transformed sector in the country. The sector has seen little change, though there is general consensus that transformation is in business’s own long-term interest and it is crucial that a concerted effort is made by the sector to create meaningful opportunities for all South Africans.

In June 2021 the Steel Master Plan (SMP) was signed by representatives of Government, Business and Labour with the aim of reinvigorating the industry. SEIFSA convened a Mainstreaming of the Steel Master Plan Conference in May 2022 to allow stakeholders to assess the progress made and provide a forum for on-going discussions between all stakeholders with a vested interest in the growth and wellbeing of the sector to agree on additional plans and initiatives needed to ensure the objectives of the SMP are met.

In February 2018 Cyril Ramaphosa replaced Jacob Zuma as head of state. The Zondo Commission began sitting in August 2018 and heard many hours of testimony on the extremely invasive and destructive nature of state capture. Chief Justice Raymond Zondo handed over the Commission’s final report to President Ramaphosa in June 2022 and over the following months we have witnessed a number of high-profile arrests and court appearances of people implicated by corruption, fraud and money-laundering.

Reflecting on the period there is no doubt the Covid-19 global pandemic, a black swan event of gigantic proportions, wreaked havoc on the world and our economy. Lives were lost, business closed and many thousands of citizens to this day remain without work. It has forever changed the world of work, how we meet, interact with one another and travel. The total shutdown of the economy was unprecedented and had a devastating impact on an already fragile economy. The metals and engineering sector has had to survive all of this and more.

Prospects for economic growth and tackling the three challenges ravaging our country: unemployment, poverty and inequality seem an almost unassailable task. With a general election looming in 2024 and the fortunes of the governing party remaining uncertain, the Federation approaches the next period with a degree of trepidation.

Nevertheless, we are a resilient and tenacious people, blessed with ingenuity, creativity and an entrepreneurial flair that has helped us overcome many challenges. We have no doubt that as the world slowly begins to readjust to the new normal and slowly position itself for growth, South Africa, the metal and engineering industries and SEIFSA will be ready to write the next chapter in our illustrious history.

The Era of a New Deal

The ANC joined leaders and organisations across the continent in declaring the 21st century an African century. The decade dawned however with an emerging awareness that the transformation of a resistance movement with a high level of legitimacy into an effective government able to run the country was by no means an easy process.

As the decade of the infant democracy progressed, the high hopes of the nation began to be tempered by realism as the harsh reality dawned of the enormous challenges of mending a broken state with tremendous backlogs across the spectrum of housing, social services, education and opportunity resulting from the apartheid era.

At the beginning of the decade, SEIFSA, together with the industry’s trade unions, was instrumental in introducing a radical restructuring of both the bargaining council and the approach to wage negotiations. This entailed a decisive move away from the long-standing, confrontational bargaining stance of the past and the introduction of more collaborative and effective collective bargaining mechanisms.

This significant departure from past practice with the assistance of a skilled facilitator resulted in a landmark two-year wage deal, a programme to introduce a 40 hour work week and flexible working time arrangements for voluntary implementation at company level. Central to this so-called new deal, was a commitment to the joint formulation of an industry strategy to increase economic and employment growth in the sector. The establishment of the new bargaining relationship in the sector foreshadowed a more mature approach to future negotiations, improved relationships between the employers and trade unions as well as a sound platform for industrial stability and growth in the industry.

Numerous progressive initiatives also emerged such as the introduction of a collective bargaining levy across the industry and expedited dispute resolution processes.

In 2006, government released the Accelerated and Shared Growth Initiative Programme (Asgisa) aimed at promoting economic growth and halving unemployment so as to reduce poverty by 2014. The social partners engaged actively in the ensuing debates which included an analysis of the impact of the labour law framework on the employment environment.

A protracted labour law review process which started in 2006 took up a great deal of time and energy on a range of issues including the proposed restrictions on employers’ rights to use fixed-term contracts of employment.

SEIFSA continued to play a major role in Business Unity South Africa activities (the body that emerged from the previous Business South Africa) in terms of social dialogue and engagement on trade policy, skills development, employment equity, tax matters and liaison with international employer bodies.

The introduction in 2003 of the broad-based empowerment strategy sparked off years of discussion and debate. While SEIFSA supported the broad thrust of the strategy, there was concern that it could undermine the key national objective of job creation and retention through loss of support for local manufacturing.

Growing competition from China and India presented significant challenges to local manufacturing which impacted negatively on the sector. Concerns grew that China might emerge as Africa’s new coloniser in the years ahead.

A massive influx of migrants into South Africa from Africa and Asia, described as the largest mass migration in modern history, resulted in devastating xenophobic attacks leaving people dead or displaced as well as extensive destruction of property.

The year 2000 saw the implementation of the Sector Education and Training Authority (Seta) system in terms of the Skills Development Act and the Skills Development Levies Act. SEIFSA played a leading role in the establishment and management of the newly established Merseta and the introduction of the new levy/grant system.

The federation increasingly emerged as the national champion of artisan training in South Africa. Aside from committed support for artisan training at national strategic level and at sector level on the Merseta, SEIFSA became an active participant by outsourcing the management of its apprentice training centre in Benoni to GijimaAST in 2003. The centre was renamed Fundi Training Centre and quickly established a reputation as a centre of excellence.

In response to growing artisan skills shortages, SEIFSA developed and piloted an innovative accelerated artisan training programme subsequently adopted and funded by the Merseta which garnered national recognition. The federation also secured donor funding to ramp-up apprentice intake. SEIFSA funded a major expansion of the Fundi Training Centre from the reserves of the previous Metal and Engineering Industries Education and Training Fund to cater for growing demand for training.

As the decade drew to a close, the global economic crisis began to take its toll on the national economy and on manufacturing in particular. Many companies had to implement short-time working arrangements and large-scale retrenchments as they were forced to move into survival mode.

At the end of the decade, the enormous national optimism of the fledgling democracy became tempered by an awareness of the multiple challenges across the political, economic and social spectrum. Nevertheless the nation’s dream, despite the obstacles, of reaching its full potential as a global example of genuine democracy in Africa with equitable economic development and harmonious racial integration based on the ideal of Madiba’s rainbow nation remained essentially undimmed.