OPEN LETTER

6 October 2022

Mr. Thulas Nxesi

The Minister of Employment and Labour

Dear Minister

EXTENSION OF MAIN AGREEMENT WILL BE IRRESPONSIBLE

As you are aware, the Metals and Engineering Industries Bargaining Council (MEIBC) submitted a request to you to extend its Consolidated Main Agreement (the ‘Agreement’) to non-parties.

NEASA already submitted comprehensive submissions to you opposing the extension of said Agreement.

There are, however, a number of socio-economic factors that you should consider when exercising your discretion whether to extend the Agreement or not.

This Agreement, if extended, would require from all employers in the Sector to pay a minimum wage rate of R55,67 per hour, for an unskilled, inexperienced employee, plus an on-cost of approximately 40%. That would bring the total cost-to-company for a new, entry-level employee to approximately R78,00 per hour.

Should one do a wage rate comparison with the two other most expensive sectors resorting under bargaining councils, a completely disproportionate picture emerges:

• the Road Freight Sector has a minimum wage of R39,60 per hour for entry-level employees, plus a percentage on-cost; and
• the Motor Industry has a minimum wage of R24,30 per hour for a Char or R32,63 for a general worker, plus a percentage on-cost.
• The current national minimum wage is R23,19.
• The minimum wage for employees employed on the Expanded Public Works Programme, the aim of which is to create employment, amounts to R12,75 per hour. 

At a simple glance, it should be clear that the wage rates in the Metals Sector are completely out of step with the rest of the economy and cannot be sustained in a shrinking sector which is already bleeding jobs and is hopelessly uncompetitive.

The wage rate prescribed by the Agreement flies in the face of the request by the President that, among others, lower wage rates are required to kickstart the economy and address the massive unemployment problem.

Minister, you should appreciate the fact that in a country that has an expanded unemployment rate of almost 50%, the extension of agreements that prescribes unsustainable, unaffordable wages, will do nothing to alleviate this situation; in fact, it will exacerbate it. An excessive minimum wage, in any sector, only protects the few that are lucky enough to still be employed, but act as a barrier to the millions of job seekers who wish to enter the labour market, but are not provided with opportunities due to the prohibitive costs.

Excessive cost structures further prevent new enterprises to enter the Sector, which again inhibits job growth, and are causing more and more businesses to simply close down or reduce their employee count. In this regard, please take into consideration:

• the availability of electricity, which is severely damaging and restricting the economy;
• the ever-increasing cost of electricity;
• the cost of fuel, which adds billions to the cost of doing business;
• rising interest rates;
• poor infrastructure;
• logistical issues; and
• restrictive economic policies.    

All of the above makes it extremely difficult for businesses in this Sector to compete with imported goods, also currently being manufactured in South Africa, and if this Agreement is extended, it will simply accelerate the decline in our manufacturing capabilities and will increase the importation of finished goods.

It is simply disingenuous of role-players in the MEIBC to request you to even consider extending this outrageous Agreement, which is not supported by more than 80 percent of employers in this Sector, to non-parties.

It will be simply irresponsible of you to agree to the extension of an Agreement that will have a massive negative socio-economic impact on the Metals Sector and the economy as a whole. It makes no sense to drain every last drop of economic blood out of a sector, which will destroy many businesses, only to benefit a small number of employees, while it leads to further unemployment and the potential eventual demise of the Sector.

NEASA has already in previous correspondence, as well as in its formal submissions, indicated why the request and Agreement are in any event legally flawed and may not be extended. The socio-economic issues serve only as further motivation as to why the Agreement should not be extended.

Minister, the South African economy and the Metals Sector are at a tipping point and the extension of this so-called ‘Consolidated Main Agreement’ may just be the last straw.

Therefore, it is incumbent upon you to act rationally and reasonably by not extending the Agreement as extension will simply kill the proverbial ‘golden goose’.   

Yours faithfully,

G.C. Papenfus

CHIEF EXECUTIVE

For more information:

NEASA Media Department

media@neasa.co.za

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