A leading business representative has issued a stark warning that South Africa’s declining steel sector employment is a symptom of a broader manufacturing crisis, which he attributes directly to a collective bargaining system he describes as “hostile” to small businesses.
In a televised interview, Gerhard Papenfus, CEO of the National Employers Association of South Africa (NEASA), pointed to recent employment figures as a “rude awakening for the economy.” He stated that the rapid drop in manufacturing is a direct result of what he called a “lopsided” and “SMME-unfriendly” collective bargaining arrangement.
Papenfus explained that the current system, which he claims was created to enhance the interests of trade unions, gives larger companies disproportionate voting power during wage negotiations. He detailed that an employer’s vote in a bargaining council is weighted by their number of employees, not by a one-company-one-vote principle.
“So, if you have a company employing a thousand employees, you have 100 times the voting power than a company employing 10 employees,” Papenfus said. “What is happening is that big business make decisions that suit them.”
These decisions, he argued, are made by large businesses located in the country’s economic hubs but are then extended by the Minister of Employment and Labour to all parties in the sector, including small and medium enterprises (SMMEs) in rural areas. He cited the metal and steel industry as a prime example, where the entry-level wage for an unskilled worker, such as a sweeper, has been set at R16,000 per month.
According to Papenfus, this wage level is unsustainable for small, growing businesses. He explained that while a large business can later apply for an exemption from the very deal it helped create, an SMME must prove it is in financial distress to be considered for one.
“This is an arrangement that is so hostile to job creation,” he stated. “You cannot grow on that basis.”
The warning comes amid significant turmoil in the steel sector, with the largest company, ArcelorMittal, reportedly threatening to shut down operations. Concurrently, the National Union of Metalworkers of South Africa (Numsa), the largest union in the sector, is demanding higher wages for its members.
Responding to this, Papenfus argued that the fundamental issue is that wages have been set at a level the market cannot sustain. He emphasized that while unions have successfully negotiated for those with jobs, the consequence has been rampant unemployment.
“You can set a wage on any level. The point is you must find an employer that is willing to pay that wage,” Papenfus said. “If you set a wage beyond that level, you will get unemployment.”
Citing South Africa’s official unemployment rate of 45% and youth unemployment of 62%, Papenfus revealed that the steel sector alone has lost 23% of its workforce over the last five years. He stated that the country needs a “drastic intervention” and political leadership with the “guts to take on the unions on this issue.”
He concluded by clarifying that his position is not an argument for low wages, but rather for a system that addresses the unemployment crisis.
“We cannot sustain 45% unemployment,” Papenfus said. “We need to get people back to work and we need to create a dispensation that gets people back to work.”