Steel industry unions urged to temper demands in wage negotiations

11 Feb 2024

Employers and trade unions in the steel industry are set to begin pay talks for 2024. Employers are already urging unions to moderate their wage expectations.

Labour relations in South Africa’s beleaguered steel industry will be in the spotlight in the coming weeks with trade unions set to table their wage demands for 2024.

Workers at steel factories are expected to push for wage adjustments in line with the cost of living, whereas employers are hoping for reasonable demands because of the dire financial situation of the steel industry.

Both parties want to avoid a breakdown in negotiations and relations that could lead to industrial action — similar to the one in October 2021, when steelworkers downed tools for nearly three weeks. The strike cost workers R200-million in lost wages as steel companies implemented a “no work, no pay” policy, and cost the industry more than R500-million in lost revenue.

The strike ended after workers, mainly those affiliated with the National Union of Metalworkers of South Africa (Numsa), accepted a wage increase of 6%. In 2022 and 2023, workers received increases equivalent to 5%. Numsa, the biggest trade union in the steel industry, signed the wage deal with the Steel and Engineering Industries Federation of Southern Africa (Seifsa), the steel industry’s largest employer body, which represents 18 organisations employing about 170,000 workers.

This agreement, which ends on 30 June, was gazetted by the minister of employment and labour, Thulas Nxesi, which made it legally binding on other trade unions that concluded separate wage agreements with other employment bodies. The unions include Solidarity, the United Association of South Africa, the Metal and Electrical Workers Union of South Africa and the South African Equity Workers Association.

A new wage deal for 2024 has to be concluded in the coming weeks.

Pay demands not yet tabled

Although Numsa has not received a mandate from its members about their wage demands, the union’s general secretary, Irvin Jim, is already talking about “a sweetener to improve” the agreement that will expire in the coming weeks.

“We want to find a quick settlement to wage negotiations,” Jim said at a conference on 7 February that served as a precursor to formal wage negotiations. Jim did not elaborate on what a “sweetener” could entail, but his willingness to quickly settle wage negotiations arguably indicates that he does not want a repeat of the October 2021 strike.

Numsa emerged from that strike embarrassed. The industrial action could have ended early, as employers improved their offer to 6%, only for Numsa to reject it by tabling a counter-demand of 8%. The union then accepted the 6% after prolonging the strike and causing workers unnecessary wage losses.

Elias Monage, the president of Seifsa, has offered more details on what options could be considered when wage negotiations ensue. The options entail reopening wage negotiations from scratch to include new wage increases and other remuneration benefits, or working from the existing agreement (as a base) and improving parts of it.

The “sweetener” that Numsa’s Jim has proposed could include extending the existing agreement to offer housing benefits to steelworkers, Monage said. The idea would be to target the pension and provident funds to which steelworkers contribute so they can mobilise their savings to purchase homes or improve their existing homes, instead of approaching commercial banks for mortgages.

Employer response

Some employers say that going into the 2024 wage negotiations, workers have to be realistic in their expectations, considering that SA’s steel industry is nearly on its knees.

A steel industry executive told Daily Maverick: “The days of wage increases that are well above inflation are long gone. Workers have to be realistic and approach wage negotiations maturely and constructively. High wage increases are not sustainable. Workers will be faced with a tough choice: receive reasonable wage increases and still keep their jobs, or receive high wages that will drive up operational costs of factories, resulting in their closure and job losses.”

This is a conundrum that ArcelorMittal South Africa is facing. Like other steel producers, ArcelorMittal’s financial situation has been hampered by Eskom blackouts, the logistics crisis at Transnet, a weak economy in South Africa and China which has caused the demand for steel to falter, and a squeeze in international steel prices.

Last year, ArcelorMittal announced that it planned to shut down its loss-making steel factories in Newcastle and Vereeniging, which would lead to the loss of 3,500 jobs and put tens of thousands of jobs in value-chain industries at risk.

On 8 February, ArcelorMittal agreed to defer the closure of the Newcastle and Vereeniging factories for six months to see whether the situation around the economy, electricity and logistics improves. In other words, ArcelorMittal is kicking the can down the road in the hope that structural economic and political problems in SA improve.

ArcelorMittal CEO Kobus Verster said the company had proposed several options to its steelworkers about the adjustment of their pay — a separate process to the upcoming industry wage negotiations. The options, Verster said, include not awarding pay increases to workers in its South African operations from April (all workers beyond Newcastle and Vereeniging factories taking the pain), or aggressively cutting the cost base of the Newcastle factory.

“We have [given] those options, which will be very punitive. Either we are unable to save the business or we lose jobs, or we will have a very punitive regime for the long [steel] business. We are still in the consultation process,” Verster said. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.

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Pay demands not yet tabled

Employer response