Stitched up

SA’s ma­jor cloth­ing firms back­track on bar­gain­ing coun­cil sys­tem

Finweek English Edition - - Business strategy - BAR­RIE TERBLANCHE

EM­BAT­TLED SOUTH AFRICAN cloth­ing cor­po­rates are des­per­ately try­ing to undo the strin­gent laws they helped write for their in­dus­try that have left them de­fence­less against the tsunami of cheap Chi­nese im­ports. In a ma­jor about­turn they’ve reached out to small busi­nesses that they’d ef­fec­tively out­lawed through sec­toral bar­gain­ing and hired the ar­chi­tect of the bar­gain­ing coun­cil sys­tem – law Pro­fes­sor Hal­ton Chea­dle – to fa­cil­i­tate a new deal for the haem­or­rhag­ing in­dus­try.

The “Chea­dle process” – as it’s known in the cloth­ing in­dus­try – could have far­reach­ing ef­fects on the bar­gain­ing coun­cil sys­tem in SA.

How­ever, bizarrely – and de­spite the cri­sis and the re­think – the in­dus­try’s self-gov­ern­ing body, the Na­tional Cloth­ing In­dus­try Bar­gain­ing Coun­cil (NCIBC), of­fi­cially con­tin­ues to pros­e­cute more than half of all cloth­ing busi­nesses in SA for fail­ing to com­ply with the high pre­scribed wage pack­ages. A to­tal of 831 cases are be­ing pro­cessed against 704 firms, or 55,4% of all cloth­ing busi­nesses. That’s been brought down from 71% a few years ago.

Latest fig­ures from the NCIBC show that the in­dus­try shed 21 265 jobs since Jan­uary 2005. Last year alone, 8 625 jobs were lost: from 83 031 in Jan­uary 2006 down to 74 456 in De­cem­ber last year.

Reel­ing from the shock of cheap Chi­nese im­ports, pre­cip­i­tated by fall­ing im­port du­ties and a strong rand, dom­i­nant cloth­ing com­pa­nies called out­lawed, un­rep­re­sented small busi­nesses to a bos­ber­aad to try to re­think the sys­tem.

Up un­til then, big busi­ness had fought side by side with the unions to close down small busi­nesses that could not or would not pay the wage pack­ages agreed to at the NCIBC and made law for ev­ery­one in the in­dus­try by the Min­is­ter of Labour, whether they were party to the agree­ment or not.

The in­dus­try be­came deeply di­vided be­tween “party-em­ploy­ers” – those or­gan- ised, re­sourced and es­tab­lished enough to take part in the an­nual bar­gain­ing coun­cil ne­go­ti­a­tions, and “non-party em­ploy­ers” – smaller, less es­tab­lished firms which don’t have the re­sources, in­clud­ing time, for rep­re­sen­ta­tive pol­i­tics.

At the first his­toric bos­ber­aad be­tween “party” and “non-party” em­ploy­ers in Cape Town last year, the dom­i­nant firms ap­par­ently took a con­cil­ia­tory, apolo­getic stance for pric­ing the South African in­dus­try out of the mar­ket. Says a se­nior ob­server: “They (the party em­ploy­ers) apol­o­gised and said: ‘Lis­ten, we made a mis­take in the past’.”

In a frank in­ter­view, Jo­han Baard, spokesman for the em­ploy­ers’ cau­cus in the NCIBC, says: “The em­ploy­ers and the unions should, in my opin­ion, shoul­der much of the blame for what’s been writ­ten in those agree­ments.”

But then Baard dished out some more blame for the union: “Busi­ness as usual isn’t an op­tion – it’s sui­cide. As long as we carry on do­ing things the same way, we can only ex­pect the same out­comes. And the cur­rent out­come is an in­dus­try in de­cline, an in­dus­try that doesn’t fa­cil­i­tate small busi­ness growth and en­trepreneurs. Be­tween 70% and 80% of reg­is­tered em­ploy­ers in the cloth­ing in­dus­try don’t com­ply with the pro­vi­sions of the agree­ment.

“The union knows that and so do we. Then we ask the union: ‘What do you want us to do, close down 80% of the in­dus­try? We can. Legally, the pro­cesses do ex­ist. But do you want to tell us that it’s re­ally an op­tion from a po­lit­i­cal, eco­nomic, so­cial and moral point of view? So now we’ve be­ing do­ing a soft-shoe shuf­fle in that

re­gard for the past five years,” says Baard.

But why did the cap­tains of this in­dus­try al­low the ship to drift so close to the rocks by giv­ing in to union de­mands year af­ter year? Baard says that it’s pol­i­tics. The mil­i­tancy and politi­ci­sa­tion of the South African Cloth­ing & Tex­tile Work­ers’ Union (Sactwu) un­der apartheid were ce­mented when the ANCCosatu al­liance came to power. Sactwu has a di­rect line to the Min­is­ter of Labour. The large firms in the in­dus­try thought it po­lit­i­cally wise to con­cede to high union de­mands, Baard says.

Chea­dle, who de­clined to speak about the cloth­ing in­dus­try specif­i­cally due to his me­di­a­tion role, did say that the ul­ti­mate weapon of a union was strike ac­tion. If em­ploy­ers per­ceive a strike as a big­ger threat to an in­dus­try than high union de­mands, they’ll give in to those de­mands.

Oth­ers, in­clud­ing many of the non-party em­ploy­ers, be­lieve that the truth is more com­pli­cated than sim­ple union power.

The Labour Re­la­tions Act al­lows the play­ers in any in­dus­try to come to­gether and ne­go­ti­ate wages and con­di­tions of em­ploy- ment in a bar­gain­ing coun­cil, a fo­rum where the em­ploy­ers and unions have equal rep­re­sen­ta­tion. The Labour Min­is­ter then makes the agree­ment reached at a bar­gain­ing coun­cil law for the en­tire in­dus­try if he be­lieves that the coun­cil is suf­fi­ciently rep­re­sen­ta­tive of the sec­tor. It’s ef­fec­tively a form of self­gov­ern­ment, with the in­dus­try play­ers them­selves writ­ing their own labour laws.

Crit­ics of the sys­tem say an es­tab­lished com­pany is more able to af­ford higher wages than an emerg­ing one. The re­sult is that well­rep­re­sented, es­tab­lished firms tend to agree – though not nec­es­sar­ily con­sciously – to wages too high for emerg­ing busi­nesses.

But oth­ers say that, in the cloth­ing in­dus­try at least, it was a con­scious strat­egy. “They (es­tab­lished cloth­ing firms) made a deal with the union. They for­got about in­ter­na­tional com­pe­ti­tion and thought they could squeeze ev­ery­body out. They could push wages up and there­fore cut out com­pe­ti­tion from smaller firms. It worked for a while (but not) any more.

“(Then) the large firms said: ‘It can’t carry on like this, be­cause we’re get­ting killed by smaller firms and we’re get­ting killed by China and In­dia and Bangladesh, etc, etc. The sys­tem doesn’t suit us any­more’,” says the ob­server at the Cape Town bos­ber­aad.

Con­scious or not, ev­ery­body but the union seems to agree that the rea­son for the agree­ment be­com­ing un­work­able was that the par­ties to the cloth­ing bar­gain­ing coun­cil ne­go­ti­ate about ac­tual wages and not min­i­mum wages.

How­ever, the union agreed to the Chea­dle process, which has to pro­duce an in-prin­ci­ple agree­ment be­tween the union and the em­ploy­ers be­fore March this year.

Says Baard: “We’re not go­ing to re­fine that and pol­ish that and tam­per with this and tin­ker with that. We’re start­ing with a clean slate.”

The suc­cess of the Chea­dle process will hinge on whether the union can be per­suaded to ac­cept in prin­ci­ple that the bar­gain­ing coun­cil ne­go­ti­ates a na­tional min­i­mum wage and that ac­tual wages are left to be ne­go­ti­ated at each work­place.

Been do­ing the soft-shoe

shuf­fle. Jo­han Baard

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