Collective Bargaining in South Africa : Post-COVID

24 April 2022

Andrew Levy

Andrew Levy is one of South Africa’s best-known labour resources. He has been in the labour field for over forty years, has written four books on labour law and practice, and is currently writing a book on Labour Economics. As a teacher, researcher, consultant and labour commentator, he has been at the forefront of South African labour developments. He presents a regular round of seminars each year and enjoys his contact with a broad range of delegates from all industries.

The past few years have changed the face of the SA workplace and have been difficult for everyone on all fronts. Whilst the signs are pointing to a return to normality, with the worst ravages of Covid and the associated lockdown period behind us, do we have cause to be optimistic for the future – particularly from a labour point of view?

An indication that there will be changes ahead stems from some of the markers we have tracked over the years in our Wage Settlement Survey Quarterly Reports. Labour market statistics normally move slowly, an order of magnitude of less than one whole percent, but this has not been the case with some of the key figures we have followed these past few years.

A change in average wage settlements?

For example, the headline figure for average wage settlements fell by 1.9%, from 6.3% in 2020, to 4.4% in 2021. In my 50 years of active involvement in the labour market, I have never seen a fall of this magnitude. To some extent, it may have been predictable, but I would doubt this since firstly all the conventional wisdom was against it, and secondly, the whole Covid related pandemic was a completely new experience to analysts and onlookers. Few of us would have been around for the 1919 Spanish Flu epidemic, and even fewer for the plagues of the 13th and 16th century, and so we tend to forget just what the economic impact of such events might be.

So, having seen such a fall, can we expect settlement levels to rebound to their more “normal” level in the next round of collective bargaining? 

 

In my view this is unlikely. Firstly having seen levels fall to orders of magnitude more or less in line with inflation,  employers will be unwilling to revert to the higher levels of pre-Covid. Secondly, our economy already weak, and almost on its knees has been severely impacted by Covid, and although there has been a rapid recovery, particularly since work resumed after the shutdown, productive output has not yet reached previous levels.

Of course, the union movement, whose members have genuinely faced hardship, and those who unfortunately find themselves at the lower end of the wage distribution, will be pushing as hard as they can to obtain meaningful wage increases.

Increase in strike activity?

This became apparent towards the end of 2021, when strike activity increased considerably after a period of complete shutdown, associated job loss, retrenchment and short-time working. Workers who aren’t at work don’t go on strike.

Additionally, a number of centralised bargains, such as that in the Steel & Engineering sector were postponed in the year of the Covid shutdown. However, it was clear by the end of 2021, that collective bargaining was strongly influenced by the willingness of unions to call strikes in support of wage claims. What was also interesting was that employers were equally willing to resist – based on the argument that the economy was in distress, and demand was down. Given this attitude from both sides, we predict that 2022 will see more and longer strikes.

At the same time, union power and membership continue to diminish, and in a number of cases unions and their members have clearly bitten off more than they could chew, and strikes have not been delivered. Nevertheless, at this point, it is unlikely to translate into an overall unwillingness to undertake strike action.

Whilst large numbers of those in employment are by no means poorly paid (accepting the fact that everyone wants to earn more and this is legitimate), those at the bottom end of the wage distribution in the lesser paying industries face a hugely disproportionate impact of inflation on basics such as food, transport, rent, and electricity than those who have the insulation of higher earnings. Nevertheless, until such time that we as a nation are able to grasp the notion that the more productive we become, the more we can afford to pay the wages, this is unlikely to change. The tired old rhetoric of the grasping capitalist and the exploited worker will never bring about the sort of change to earnings and employment that we would all like to see.

Trends in opening offers

Of equal interest, is the fact that according to our December 2021 Wage Settlement Survey, management opening offers averaged 3.7%, marginally below the level of inflation. The danger of the lower opening figure is that the other party will reject it out of hand and simply demand their own figure, not taking the number on offer seriously. However, it is more than likely that this offer genuinely reflected the employers’ outlook and economic situation. Unions, for the most part still began with the fiction of the double-digit increase, a figure that all employers recognise immediately as being a mere puff.

Nevertheless, the distance between both opening offers is more likely to end in some kind of dispute unless either one or indeed both parties are willing to make significant moves early in the negotiation.

 

This seems unlikely if the normal run of play in South African labour negotiations is taken into account. Sadly, this too is the dated approach, and we can only hope that the parties will understand that extreme openings by either or both parties are unlikely to lead to reasonably smooth and liveable outcomes.

So, what happens now in the world of work post-Covid?

Diagram 1: Impact of Covid on developed economies

Diagram 1 shows the impact of Covid and the recovery of the world’s leading economies. It shows the typical “V” shaped diagram that we can associate with an external economic shock. Namely, a steep and immediate fall, followed by a steep and strong recovery, which in this case is not sustained in any of the economies. This again is indicative of the argument that the Covid curse fell on a world economy that was already fragile.

Diagram 2: GDP fall and recovery in relation to Covid

Diagram 2 shows similar data for South Africa, and once again, the typical V pattern can be seen. However, most importantly the diagram shows that the recovery is far below the pre-Covid level, which underlines the fragile nature of economic growth in South Africa.

Of course, none of the above comments impacts directly on the overarching and dominant problem which now appears to be entrenched in the South African economy – namely unemployment,  standing at a record high and showing no signs of improvement in the short to medium term.  The extent of imperfections in the labour market is such that one of the pre-existing requirements for turning the job crisis around, is deep and far-reaching labour market reforms.

It is hard to see how government (in)activity is yet to give any reasonable prospect of job growth, let alone the sort of stellar and continued trajectory which will have the possibility of impacting unemployment. Even if this were to be so, it would require at least a decade and a half to soak up excess labour and would take a bold soul to venture a prediction over such a time horizon with an inherently fragmented ruling party.

In any event, the extent of the labour market reforms which are necessary as a pre-requisite for growth would probably be ideologically unpalatable, and practically unachievable without major confrontation with the trade union movement, who would no doubt mobilise around any attempts, for example, to limit access to the CCMA, and to loosen the stranglehold of centralised bargaining, which results in large unions and large employers acting as a virtual labour cartel.

Prospects for 2022

It, therefore, seems at best that 2022 will see opposing thoughts and approaches to collective bargaining with wages still contesting the territory between them, with little prospect of finding common ground, but with increased zeal and vigour from both sides. There will be a strong upsurge in strike activity. The key sectors to watch are the two motor bargaining councils, certain mining activities, and of course, the public sector.

Much of the difficulty arises from deeply entrenched bargaining behaviours, which are outdated and dysfunctional, as well as being based on principles of bad faith bargaining rather than the other. 

 

These divisive approaches are so deeply ingrained, that it will take far-sighted and bold pioneering efforts on the part of both bargaining partners to break with this paradigm. Taking all into consideration, this seems to be an unlikely prospect. 

None of this augurs well for a year of rationality, peace and prosperity and so, not to mix one’s metaphors, it would seem that it is unlikely that in the short to medium term we will reach the sunny uplands of labour peace and rising employment.

Of course, the national picture is a large abstraction, and there is still an opportunity for individual employers and unions to find more functional and positive means of engaging over wages and conditions. It will doubtlessly be a long and difficult process – building trust and understanding does not happen overnight and needs to advance in small incremental steps. There is a long history of antagonism to overcome, so the sooner we start, the better.

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The annual wage round will soon be in full swing, and in this tough economic climate, exacerbated by the Covid-19 Pandemic preparation, information and a comprehensive strategic approach are prerequisites for a successful outcome at the bargaining table. Ensure that your organisation gets the best possible advantage at this year’s wage negotiations.  Invest in an intensive wage strategy session moderated by labour expert Andrew Levy. Contact andrew@andrewlevy.co.za or visit us at www.andrewlevy.co.za for more information on our products and services. There is no better way to prepare for your negotiations than subscribing to our Wage Settlement Survey, the standard-setter for reliable and up to the minute labour market, wage and strike data.