Once you cut through the noise, there are some indisputable facts about the economic world we now inhabit. Old style jobs are disappearing at the rate horses fell to the side when cars started to be manufactured en masse. Big businesses are shamelessly investing in technology to replace people. Economies are growing again, but not creating jobs. And as meritocracy becomes the norm, trade unions are growing ever weaker. Those are realities not just in SA but worldwide. And from everything we know, the only way out of a potential mess of massive unemployment sparking social unrest is through stimulating entrepreneurship – encouraging the creation of small businesses on a level never before seen. But when you listen to our CNBC Africa interview with Gerhard Papenfus, whose organisation represents small and medium sized enterprises, in South Africa the structures appear designed to do exactly the opposite of what is urgently required. And instead of addressing these inequities, the responsible Cabinet Minister is forcefully supporting the status quo. Whether that’s for political expediency or her genuine inability to appreciate the complexity of the new reality is for you to decide. Papenfus says he has tried to explain the logic. So now he has been taking to the courts. And winning. – AHÂ
ALEC HOGG:  The Metal and Engineering Industry Bargaining Council (MEIBC) is the largest bargaining council in South Africa. Joining us now in the studio is Gerhard Papenfus, Chief Executive of NEASA, to discuss what he believes is the industry illegally obtaining a Bargaining Council Agreement. Those are quite strong words, Gerhard.  What’s happening here…illegal Bargaining Agreements? You’re obviously pretty irritated.
GERHARD PAPENFUS: Oh, yes. Just a bit of history: in 2011, the Bargaining Council – meaning the employers and trade unions/some employers and trade unions – entered into a three-year agreement. Just prior to that, our organisation launched a dispute against the MEIBC on the basis of the unconstitutionality of the MEIBC in terms of their own constitution. We alerted the Minister to that in repetitive communication. She ignored that, and extended that agreement – a completely unconstitutional illegal agreement. She extended it in September of 2011. We went to court on an urgent basis and we lost. The court wasn’t interested. They said it’s nothing serious. ‘You can have an alternative remedy. There’s too much paper around here’. There were 30 lawyers in court that day. The agreement was then extended and enforced. We took that agreement, went to a Labour Court on a review basis, and we won. Just going back a bit again, two days after we got the judgment in the urgent application – where the judge turned down our application – we started with the arbitration. On the second day of the arbitration, all the parties that denied had unconstitutionality admitted it.
ALEC HOGG:  You’re going through the courts, but what is happening here that’s irritating you?
GERHARD PAPENFUS: Okay, just fast-forward it a bit. The courts found in our favour and set aside this agreement, but then the court suspended the setting aside of the agreement.
ALEC HOGG:  I understand the whole court action. Let’s put that one side. What’s at issue here? Why are you so angry about it?
GERHARD PAPENFUS: An agreement, a collective bargaining structure is a parliament for an industry. In order to have proper negotiations you must have strict constitutional structures. If the Minister ignores what the Act requires of her, you get agreements being extended which are simply illegal. There are thousands of businesses closing down in this industry. The General Secretary of the Bargaining Council said last week on SABC that this council has lost jobs from one million to 300,000. We’re not creating work. If we want to create work in South Africa, the mining industry and manufacturing is very important. We will not create work in this industry. This industry is so expensive. It is an impossible industry for entrepreneurs and small businesses.
ALEC HOGG:  Again, go a little bit further back: the Bargaining Council agrees to wage rates. Is this what concerns you?
GERHARD PAPENFUS: All Conditions of Employment…
ALEC HOGG:  But primarily wages…
GERHARD PAPENFUS: Primarily wages, but they dictate workplace environment in all respects, except funerals, but in every respect, they interfere in the businesses’ lives. It is a system which controls the working environment by remote control. Bargaining Councils control every aspect of the relationship between the employer and his employees.
ALEC HOGG:  Bargaining Councils, from what we understand from what you’re telling us, set the bar too high for small entrepreneurs?
GERHARD PAPENFUS: Absolutely, and what the problem is, is that the Labour Relations Act, which facilitates these agreements and the extension thereof favours big businesses and big trade unions. The Act doesn’t count the number of businesses. The Act counts employees twice: the number of employees that are members of trade unions and the number of workers employed by business. I’ve said it in this forum: if you have one business employing 1000 employees, you have 900 businesses, each employing one employee, and if that one employer with 1000 employees reaches an agreement with trade unions, he can have it extended. He can push all 900 out of business, close their businesses, and obtain the monopoly in the industry. That is how the system works, and it was done so on purpose because if small businesses had their say, there would not have been Bargaining Councils anymore. This is the dilemma we’re facing. The Act was written to preserve the system – from the outset – and from Jan Smuts’ time almost 100 years ago, it was an exclusive system that benefitted some at the cost of others.  It has always been the case. It is still the case. I believe there are some in government who’d like to change it, but COSATU will not allow it to be changed. That’s their lifeline.
GUGULETHU MFUPHI:Â So Gerhard, what would you then like to see change regarding Bargaining Councils?
GERHARD PAPENFUS: Well, I think the main thing is, if Bargaining Councils are to survive, there has to, at least, be a dual system where big businesses do their own thing, and small entrepreneurs have their own arrangements with trade unions. Currently, it’s not the case. That is a starting point. If that’s not going to happen, you will not see Bargaining Councils in future. The economic pressure will kill these systems.
ALEC HOGG:  It’s extraordinary. The whole world realises that the world of work is changing dramatically.  It’s there for us to see, that big business is retrenching people/laying people off, and that the only way out of all of this, is to encourage entrepreneurship. However, you’re saying that entrepreneurs – in this sector, at least, in the engineering sector – are not being encouraged. In fact, they’re being discouraged by almost a ‘closed shop’ agreement by both big business and by labour.
GERHARD PAPENFUS: Absolutely. There is no entrepreneurship in this industry. You cannot start a business.
We’ve done research among our members and we said ‘if your business burns down and you get your money, will you reinvest in this industry?’ Ninety-two percent said ‘never’.
ALEC HOGG:Â Â Say that again.
GERHARD PAPENFUS: Ninety-two percent say ‘we will not reinvest our money in this industry’.
ALEC HOGG:  So “we’re caught in here…for as long as we’re caught in here, we’ll carry on but if we had a way out, we’d be gone.”
GERHARD PAPENFUS: I see it continuously: a guy saying ‘I used to employ’. You see this big factory and you ask a person ‘what is all this size – all this space?’
He says ‘You know that I used to employ 250 people. I now employ seven’.
What do they do? Everything that was manufactured here is now manufactured elsewhere.
ALEC HOGG:  But Gerhard, politicians are not all stupid. Some of them might be, but they’re not all dumb. What is the reaction from the politicians to this? If you’re in politics, you have to create jobs. That’s your number one priority.
GERHARD PAPENFUS: I don’t think politicians are stupid. I think they are more concerned about surviving in the short term and it will take a very brave Minister of Labour to go to the President and say ‘we need to change this thing’. They will have mass action on the streets of South Africa. COSATU will fight this thing harder than they fought e-tolls. It’s a short-term thing where there’s a lack of leadership, where people say ‘we need to change this’. There is no ability – in small business – to make drastic and quick changes – to adapt. You are stuck in an agreement. You will pay this wage, you will do that, these are the working hours you will…, and these are the categories in which people will work. You can’t move out of that.
ALEC HOGG:  You’ve made a lot of talk about this. Are you taking any action? Are you going to go back to court? Are you going to force it in the courts?
GERHARD PAPENFUS: We won the first case. The courts said go and see whether you can extend that agreement in terms of a different section of the Act. What the Minister did, is she then extended another agreement. We’re back in court, and in this latest agreement with which we’re back in court again, was also illegally obtained.
Two persons out of a council of 40 people signed without other people knowing it. They signed it, gave it to the Minister, and told the Minister ‘this is an industry agreement’.
She extended it. If you tell the story, people will say ‘but this is not really possible’. Well, that is possible. That’s what happened.
ALEC HOGG:Â Â Gerhard Papenfus is the Chief Executive of NEASA and we look forward to hearing more about that story as we go forward.
