Papenfus: Oliphant stomping SMMEs: conscious murder or collateral damage?

Sometimes you have to wonder at the spectacular disconnect between reality and the world view of some South African political leaders. For a couple decades already, the global economy has been transforming from Industrial Age command-and-control behemoths to smaller, more nimble enterprises. As these big organisations trim down to survive, Governments everywhere realise that stimulating entrepreneurship is the only route away from surging unemployment. Although South Africa pays lip service – we do, after all, have a Small Business Minister – the effect of its policies are designed to do exactly the opposite or what is required. Reading this hard hitting Open Letter from Gerhard Papenfus of the SMME grouping NEASA makes one wonder what planet SA’s dreadfully ineffective Labour Minister Mildred Oliphant lives on. Is killing entrepreneurship simply collateral damage from outdated political ideology? Or whether is something more sinister behind former trade unionist Oliphant’s systematic murdering of small companies? – Alec Hogg  

Gerhard Papenfus - chief executive of NEASA, voice of South African employers in the SMME sector.
Gerhard Papenfus – chief executive of NEASA, voice of South African employers in the SMME sector.

By Gerhard Papenfus*

Dear Minister Oliphant,


If there were any prospect of us being put in a position to engage with either you or your Department in a transparent manner regarding issues of national importance, which fall under your jurisdiction, this letter would not have been necessary. In addition, if there were any prospect of your Department responding to any correspondence from the National Employers’ Association of South Africa (NEASA), as a representative of a substantial portion of South African business, especially SMMEs, this would not be necessary.

Since all our efforts to point out the repeated, blatant and fatal mistakes made by your Department are simply disregarded, we have no alternative but to submit this open letter to you.

In a recent speech delivered to the American Chamber of Commerce, you have again presented collective bargaining as the best tool to discuss issues which could bring stability to the workplace.

With respect Minister, for the reasons set out below, collective bargaining, in the manner it functions in South Africa, as well as the conduct of your Department in this regard, has failed South Africa in every respect.


You must be well aware of the fact that the Labour Relations Act, as far as collective bargaining is concerned, is specifically designed to marginalise SMMEs. This is done through a completely undemocratic arrangement where the voting power of business is not valued in terms of a business as such, but in accordance to the number of employees in its employ.

In terms of this arrangement, 10 large employers each employing a 1000 employees, have the same voting power as 1000 SMMEs each employing 10 employees. This statutory arrangement has all but completely taken away the ability of SMMEs to influence the outcome of collective bargaining.

The effect hereof, Minister, is that agreements entered into between primarily minority trade unions and large employers, situated in the economic hubs of South Africa, are made applicable (through your actions) to SMMEs, with devastating results, especially on those in rural areas.

SMMEs, who are denied a proper vote, are subjected to agreements through a dubious process of extensions, endorsed by your office.

All this is happening while SMME development and growth is regarded globally as a prerequisite for economic growth – an issue that is clearly recognised by the ruling party. The Labour Relations Act, which denies SMMEs the capability to determine, in negotiations, their own destiny, has therefore become a major stumbling block to employment and economic growth. The provisions of the Labour Relations Act in this regard are therefore counterintuitive to government’s objectives.

You are aware of the fact that you are constantly requested to extend agreements entered into by minorities on both the employer and trade union side. That, Minister, is because there is no incentive for South Africa’s SMMEs to participate in collective bargaining in a dispensation where they are deliberately denied the ability to determine their own affairs.


Your Department’s attitude towards SMMEs, within the context of collective bargaining, is illustrated by its approach towards the extension of these agreements. The quintessential example being the repeated extension of agreements in the Metal and Engineering Industry (MEIBC), South Africa’s largest bargaining council, and, until it was exposed, generally held out to be the ‘flagship’ of bargaining councils.

After close to four years of continuous litigation, the Labour Court has declared the 2011/14 Metal Industry Agreement invalid and consequently of no force and effect. In the initial judgement and in turning down the leave to appeal application, the Court, inter alia:-

–          referred to ‘the total absence of any agreement’ and the ‘irregular’ way in which the MEIBC sought extension of this Agreement. This Agreement, which the MEIBC requested you to extend, and which you subsequently extended, never even existed;

–          stated that you, as the Minister, were ‘clearly misled’ by the MEIBC. This, consequently,  amounts to fraud;

–          stated that both the Minister and the MEIBC ‘have failed to get their proverbial house in order and have failed to do so in ways that are both obvious and fundamental’;

–          expressed strong criticism of the ‘unauthorised infringement of the rights of affected parties’;

–          described certain actions of the MEIBC as ‘deplorable…but in keeping with the generally slip shod (haphazard, messy) manner in which the entire matter of the July 2011 collective agreement has been handled by the MEIBC’; and

–          referred to these actions as a ‘sham’.

All this comes after our repeated attempts to caution your Department about numerous irregularities in the manner in which the agreement was obtained and in the agreement itself. All our attempts to convince you not to extend this illegal agreement were simply ignored by your Department. The proof in respect of each and every illegal element was submitted to you and yet your office never acted upon it.

Your Department’s approach throughout this debacle was rather one of leaving it for the courts to decide. The Labour Court and the Labour Appeal Court eventually did. Millions of Rands later in legal expenses – our expenses funded by our members – while your Department has done so with tax payers’ money. Incidentally, the MEIBC pays for this litigation with our members’ compulsory contributions. These members, who are doubly prejudiced by these irregular extensions, are the ones footing the bill for both sides of the litigation process. This in itself is outrageous!

To add insult to injury, your Department did the very same thing again with the illegal 2014/17 Metal Industry Agreement. Our submissions, where each argument was meticulously proved, were simply unheeded by your Department. It has refused to engage with NEASA on any of our substantiated concerns, but has on numerous occasions rather opted to engage with those who were responsible for this legal and administrative disaster. You are more than likely aware that this matter has once again been taken on review in the Labour Court.

Another agreement is currently before you. This agreement relates to provisions which will compel employers and employees to make financial contributions to the MEIBC to ensure its survival. Again, not surprisingly, this request from the MEIBC does not comply, on various grounds, with the basic requirements of the Labour Relations Act and administrative justice. Once again, we have painstakingly pointed out to you the defects and again your Department does not take heed. Thus, once more, we will be obliged to take legal action should you disregard our submissions.


One of the objectives of the Labour Relations Act is to promote ‘orderly collective bargaining’. What we have been challenging, and have described above, is not orderly collective bargaining, but rather a ‘sham’, as stated by the Labour Court.

NEASA and its members are vehemently opposed to this unscrupulous conduct. As responsible citizens, we are obliged to challenge this irresponsible conduct to finality. If we don’t do this, we will be abdicating our responsibilities as citizens of South Africa, condoning the decay observed in many areas of our society.

NEASA and its members strongly take exception to the undemocratic statutory arrangement in the Labour Relations Act, which makes SMMEs second-class participants in the collective bargaining arena.

Let us unreservedly state that we are not the enemy of collective bargaining. The enemy is he who clings, out of self-interest, to an outdated collective bargaining dispensation, which stands in the way of job creation and therefore contributes to unemployment and poverty. The enemy of collective bargaining is he who persists with illegal and unconstitutional conduct.

In a recent ruling, the Labour Court held that ‘the objects of the Labour Relations Act concerning collective bargaining are best served by insisting at least on substantial compliance with the statutory requirements and safeguards set forth in…the LRA’. In the current scenario outlined herein, this is completely absent.

What South Africa desperately needs from the Department of Labour is to move beyond the mere execution of a particular ideology and interests and to act in the interest of all affected groups. SMMEs and the unemployed suffer the most in the current turmoil. What is expected of the Department of Labour is to play the role of an honest broker in creating jobs, fight unemployment, eradicate poverty, and strike a balance between different interest groups to bring about prosperity, peace and stability.

Yours faithfully

Gerhard Papenfus

* Gerhard Papenfus is the Chief Executive of the National Employers’ Association of South Africa (NEASA)