Minister must intervene to stop small business failure

THE settlement reached by the MEIBC, Numsa and Seifsa this week demonstrates the staggering hypocrisy that dominates current discourse about the importance of small business to South Africa's economy and is at the heart of the Free Market Foundation's (FMF's) legal challenge to Section 32 of the Labour Relations Act (LRA). How can this settlement have been welcomed with such relief by anyone who says he or she cares about small business?

The reality is that this agreement sounds the death knell to thousands of smaller companies. Only the employers' organisation Neasa is holding out on the side of small business by refusing to sign because it sees through the agreement to the devastating impact it will have on smaller firms and employment prospects for the current and soon to be unemployed workers.

As an entrepreneur and businessman, I know first hand the risks of employing even one extra worker and I implore the new minister of small business to immerse herself in the detail and consequence of this – and similar – bargaining council agreements and to act to stop this agreement being extended by the minister of labour who, tragically is hamstrung by Section 32.

The recent developments in the MEIBC negotiations reflect the unholy alliance between unions and large business. Big business (represented by Seifsa) has agreed to increases for the next three years without being concerned about the impact on small business.

Neasa has refused to sign the agreement because it will put many small players out of the industry. Numsa and Seifsa appear to have adopted the stance that the views of Neasa (that is small businesses) do not matter, presumably because they believe they will get the agreement extended in terms of Section 32 to non-parties to the agreement, that is small businesses who were not at the bargaining table.

If MEIBC is able to establish the necessary degree of representivity (of those who agree to settle), then, under Section 32, the minister of labour will have no option but to extend the terms of the agreement to non-members, including small businesses. It is baffling that, while all appear to agree that this current agreement will do nothing to stem the job losses in the metal and engineering sector, it is still being welcomed as a good result.

The impact on current and future jobs is the very point that the FMF believes must be taken into account by the minister of labour when exercising her discretion and the reason why the case was launched.

It is unlikely big business would have agreed to the high increases if it believed agreements would not be extended to non-parties and that its smaller and struggling competitors would not be compelled to pay the high wages by means of a Section 32 extension. This, after all, is a means of maintaining dominant power in the industry.

If big business (Seifsa) knew that the agreement would not be extended, it might have held out for a more realistic and market related increase. This is because it would know that small businesses, through Neasa, would have held out for market related increases and hence would reduce the competitive disadvantage they experience now vis à vis big employers.

In its current form, without ministerial discretion, LRA Section 32 extensions serve as a catalyst for the unholy alliance I have described and is driving up cost of production (wages) with a view to creating barriers to entry and making small business unprofitable. Minister Lindiwe Zulu, please act to save small firms in the metal and engineering industry by intervening to prevent this agreement being extended to non-parties.

Herman Mashaba, businessman and leader of the Free Market Foundation's legal challenge to LRA Section 32