FREE OUR HANDS’

South Africa's SMMEs

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There is general consensus that SMMEs are immensely important if South Africa wants to be able to unlock economic opportunities and achieve economic growth and job creation. That is if SMMEs are liberated to fulfil this role. In South Africa this is not the case though.
 
Nobody can deny the fact that in order to address the problems confronting our economy and in order to create jobs, a radical policy shift will be required in order to enable SMMEsto become the drivers of economic recovery. Even government agrees with this, but what they say and what they do are at the opposite ends of the spectrum.
 
This brief will only focus on one area where the unwillingness by government to implement policy changes is completely paralysing SMMEs to live up to their potential.
 
The South African centralised bargaining model [by virtue of the provisions contained in the Labour Relations Act (LRA)] is designed in such a way that, in the area of collective bargaining, SMMEs practically have no say in their own affairs. Their ability to negotiate a dispensation with trade unions is completely eroded by the fact that SMMEs are left completely exposed when deals among big business and trade unions, with the help of the Minister of Labour, are forced upon them.
 
The following example illustrates some of the unique elements of this plot against SMMEs:- 

For the sake of the argument, in a particular industry, there are 5 employers, all situated in the economic hubs of South Africa and each employing 1000 employees. In that same industry there are 500 SMMEs, situated in rural areas, each employing 10 employees. 

Through a form of blatant collusion in that industry's bargaining council, the 5 big employers (with a collective workforce of 5000 employees), reach an agreement with a trade union on wages and other conditions of employment and then, through a process involving the Minister of Labour, extend and enforce that agreement upon the 500 SMMEs - which also has a collective workforce of 5000 employees. 

This is made possible through a legal dispensation in the LRA which enables the Minister of Labour to, in considering whether or not to extend the arrangement between the 5 big businesses and trade union to the SMMEs, the Minister does not consider the comparative numbers and interests of the 5 big businesses versus that of the 500 SMMEs, the Minister only considers the number of employees employed by the respective group of employers. Since, as in the case of this example, both interest groups employ 5000 employees, the Minister will, without exception, enforce the deal of the 5 big businesses on the 500 SMMEs, simply because such an extension promotes 'centralised collective bargaining'. 

The fact that the wages and other conditions of employment of the 5 big employers may not be affordable to the 500 SMMEs, that it may lead to the downsizing of businesses among the ranks of the 500 SMMEs, and, in some cases may lead to business closures and consequent job losses, is of no significance to the Minister.

It is also of no significance to the Minister that the wage-to-turnover ratio of the 5 big companies might be below 5 percent, while in the case of the SMMEs it may be as high as 50 percent; neither will it be of any value to the Minister that the trading conditions of the big and small businesses, even in the economic hubs, are completely different. In respect of SMMEs in the rural areas, this problem is even more accentuated.

The Minister has only one objective and that is to promote 'centralised collective bargaining' - at all cost. The Minister is clearly not concerned about the plight of the unemployed. If unemployment was of any concern to the Minister, he/she would have initiated changes to the LRA long ago.
 
In 2013 the Minister of Labour said the following: 'Collective bargaining is about change and innovation, and not only due to economic pressures faced by employers and employees, but also because bargaining is about change and adaption'. Back then the Minister admitted that there was growing hostility against the extension of agreements. Four years later and no effort has been made by the Minister to alleviate the paralysing dilemma SMMEs find themselves in.
 
All the challenges generally faced by SMMEs (access to finance and credit, poor infrastructure, onerous labour laws, inefficient government bureaucracy, crime, lack of access to markets), are also faced by SMMEs governed by bargaining council agreements; for them the challenges faced are however compounded exponentially. On top of all obstacles generally faced by SMMEs, bargaining councils, completely ignorant of the needs of SMMEs, just add substantially more weight to problems experienced. This is simply not an environment conducive to economic growth and employment - caused by the fact that SMMEs are not allowed to negotiate their own agreements.
 
In terms of the example outlined above, which is not far removed from the reality, the 1 employer employing a 1000 employees, has 100 times the voting power of the employer employing 10 employees. In this day and age, how can such a structure in which power rests with a small number of businesses even be tolerated? If a wealthy tax paying individual has equal voting power to an unemployed individual, then surely the weight of anemployer's vote, when a decision is made on the extension of an agreement, can't be determined by the size of the employer - on the basis of the number of employees that it employs. To say that the system is unrighteous to the core is an understatement.
 
In order for SMMEs to no longer be treated as inferior business-citizenry, in order to allowSMMEs the privilege to negotiate their own agreements and thus being empowered to make the contribution which only they can - and not to be sacrificed by big business and trade unions, for the sake of a hollow form of 'labour peace' - the Minister of Labour can no longer delay appropriate changes to the Labour Relations Act.

This opinion piece is by Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA).

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