NUMSA commemorates the 100 year anniversary of the Russian Revolution

Numsa might file section 77 notice with NEDLAC for a strike.

24 November 2004, Posted in Press Releases

DATE: 24 November 2004




The National Union of Metalworkers of South Africa (NUMSA) might file section 77 through COSATU for an economic strike action in terms of the Labour Relations Act to prohibit major automotive and steel producers from retrenching workers as a result of the strong currency. For example industrial group Dorbyl and Tiger-Wheels may cut hundreds of jobs in the automotive components because of the strong rand. Some steel producers have shown the same intentions. They argue that the strong rand means our export goods will become more expensive. The demand in the global market will slack badly , leading to companies shutting down or restructuring causing job losses.

Our actions will not be directed at government or Reserve Bank but against companies that want to shed jobs. The union has conducted a study last year with Brentley West and NALEDI in the South African steel, engineering and automotive component which has revealed that the strength of the currency is not an impediment to jobs. There is no empirical evidence that suggest that the strength of the rand affects employment. Companies must adjust their business to the strong currency. It is part of the business cycle for companies to adapt to currency fluctuations and different conditions. We must understand that giving business what they always want is not enough to get them to invest their profits and create sustainable jobs in South Africa. They always look for excuses to make super profits. There is an expectations problem. These expectations within the business people have turned out to be incompatible with subsequent reality of the South African economy.

The truth is that the economy we have today developed on a strong foundation of raw material extraction and racism, including draconian controls to keep black labour cheap. Therefore no one can separate the development or the growth of South African big business from this history of minerals extraction and oppression of the black population. Big business remained in South Africa during apartheid because they were able to reap extraordinarily high monopoly profits by extracting and processing minerals while exploiting cheap labour. No institution came out in challenge of this phenomenon, except few companies. These big businesses and their foreign subsidiaries were part of one global merger and acquisition frenzy of the 1990s to 2000 which led to the greater concentration in the global economy. They move a significant part of their profits offshore. Big business is unwilling to admit that increased offshore investment and global integration of their business is a reason for low investment and underdevelopment. Instead, they choose to use the strong rand as an easy excuse for job losses and lower export output.

We must acknowledge that there is always a difference between strategies to build competitiveness of individual global company and building the competitiveness of the national economy. The lower levels of volatility as the result of the strong rand created a more certain operating environment for importers, exporters, borrowers and investors.

The recovery of rand is a reflection of several factors. The rally in the commodity prices has encouraged a rally in all commodity-sensitive currencies like the Australian and Canadian dollar. The strength of the rand is based on the relative prices of currencies and is largely linked to the weaknesses of the dollar. Globally, there are other nations with economic dichotomies similar to South Africa’s dual First and Third world economy. Some people say South Africa is in a second world economy like Brazil. Everyone agrees that the South African economy should develop and grow into a First class economy over a long term period. Looking at the state of the economy today one might well ask that if we want to be developing and growing nation why we should have a weak currency. All developed nations have a strong currency and low unemployment levels. Closing this gap is a very long –term project. Fortunately, lessons from countries that are developed show that it is possible to significantly reduce the time needed to fully develop. The ills of the South African economy are well known : low skills level , poverty , unemployment , among other things. We need to aggressively move to increase the skills base of productive workers.

In fact, those who argue strongly about the weak rand will stand to benefit and continue to exploit the resources of the country as in 1998. In a highly competitive global environment a weak rand will not put the country in the developing path but will benefit those South African companies that have invested in the London Stork Exchange. Obviously, a weak rand means that London listed are able to purchase local equipments and assets cheaply. This does not benefit South Africa but assist other countries for their competitive drive. These London listed companies do not have confidence on the rand and less responsibility to participate in the development of South Africa.

The most incomprehensible contradiction about companies wanting to retrench as a result of the strong rand is their inability to explain why they did no employ new workers when the rand was weak. Where do all the profits go when the rand was weak?. Conventional wisdom holds that there is a trade – off between risks and return. This view is based on assumptions that do not hold in practical situations. In the real world, companies are able to pass on risks to ordinary workers when the rand weakens. Giant corporations are able to use their power to make large profits without taking any risk and workers bearing all the costs. This is exactly what is happening when the rand strengthen, all the costs and risk are past on to the workers. The victims are always workers.

For more information contact Dumisa Ntuli @ 689-1700 or cell 0829737282