Impacto económico en los sectores productivos:

South African manufacturing has been in decline. The contribution to Gross Domestic Product declined from 21% in 1994 to 12.4% in 2012. One of the concerns raised has been the need to improve working relationships to restore confidence and maximise the use of production capacity (Industrial Development Corporation, 2013a).

The 1995 Labour Relation Act seeks to encourage social dialogue and facilitate relationships at industry and enterprise levels that will ensure organisational and industry competitiveness. Examples exist in the automotive, automotive component and metal and engineering industries where the implementation of the unionised vision of the Labour Relations Act is articulated. These are strongly unionised environments, the bargaining councils or forums are well constituted, and the trade unions are active at enterprise level. These industries are serviced by four bargaining councils that originated in the old Industrial Council system. Whilst initially involving white and sometimes coloured unions, the metal workers’ trade union, NUMSA, effectively organised across the sectors, becoming the dominant union in all four bargaining councils by 1989. Currently, the employers vary in size, ideological orientation, and country of origin. The automotive sector is mainly large employers and both the automotive and component sectors tend to be dominated by multinationals. On the other hand, the metal and engineering industry is dominated by South African owned businesses and bedevilled by complexities of size, and different product and labour market needs (SEIFSA, 2018).

During the timeframe of the study, the automotive, automotive component and metal and engineering industries together employed about 32% of the employees in the manufacturing

89 sector26_{. The automotive and automotive component industry employment figures together}

remained relatively stable between 1995 and 2011 (DTI, 2013).27 _{The new vehicle} manufacturers employed in the region of 30 000 employees and there were between 70 000 and 80 000 in the component industry, of which between 6000 and 7000 were in tyre manufacturing (NAACAM, 2018; NAAMSA, 2018; Venter, 2014). Between 2000 and 2016 employment figures in the metal and engineering industry employment figures ranged between 375 000 and 414 000 (SEIFSA, 2015, 2016).

3.2.1 Automotive and Component industries

Globally the automotive industry positions production in locations with competitive cost inputs and proximity to emerging markets. This led the traditional Original Equipment Manufacturers (OEMs) to invest in South Africa. However, survival as a production centre is built around the ability to timeously deliver competitively priced, quality goods to domestic and export markets (AIEC, 2017; Alfaro, Bizuneh, Moore, Ueno, & Wang, 2012; Financial Mail, 2016; NAAMSA, 2018).

Since 1994, the automotive and component industry, backed by sound government policies and financial support, and through continuous development and improvement, has moved from inefficient to a world class competitive industry, well integrated in the global manufacturing chain (Bell, Goga, Mondliwa, & Roberts, 2018; Cokayne, 2017; DTI, 2013; Financial Mail, 2014, 2015, 2016).

States world-wide provide automotive industries with financial incentives - South Africa’s financial support is considered quite modest (AIEC, 2017; DTI, 2013; Financial Mail, 2012). Policy certainty is critical, and the automotive sector has been provided with favourable policies and policy certainty through the Motor Industry Development Programme (MIDP) 1995-2012 and its successor, the Automotive Production Development Programme (APDP) 2013-2020. In 2016 discussions for the replacement for the APDP, the South African Automotive Masterplan (SAAM) 2021-2035, started with multiple stakeholder tasks teams of policy analysts, government officials, OEMs component manufacturers and trade unions (AIEC, 2017; Financial Mail, 2013, 2016).

26 _{Calculation based on 1645 000 employees in manufacturing 2016 South African Labour Market}

Bulletin

27 _{1995 – 2011 – New Vehicles 38 600 to 28 300 (DTI, 2013) 1995-2011 – components 60 800 to 68 500}

90 In global terms South Africa’s share of the new vehicle global production is small (AIEC, 2017), however, the automotive industry sources inputs from the primary, secondary and tertiary sectors of the economy and the contribution to the South African GDP is significant (AIEC, 2017; Alfaro, Bizuneh, Moore, Ueno, & Wang, 2012; Financial Mail, 2016; NAAMSA, 2018). South Africa has a relatively small domestic market, but since 1995 the sector has steadily grown in competitiveness and increased its exports (Industrial Development Corporation, 2015). Between 1995 and 2015, new vehicle exports increased from 15 764 to 333, 802 units. In 2015 the total value of automotive and component exports was R151.5 billion, of which 33% were components (AIEC, 2017; DTI, 2013; NAAMSA, 2018).

The automotive and component industry is concentrated in three main clusters, Gauteng, Kwa-Zulu Natal and the Eastern Cape (DTI, 2013). From 1990 onwards, there was a substantial shift to foreign ownership. (Alfaro, Bizuneh, Moore, Ueno, & Wang, 2012; Mahomedy, 2017). At the time the study was conducted there were seven major vehicle assemblers (OEMs) with three in the Eastern Cape; Mercedes-Benz SA (Pty) Ltd in East London and Volkswagen Group South Africa (Pty) Ltd and General Motors South Africa (Pty) Ltd in Nelson Mandela Bay (NAAMSA, 2018). The 360-450 component manufacturers were divided into three tiers with approximately 150 located in the Eastern Cape. Included in the component industry were the four tyre manufacturers, all foreign owned, of which three, Goodyear, Continental and Bridgestone, had production facilities in Nelson Mandela Bay (AIEC, 2017; Alfaro, Bizuneh, Moore, Ueno, & Wang, 2012; Financial Mail, 2013; Mahomedy, 2017; NAACAM, 2018; SAABC, 2018).

The automotive and component sector is well-serviced by a network of organisations bringing together state departments, trade unions and employers. These organisations play a significant coordinating role at multiple levels in the industry.

Employer organisations include the National Association of Automobile Manufacturers of South Africa (NAAMSA) and the National Association of Automotive Components and Allied Manufacturers (NAACAM), both of which address industry-wide issues (Financial Mail, 2012; NAAMSA, 2018; NAACAM, 2018). The Automotive Industry Export Council (AIEC) (Alfaro, Bizuneh, Moore, Ueno, & Wang, 2012) was established at the end of 1999 to assist vehicle and component manufacturers. It works with a council composed of representatives of NAAMSA, NAACAM and the Department of Trade and Industry (AIEC, 2017). A newer body, the African Association of Automotive Manufacturers (AAAM), was formed in 2015 to engage with role players in Africa (AIEC, 2017)

91 Research and development and competitiveness improvement is facilitated through a range of bodies; the South African Automotive Benchmarking Club, a continuous improvement initiative, founded in 1997 and the Automotive Industry Development Centre (AIDC) set up in 2003 (AIDCEC, 2018).

The Automotive Supply Chain Competitiveness Initiative (ASCCI) was established in 2013 to coordinate all stakeholders. It embraces the Automotive Industry represented by NAAMSA and NAACAM, the Department of Trade and Industry and Labour and NUMSA. It seeks to maintain world-class competitiveness by improving supply chain competitiveness, local manufacture, increasing local content and creating employment growth. This involves containment of input costs, developing world-class manufacturing standards, increasing employment and skills development, and collaboration through the three tiers of the supply chain and the OEMs (ASCCI, 2018).

Several employer organisations provide business and employment-related services and represent industry segments when working with trade unions in bargaining councils. The Retail Motor Industry Organisation (RMI) represents retail and manufacturing concerns and the automotive component manufacturers and is the largest employers’ organisation registered with the Motor Industry Bargaining Council (MIBCO) (RMI, 2018). The new vehicle manufacturers (OEMs) are represented on the National Bargaining Forum (NBF) by the Automotive Manufacturing Employers Organisation (AMEO). The tyre manufacturing industry has the South African Tyre Manufacturers Conference (SATMC) to promote their interests, and a separate bargaining council, the New Tyre Industry Bargaining Council (NTMIBC) with employer body, the New Tyre Manufacturers Employers’ Association.

In conclusion, the automotive and components industry has achieved world-class competitiveness. In this quest it has been well served with policy certainty, financial incentives, and a significant network of organisations fully representative of all key stakeholders.

3.2.2 Metal and Engineering industry

In 1994 the South African Metal and Engineering Industry had a base of productive capabilities in machinery and equipment, and major investments in basic metals (Bell, Goga, Mondliwa, & Roberts, 2018). However, it has not achieved world-class competitiveness (SEIFSA, Annual Review 2016, 2016). While the industry does make a significant contribution to the national GDP, the sector has been troubled; the financial crises of 2008 created problems and between 2013 and 2016 the sector contracted every year (SEIFSA, 2014, 2015, 2017).

92 In the industry the value of imports exceeds exports (SEIFSA, 2017). The exports in this sector have been associated with base metals and there has been no coherent strategy to develop the downstream products in machinery and equipment where the opportunities for value- adding and employment have been (Bell, Goga, Mondliwa, & Roberts, 2018; SEIFSA, 2015). The industry has not enjoyed the policy certainty or the level of financial support from the State that is found in the automotive and component sectors (SEIFSA, 2015, 2016). Policy uncertainty, the cost and unreliability of the national electricity supply and the escalation of other input costs, including labour, have led to low investment in capital, research and development (SEIFSA, 2017). The opinion has been expressed that the building of a world- class competitive sector for Metal and Engineering requires greater cooperation and coordination among the major stakeholders than has been previously evidenced (SEIFSA, 2016).

The industry involves several different sub-sectors with different product markets and labour market requirements. The sub-sectors are machinery and equipment, basic non-ferrous metals, basic iron and steel, rubber and metal products, electrical machinery and plastics (SEIFSA, 2017). The size of operation varies considerably in the industry, from many thousands to less than 50 employees. In 2011, 63% of employers belonging to the Steel and Engineering Industry Federation of Southern Africa (SEIFSA) employed fewer than 50 employees (SEIFSA, 2011).

The Metal and Engineering industry is serviced by the major employer organisation federation, namely, the Steel and Engineering Industry Federation of Southern Africa (SEIFSA). At the time of writing, SEIFSA represented approximately twenty industry associations. It represented the Industry at a national level on bodies like Business Unity South Africa (BUSA), NEDLAC, the National Skills Authority (NSA) and MERSETA. However, SEIFSA has had difficulty in developing a coherent vision for the industry. The number of employer organisations, plus the diversity of product market sectors have made interaction with the Department of Trade and Industry difficult. There has been movement in the industry towards a new approach which involves clustering into sub-sectors to negotiate policy frameworks (SEIFSA, 2011, 2016).

SEIFSA also is the major employer federation representing the industry at the Metal and Engineering Industry Bargaining Council (MEIBC). The National Employer’s Association of South Africa (NEASA), which represents small business across different industries, is also party to the MEIBC. Bargaining in the MEIBC meets with difficulties given the diversity of product

93 market sub-sectors, labour market requirements and intra-employer tensions. The extension of collective agreements to non-parties has caused tensions in MEIBC. Smaller firms have complained about the unaffordable wage increases negotiated between large employers and the dominant trade union, and the extension of these agreements (Nattrass & Seekings, 2015; SEIFSA, 2011, 2016).

The 2011-2013 MEIBC agreement committed SEIFSA and the trade unions to the establishment of an Industry Policy Forum to explore the means to make the industry more competitive and stimulate growth. NEASA was not a signatory to the Forum. Little progress was made, and the 2014 agreement contained a recommitment to an Industrial Policy Forum and engagement with government ministers regarding the state of the industry. It was agreed that the forum should address the challenges of outputs, employment and competitiveness in the Industry and develop strategies for trade policies, export opportunities, development of product diversification, promotion of investment, skills development and job creation and the reconfiguration of collective bargaining to accommodate the diverse needs of the different employers by size and sub-sector diversity. However, little progress was made in 2015 and 2016 due to internal problems within SEIFSA and the MEIBC. These have included on-going tensions between employer associations, challenges from the Free Market Foundation and the financial viability of the MEIBC (SEIFSA, 2013, 2014, 2016).

In conclusion, the Metal and Engineering industry has suffered from policy uncertainty and lack of coordination between the key stakeholders and consequently the industry has not achieved world-class competitiveness and has contracted.