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By Tanya Rosenthal1
Manufacturing is the single largest contributor to South Africa's GDP (24.3%, figure 1). Within manufacturing the iron and steel industry contributes 7.2% while the metal products industry contributes a further 6.4%. (figure 2). Manufacturing accounts for 23.1% of employment.
In 1995 the iron and steel industry accounted for 4.3% of employment. As table 1 shows, employment in the sector has been declining, although its proportion of total employment has remained relatively stable at 4-5%.
Table 1. Employment in the steel industry, 1988-95
| 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 |
| 80 427 | 79 700 | 79 500 | 77 800 | 72 900 | 68 300 | 67 233 | 60 439 |
| Source: Central Statistical Services. Labour Statistics. | |||||||
The steel industry is an important contributor to foreign exchange earnings, contributing 16.9% to South African exports (IDC). It maintains a positive trade balance -- exports and imports by the primary carbon steel industry amounted to R4.5bn and R0.65bn respectively in 1995. The industry is an important player on the African continent, accounting for about two-thirds of steel production and 80% of steel exports.
Given the importance of the industry to South Africa, it is essential to ensure its competitiveness. South Africa has a competitive advantage in terms of the cost of raw materials and electricity. For example, electricity costs at Iscor's Vanderbijl plant are about 7.5% of input costs, compared with the norm of 14%-15% internationally. Because South Africa has to import nickel, Iscor does not have a cost advantage in raw materials for stainless steel but it does for alloy and carbon steels. Input costs for alloy steel in are about 45% compared with 52% overseas. Input costs for carbon steel are about 24% compared with 30% overseas. A final competitive advantage for steel exports is the rand-dollar exchange rate which, at around R4.5 to the dollar, makes exports attractive to countries with a strong currency. High internal transport costs, however, make South Africa vulnerable to imports in coastal areas that are far from the local production centres. Moreover, a lack of protection from the Government makes the domestic steel industry particularly vulnerable to the dumping of steel. South Africa's cost of labour as a percentage of output is considerably higher than in competing countries. Iscor estimates that current labour costs account for 28% of total costs compared with the international norm of less than 20%.
There are two possible interpretations of the high cost of labour. The first suggests that the industry is more labour-intensive than that of other countries. This illustrates a productivity constraint faced by the South African industry given the capital intensive nature of the iron and steel industry. However, Iscor management claims to have the same degree of capital-intensity as western European steelworks. The difference, according to management, relates to the literacy level of the workforce -- Iscor's illiteracy rate is 30% -- which results in fewer workers being able to read instructions, leading to a need for greater supervision and lower productivity. It requires 6-7_ hours of work in the company's integrated plants to produce a tonne of liquid steel. The international benchmark is about three work hours.
The South African steel industry is clearly facing a major challenge to become more competitive and all Iscor's operations are now benchmarked against best international practice. However, the current nature of the workplace and attempts to improve productivity are constrained by the past. The challenge facing the South African steel industry is how to improve productivity while dealing with the legacy of apartheid. This legacy in the workplace has been termed the "apartheid workplace regime" (von Holdt: in press).
This report focuses on the largest steel producer -- Iscor. Research is also drawn from ongoing studies at Highveld Steel. A brief background of Iscor and its history is followed by a discussion of the current workforce and the employment requirements of the steel industry.
Information is drawn from documents provided by Iscor management and the Industrial Development Corporation of South Africa (IDC). In addition, a range of interviews was conducted. The managing director and human resources director of Iscor steel represented senior management at Iscor, while the human resources manager at the Vanderbijl plant represented middle management. Two national organizers from the National Union of Metal Workers of South Africa (NUMSA) were interviewed as well as regional organizers and shop stewards in the Vanderbijl plant. Further interviews were conducted with officials and shop stewards of the Mynwerkers Unie (MWU) which represents 19% of the workforce at Iscor and with shop stewards from the National Employees' Trade Union (NETU) at the workplace.
For some plants, initiatives to improve productivity are essential for survival. One example of this is the Newcastle works which produces long or profile products and is under considerable threat from imports, mini-mills and substitutes such as wood, glass and aluminum. For both NUMSA and MWU, preventing job loss and gaining job security are major aims. Other Iscor plants, such as the new Saldanha plant, will be able to compete more effectively on the global market.
Iscor's competitive strategy broadly involves the continual upgrading/improving of technology, equipment and processes, decreasing cost and increasing yield:
The way to survive and grow is to become more productive. Our objective is to modernize, decrease costs, increase labour's skills, increase yields and maintain our competitive position in South Africa and internationally (Robertson & Viljoen, 1996).
The company is introducing human resources and industrial relations innovations as a part of its efforts to improve productivity. Iscor's ideal workforce in 5-10 years time is:
A well-trained and well-developed workforce that is productive and accepts ownership (Robertson & Viljoen, 1996).
Part of ensuring a productive workforce is ensuring that sufficient attention is given to workers' voice and welfare:
We aim to have a happy workforce -- motivated, loyal to the company, able to influence the company. The company is to have a major interest in the employee's welfare (Robertson & Viljoen, 1996).
NUMSA, the largest union in Iscor, shares the vision of a well educated workforce, although for different reasons:
Our ideal membership in ten years time is a membership that is skilled. Our bargaining unit will extend to all levels and thus we will go beyond the categories of workers we have organized now. This will weaken the power of the skilled white workers because we will have more skills. Skilled workers are more difficult to retrench (Galeni & Nhlapo, 1997).
While Iscor management stresses loyalty to the company, NUMSA wants to strengthen the union:
We aim to build a strong union where workers are well organized and militant (Galeni & Nhlapo, 1997).
Given a broad vision of where the company wants to go, and the union's aims, it is important to examine the history and current state of the company, how it is attempting to reach its goals and the impact of labour on these goals.
Iscor remained a state organization until the Government announced in February 1989 that Iscor would be privatized and in November 1989 shares were listed on the Johannesburg Stock Exchange. As of June 1996, 149,000 individual shareholders held 98.6% of Iscor shares. Those with a share holding of more than 5% include Standard Bank Nominees (26.31%), Industrial Development Corporation (15%) and South African Mutual Life (10%). As of December 1996 ten companies held 86.6% of Iscor shares.
We believe that this policy [of giving preference to white labour] would yield better results in a modern highly mechanized works such as are being built at Pretoria and our estimates of production costs are based on white labour entirely... (Richards, 1948).
Soon after production began in 1934 it became apparent that the industry needed extensive State support. Iscor was subject to competition from more efficient overseas companies but protectionism was opposed by industrial and mining interests since it would simply raise prices. In December 1937 the company moderated its "civilized labour policy" to reduce costs. Semi-skilled white workers doing boring and milling were replaced by African labour at lower wages. A further rationale for moderating the policy was the shortage of skilled labour(Webster, 1985).
While a relaxation of the "civilized labour policy" was present from the early days of Iscor, the process of moving black workers into what were traditionally regarded as white workers' jobs intensified in the boom of the 1960s. This approach was fiercely contested by the white unions, but Iscor made wage increases for white workers conditional upon a relaxation of the job colour bar.
The degree to which this could be considered "advancement" has been questioned (Morris and Kaplan) and it has been argued that skilled artisanal jobs previously done by white workers were broken down into simpler tasks to be performed by black operators. This fragmentation was also accompanied by a regrading of jobs to exclude African workers. A common way of restructuring the labour process was to appoint a skilled white worker in a supervisory capacity accompanied by several black "assistants" who in fact did most of the work. Black workers who were moved up into reorganized white jobs or jobs that were fragmented earned 50%-60% of the previous white worker's wage.
As part of its strategy to protect the jobs of semi-skilled white workers the Association took the view that white jobs would be preserved by preventing any employment of black labour in jobs thus far defined as "civilized". It also came to rely on appeals to the Government rather than taking strike action. Thus, for example, when a deadlock was reached in wage negotiations in 1956 the Association appealed to the Government and then individual cabinet members to intervene. This guardianship from the State had relevance for the beneficiaries of the "civilized labour policy" in the State sector, but the white unions were in a weakened position in privately owned steel plants such as Highveld Steel.
In the 1970s management at Iscor was prepared to recognize representation for African workers through the statutory structures of liaison and works committees. However, African workers were dissatisfied with these structures and wanted union recognition. The Metal and Allied Workers Union (MAWU)2 organized African workers at Iscor in 1984-5. Management, however, was resistant to the notion of trade union representation for African workers:
The organization accepted white unions. Management was very hostile to black unions and was very difficult. When we had organized the workers we couldn't get recognition from the company (Galeni & Nhlapo, 1997).
Recognition was not only blocked by management but also by the white trade unions:
We were blocked by the Boiler Makers' Union. It saw NUMSA as a threat. The Boiler Makers' Union had a compartment for black workers and said that the black workers should join them. After industrial action we won recognition and signed the agreement in 1985 (Galeni & Nhlapo, 1997).
* Vanderbijlpark (flat products)
* Newcastle (long or profile products)
* Vereeniging (specialized products)
* Pretoria (stainless steel products).
Iscor is also involved in a number of joint ventures:
* Saldanha Steel -- steel (50%)
* Reinforcing Steel Holdings -- reinforcing bar (50%)
* Microsteel -- stainless steel (50%)
* Safore -- shipping (40%)
* Consolidated Wire Industries -- wire products (50%)
* Heckett Multiserve -- slag processing (49%).
Iscor has steel distribution centres in Benoni and Vanderbijlpark and shipping offices at Durban, Richards Bay and Saldanha Bay. For the year ending 31 December 1995 Iscor sold 5,24 Mt of steel, 45% of which was exported. Turnover for the Group (steel and mining) for 1995 was R11.6 billion. Financial turnover (which includes intergroup sales) in 1996 was R3.33 billion for mining and R9.4 billion for steel. Fixed assets for 1996 were R7.7 billion and current assets were R5.6 billion.
1 Sociology of Work Unit, University of the Witwatersrand. Assisted by Karl von Holdt. Coordination by Professor E.C. Webster.
2 MAWU later merged with other unions to become the National Union of Metal Workers of South Africa (NUMSA).
