Report of the Employment Conditions Commission on the

2012-2013

Report of the Employment

Conditions Commission on the investigation into Civil

Engineering Sector, South Africa.

Department of Labour

Report of the Employment Conditions Commission on the investigation into Civil 2012-2013

Engineering Sector, South Africa.

Table of Contents

CHAPTER ONE ............................................................................................................................ 3

1.1

BACKGROUND TO THIS INVESTIGATION ............................................................. 3

1.2

METHODOLOGY .............................................................................................................. 3

P HASE O NE

–

T ERMS OF REFERENCE ............................................................................................... 4

P

HASE

F

OUR

– P

UBLICATION OF THE AMENDED SECTORAL DETERMINATION

................................ 6

1.3

S TRUCTURE OF THE R EPORT ............................................................................................... 6

CHAPTER TWO ........................................................................................................................... 7

2.1

INTRODUCTION ................................................................................................................ 7

2.2

SECTOR PROFILE: CIVIL ENGINEERING .................................................................. 7

2.2.2

T HE POSITION OF THE CIVIL ENGINEERING INDUSTRY ................................................. 10

C ONFIDENCE INDEX ....................................................................................................................... 11

T

ENDERS

........................................................................................................................................ 11

E MPLOYMENT ................................................................................................................................ 12

C ONTRACT AWARDS ...................................................................................................................... 13

T URNOVER ..................................................................................................................................... 13

2.3

SECTOR PROFILE: BUILDING INDUSTRY ............................................................... 14

2.3.1

T HE POSITION OF THE BUILDING INDUSTRY ................................................................... 15

2.3.2 T HE B UILDING C ONFIDENCE INDEX .................................................................................. 16

CHAPTER THREE .................................................................................................................... 18

DISCUSSION AND PROPOSALS ............................................................................................ 18

3.1

E

XTENSION OF SCOPE TO INCLUDE BUILDING SECTOR

.................................................... 18

V IEWS OF THE B UILDING B ARGAINING C OUNCILS ....................................................................... 22

V IEWS OF EMPLOYEES ................................................................................................................... 22

V IEWS OF THE D EPARTMENT ......................................................................................................... 23

3.2

W AGES AND ANNUAL INCREASES ....................................................................................... 24

V IEWS OF THE EMPLOYERS ............................................................................................................ 25

V IEWS OF THE EMPLOYEES ............................................................................................................ 27

V IEWS OF THE D EPARTMENT ......................................................................................................... 27

3.3

D URATION OF THE SECTORAL DETERMINATION .............................................................. 29

V IEWS OF EMPLOYERS ................................................................................................................... 29

V IEWS OF D EPARTMENT ................................................................................................................ 29

3.4

M

INIMUM WAGE INCREASES FOR YEARS

2

AND

3 ............................................................. 29

V IEWS OF EMPLOYERS ................................................................................................................... 29

3.5

O THER BASIC CONDITIONS OF EMPLOYMENT DISCUSSED IN THE PUBLIC HEARINGS . ... 30

I NCLEMENT WEATHER ................................................................................................................. 30

F AMILY R ESPONSIBILITY L EAVE ................................................................................................ 31

A NNUAL LEAVE ............................................................................................................................ 32

Page 1 of 40



M ATERNITY LEAVE ...................................................................................................................... 33

CHAPTER FOUR ....................................................................................................................... 34

EVALUATION IN TERMS OF ECC CRITERIA ................................................................... 34

4.1

A BILITY OF EMPLOYERS TO CONDUCT THEIR BUSINESS SUCCESSFULLY AND OPERATION

OF SMALL , MEDIUM OR MICRO ENTERPRISES , AND NEW ENTERPRISES . .................................. 34

4.2 T HE IMPACT OF THE PROPOSED MINIMUM WAGE ON THE COST OF LIVING AND POVERTY

ALLEVIATION ................................................................................................................................. 35

4.3 W

AGE DIFFERENTIALS AND INEQUALITY

............................................................................. 36

4.4 T HE LIKELY IMPACT OF THE PROPOSED WAGES ON CURRENT EMPLOYMENT AND THE

CREATION OF EMPLOYMENT .......................................................................................................... 36

CHAPTER FIVE ......................................................................................................................... 38

RECOMMENDATIONS OF THE ECC ................................................................................... 38

Table of Figures

Table 1: Schedule of public hearing dates, venues and attendance .................................... 5

Table 2: Employment Q-Q change by firm size ............................................................... 12

Table 3: Employment Contribution by firm size .............................................................. 13

Table 4: Percentage Change in main indicators ................................................................ 14

Table 5: Current minimum hourly wages in Civil Engineering ....................................... 24

Table 6: The impact of current employment, contract awards, turnover and wages. ....... 26

Table 7: Minimum hourly rates proposed by the Department .......................................... 28

Table 8: Minimum hourly rates proposed by the ECC ..................................................... 38

Page 2 of 40



CHAPTER ONE

The Employment Conditions Commission (ECC) has the pleasure of presenting its report and recommendations into the review of the Sectoral Determination for the Civil

Engineering Sector. This report is presented in accordance with section 54 (4) and 62(1) of the Basic Conditions of Employment Act (BCEA).

1

In making its recommendations, the ECC took into account the considerations set out in section 54(3) of the BCEA, to the extent to which they are appropriate.

1.1 BACKGROUND TO THIS INVESTIGATION

The current civil engineering sectoral determination was published on 27 August 2010.

The provision in respect of conditions of employment and the minimum wages became applicable on the 1 st

September 2010.The wage dispensation, including annual increases, was fixed for a period of two years; The rates will remain in operation until 31 August

2012, therefore the new wage dispensation must be in place by 1 September 2012. The minimum wage rates for Grade 1 however, shall increase on 1 September 2012 by 8.07% to R20.50, as per the current sectoral determination

2

.

Most of the terms contained in the sectoral determination, including wages were informed by and mirror the collective agreement reached by the employers and trade unions in the sector in their last round of wage negotiations in 2010. Indeed, this has been the norm in the sector.

1.2 METHODOLOGY

A four-phased project framework was developed for the investigation.

1 No 75 of 1997.

2 Government Gazette No 33505 dated 27 August 2010.

Page 3 of 40



Phase One – Terms of reference

A notice was published in the Government Gazette No. 34980 on 27 January 2012 inviting interested parties to make written representations within 60 days to the Director-

General on their views about a review of the conditions of employment and wages in the civil engineering sector.

The terms of reference for this investigation were as follows:

“to review wages and the conditions of employment and the feasibility of extending the scope of Civil Engineering Sector to cover the Building and Construction sector in the Sectoral Determination 2, Civil Engineering Sector, South Africa”.

In response to the notice, five written submissions were received from the following organisations:

1.

South African Federation of Civil Engineering Contractors (Employer

Representative);

2.

Master Builders Association (East Cape);

3.

Master Builders Association (Gauteng);

4.

Master Builders Association (Western Cape);

5.

Master Builders Association (Kwa-Zulu Natal);

6.

National Union of Mine workers (Employee representative).

During the public hearings, further written submissions were received from the constituents of the above-mentioned organisations at the provincial level, which were similar to the submissions forwarded by their national offices.

Phase Two – Consultation with stakeholders

This phase involved meeting with stakeholders through the public hearing process.

Invitations for the public hearings were issued through the Department’s provincial offices and labour centres. A schedule for these public hearings was also published on the

Page 4 of 40



department’s website in order to ensure enough participation. Public hearings were scheduled to take cognisance of the areas where civil engineering and building activities are more prevalent in the provinces as set out in the table below.

During the public hearings, South African Federation of Civil Engineering Contractors

(SAFCEC) and National Union of Mine workers (NUM) representatives informed the

Department that they were currently engaged in wage negotiations as parties to the

National Negotiating Forum (NNF). However, for the benefit of the public hearings the parties made their individual submissions on behalf of their constituencies.

Despite all the efforts to improve attendance and participation, employee attendance was disappointing at most of the public hearings. Trade unions indicated that the time that these public hearing sessions are held make it impossible for the employees to attend and proposed that, in order for these hearings to be a success, the Department should in future hold the hearings on Saturday and Sunday or conduct site visits in order to maximise employee participation..

Table 1 below indicates places visited together with the attendance profile of stakeholders for each hearing.

Table 1: Schedule of public hearing dates, venues and attendance

Province

Eastern Cape

Free State

Kwa-Zulu

Natal

Limpopo

Date Venue

16/05/2012 Labour centre

Port Elizabeth

23/05/2012 Protea Hotel

Bloemfontein

9/05/2012 Lavita Lodge

Durban

18/05/2012 Royal Hotel

Polokwane

Employers/

Employer

Org

11

Employees/

Employee

Reps

5

6

6

3

6

1 3

Page 5 of 40



Northern Cape 26/04/2012 Provincial office

Kimberly

North West 24/04/2012 Civic Centre

Rustenburg

Western Cape 09/05/2012

10/05/2012

Provincial office

Cape Town

D’Almeida Library Hall

Mossel Bay

Total

3

1

8

8

44

0

0

5

1

23

As reflected in Table 1 above, public hearings were not well attended, especially the employee representation.

The hearings thus provided information from a total of 44 employers and 23 employees. It should further be noted that the representation was both from individual employees and employers as well as those representing organised business and labour.

Phase Three – ECC Process

During this stage, the Employment Conditions Commission (ECC) deliberated on the consolidated report prepared by the Department on the basis of the written submissions forwarded to the Department and inputs captured during the public hearings.

Phase Four – Publication of the amended sectoral determination

This phase will see the publication of amendments to the sectoral determination in the

Government Gazette, once approved by the Minister and subsequent awareness-raising.

1.3 Structure of the Report

The report consists of the following chapters:



Chapter 2 of this report outlines the sector profiles of both civil engineering and the building industry and the current state of the two industries;



Chapter 3 focuses on the findings of the investigation and resultant proposals;



Chapter 4 focuses on the proposals in light of the criteria that the Commission has to consider; and



Chapter 5 summarises the recommendations by the Commission.

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CHAPTER TWO

2.1 INTRODUCTION

The construction industry in South Africa is divided into two sectors: the civil engineering sector and the building sector. The building sector comprises the erection, completion and renovation of buildings and structures. Civil engineering involves the construction of infrastructure such as roads, bridges, dams and other structures excluding buildings. There are stark contrasts between the collective bargaining arrangements in the two sectors. While the civil engineering sector has a single bargaining forum, collective bargaining in the building sector is highly fragmented. The wages also differ between the two sectors even though many of the work tasks are the same 3 .

The South African construction and engineering sector was pre-occupied for some time by the execution of significant infrastructure projects in preparation for the 2010 FIFA

World Cup. Most of these contracts had been awarded prior to the global economic slowdown and shielded many employers from the worst of the recession. After the World

Cup, the industry had been faced with replenishing order books and experienced delays in contract awards and a general slowdown in certain sectors

4

.

A number of challenges now face the industry during post-World Cup slump and amidst the economic downturn

5

.

The severity of the situation is highlighted in the SAFCEC’s ‘State of the Civil

Engineering Industry Report’ for the first quarter of 2012. SAFCEC indicates that a decline in the sector is clearly visible, and along with it is dropping employment figures, capital expenditure, tender activity and contract awards. Projects across the public and private sectors are being decelerated, postponed and re-scoped.

2.2 SECTOR PROFILE: CIVIL ENGINEERING

3 www.lrs.org.za/docs/Bargaining_Monitor_Sept2009 .

4 http://www.isiza.co.za/magazine/current-issue .


Page 7 of 40



Employers

The main employer role-player in the industry is the South African Federation of Civil

Engineering Contractors (SAFCEC). SAFCEC is registered as an Employers

Organisation constituted in terms of the Labour Relations Act.

6 It reportedly represents

368 registered contractors, employing approximately 70 000- 90 000 employees.

The proportion of Civil Engineering Contractors registered with the Construction

Industry Development Board (CIDB) are 63.4 % for level 9, 49% for levels 8 and 7, 21% for levels 6, 5 and 4, 7 % for Emerging contractors levels 3, 2, and 1.

Employees

According to the Quarterly Labour Force Survey (QLFS) 7 for 1 st

quarter which was released by Stats SA in May 2012, the number of persons in the labour force in South

Africa increased by 466 000 between Q1:2011 and Q1:2012.

The QLFS revealed that compared to a year ago, employment increased by 2.3% (304 000), unemployment increased by 3.7% (162 000). Formal sector employment increased by 290 000 jobs while

Informal sector employment decreased by 73 000 jobs.

Employment in the construction industry reported an annual decrease of 45 000 employees (-4.4%) at Q1:2012 compared with Q1:2011. A quarterly decline of 71 000 (-

6.7%) between Q4:2011 and Q1:2012 was recorded suggesting that the government’s infrastructure spending programme has not yet had an effect on the labour market .

In its submission to the Commission on 26 March 2012, SAFCEC reported that the outlook for new employment opportunities in the industry remains weak, as only 20% of the firms expect to hire staff in the next quarter (Q1:2012). SAFCEC reported that the

6 Act 66 of 1995 SS 95-111.

7

The Quarterly Labour Force Survey (QLFS) is a household-based sample survey conducted by Statistics

South Africa (Stats SA). It collects data on the labour market activities of individuals aged 15 years and above who live in South Africa.

Page 8 of 40



majority of firms expect to maintain current staff levels, although 23% expect to lay off staff in the 4 th

quarter.

With regard to employee representatives, NUM submitted that it represented 63 000 members and Building and Construction Allied Workers Union (BCAWU) claimed to represent 35 000 active members in 2010. The unions have indicated that union membership within the civil engineering sector is often difficult to estimate as employment is largely based on limited duration contracts.

2.2.1 Collective Bargaining in the sector

The Civil Engineering sector does not have a bargaining council, but has a National

Negotiating Forum (NNF), which consists of one employer’s organisation and two trade unions. The employers are represented by SAFCEC and employees are represented by

NUM and BCAWU.

The NNF was established in 1996, and has traditionally negotiated with the unions on wages and other conditions of employment in order to create some stability in the industry. The parties to the NNF have been investigating the possibility of establishing a

Bargaining Council for the Civil Engineering Industry (BCCEI) and in its submission to the Commission; SAFCEC indicated that an application has been submitted to the

Registrar of Department of Labour for the registration of the Bargaining council.

Despite this, collective agreements concluded in the NNF have always been forwarded to the Department as an input document in the reviewing process of the sectoral determination. The Department has always encouraged parties, in line with the spirit and aims of the Labour Relations Act 66 of 1995, to strive for self-regulation in their working arrangements, including terms and conditions of service. Hence collective agreements, such as those concluded by the parties in the NNF, have always been endorsed by the

ECC in its recommendations.

Page 9 of 40



In 2012, the first round of negotiations in the sector commenced on the 28 March 2012, the parties have agreed in principle on wage increases for a period of one year but have not yet signed the agreement. They have agreed that the wage increases will remain in operation for a minimum period of 1 year or until amended by a further Agreement after the 1 year period has expired. The parties have further agreed that the provisions in relation to annual leave, maternity leave and family responsibility leave will be renegotiated upon the registration of the Civil Engineering bargaining council.

The Department has however not received the agreement from the parties and will therefore not consider it during this review.

2.2.2 The position of the civil engineering industry

The civil engineering sector has always been dogged by its cyclical nature, with its services in high demand during period of intense development, and in low demand when development spending is cut to cool over-heated economies.

In its submission to the Commission, SAFCEC raised its concerns about the Small,

Medium and Micro Enterprises who have expressed real concern about the sustainability of their businesses as a result of the economic downturn and lack of consistent work.

SAFCEC further reported that profitability in the sector has deteriorated in the 3 rd

quarter of 2011, following a hopeful recovery in the 1 st

quarter, but did rebound in the 4 th

quarter of 2011. They further argued that accelerated and additional improvements in employment conditions will adversely affect the civil engineering industry and specifically smaller and upcoming BEE contractor’s sustainability, even more so, under current market conditions.

The following five indicators (summarised in Table 4 ) reflect actual figures compiled by SAFCEC on their state of the civil industry report for the 1 st quarter of 2012 8 .

8 http://www.safcec.org.za

.

Page 10 of 40



SAFCEC reported that there are some confounding trends in the indicators, probably typical in a period of turning points, especially through the tough periods. However, while the industry seems to be shedding staff (at overall level), the value of contracts awarded has increased substantially in the past four quarters. The impact of projects delays and cancellations (even after award date) is clearly having a more severe impact on the industry.

Confidence index 9

SAFCEC reported that there was a relapse in the index in the 3 rd quarter, but similar to what happened in 2010, levels rebounded strongly in the 4 th

quarter to a net satisfaction rate of 87 (up from 42 in 2011Q3, compared to 99 in 2010Q4). SAFCEC has indicated that while the outlook for business was not highly optimistic, the majority of respondents viewed the outlook for business as satisfactory (as opposed to rather poor in the last few surveys).

On its report on the state of the Civil Construction Industry, the First National Bank/

Bureau for Economic Research (FNB/BER) indicated that the confidence index rose from

21 in Q3:2011 and 26 in Q4:2011to 34 during 1Q12

10

. The FNB/BER has viewed the rise in confidence to be underpinned by continued improvements in activity levels and profitability. Despite these more positive results, the demand for new construction work remained relatively weak, the cyclical recovery still being in its early stages.

Tenders

There has been a marked improvement in the confidence expressed by members with regards to tender activity since the 1 st

quarter of 2011. More than 60% of members reported consistently that tender activity has been satisfactory, with an increasing percentage saying it was “better than satisfactory” in the 4 th

quarter.

9 Confidence index relates to the general business outlook amongst the companies within the sector. Below fifty indicates pessimism; 0 equals’ total negativity and 100 indicate absolute optimism.

10 http://www.ber.ac.za

.

Page 11 of 40



The FNB/BER has also established on its report that the tender activity increased for the fifth straight quarter in Q1:2012, pointing to a more sustained (albeit slow) recovery.

However, the rate of increase moderated slightly compared to the second half of last year.

The research indicates that Construction activity flowed from a number of sectors and primarily from existing or on going projects.

Within the public sector, work by Transnet (on the expansion of port facilities and the new multi-products pipeline between Durban and Gauteng) and some work from Eskom

(on their Medupi, Kusile and Ingula power station projects) continued to support expenditure by public corporations. As for the government, spending on roads, water and waste water management projects remained dominant, especially at the municipal level.

Construction work within the private sector emanated mainly from the mining sector.

This was on the back of still relatively high commodity prices and in preparation for an expected increase in coal demand once Eskom’s new power stations come on line.

Employment

SAFCEC indicated that Employment dipped in the 4 th

quarter of 2011 down- 1.2 %) to an estimated 98 837 (half of the peak in 2008Q4 when over 202 000 people were employed).For the purpose of the survey, SAFCEC categorised the responses into large, medium and small firms based on reported employment. The 2011Q4 survey was evenly distributed between large, medium and small firms (based on total employment), but it was the larger firms that decreased employment (down 2.5% quarter on quarter), while medium and smaller firms increased employment by 3.9% and 10.7% respectively. The larger firms contributed over 80% of total employment.

Table 2: Employment Q-Q change by firm size

Category

Large

Medium

Small

Employment

> 1000

Between 100 and 1000

< 100

2011Q3

-3.5%

11.8%

-15.6%

2011Q4

-2.5%

4.0%

10.7%

Page 12 of 40

Total



-2.1% -1.2%

% of firms with positive growth 38.9% 37.5%

Table 3: Employment Contribution by firm size

Category

Large

Medium

Small

Total

Employment

> 1000

Between 100 and 1000

< 100

2011Q3

33.3%

44.4%

22.2%

100.0%

2011Q4

31.3%

31.3%

37.5%

100.0%

SAFCEC indicated in its submission that the above indicators demonstrate the importance to balance SAFCEC, NUM and BCAWU’s interest against the needs of the industry (s) and non-participating parties in negotiations, hence the sensitivity surrounding the extension of the sectoral determination to other industries under the auspices of the civil industry statutory processes.

Contract awards

There has been a marked turnaround in the confidence indicator around contracts awarded to companies. What remains a concern however, is the increase in the number of civil projects postponed, which was up to 44% y/y in 2011. The postponement rate (the number of projects postponed expressed as a percentage of the number of tenders advertised during the same period), increased to close to 14%, after having recovered slightly to around 12% in the first half of 2011.The highest level since SAFCEC started recording the data was at 16% in the 4 th

quarter of 2009.

Turnover

Based on turnover estimates received from members, turnover increased by more than

10% q/q during the 3 rd

quarter (estimates in the previous report suggest an 18% increase which translates to a 33% nominal year on year increase), but decreased by around 1% q/q in the 4 th quarter, which is still approximately 27% higher compared to the same

Page 13 of 40



quarter in 2010. This implies that the total nominal turnover in the industry for 2011 had increased by 12.7%, or by 5.8% in real terms.

Table 4: Percentage Change in main indicators

Indicator

Confidence*

Tenders

Contract Awards**

Employment

6 MONTHS TO 12 MONTHS TO

2011:Q2 2011:Q3 2011:Q4 2011:Q2 2011:Q3 2011:Q4

-25.6 -12.1 -29.3 9.8 28.3 -27.4

17.4 14.6 6.6 25.9 39.7

760.7

-5.7

484.1

2.6

241.7

-1.2

44.2

-27.3

222.6

-13.6

12.5

377.5

-3.5

Turnover 19.9 4.3 -2.5

*Confidence index measured as percentage change in cumulative net improvements.

**Contract Awards based on contracts awarded in the RSA only.

20.0 12.6 7.7

2.3 SECTOR PROFILE: BUILDING INDUSTRY

Employers

The main employer role player in the industry is the Masters Builders Association

(MBA) which is a National organisation that functions as a federation of registered employer association representing contractors and employers operating in the building industry and which is regulated in terms of section 107 of the Labour Relations Act. In its

Annual Report for 2011, MBA reported that the Federation’s nine Master Builders

Associations and three Affiliate Associations represent some 4000 members and provide for some 200 000 employment opportunities from unskilled labour through to artisans, foremen and project managers as well as owner/entrepreneurs and professionals.

Employees

Employees in the building sector are represented by a number of trade unions either in terms of sub-sectors or in terms of regions. The following trade unions, amongst others, organise employees in the sector: National Union of Mineworkers (NUM), Amalgamated

Union of Building Trade workers of South Africa (AUBTW), Northern Building Union/

Page 14 of 40



Noordelike Bouwerkersvakbond (NBC), Building Workers’ Union (BWU), Building

Construction and Allied Workers’ Union (BCAWU), Building, Wood and Allied

Workers’ Union of South Africa (BAWUSA), South African Woodworkers’ Union

(SAWWU).

As already indicated above, the QLFS showed that employment in the construction industry reported an annual decrease of 45 000 (-4.4%) at Q1: 2012 compared with Q1:

2011. In Q1:2012, formal sector employment accounted for 70, 9% of total employment, a decline of 0, 3 of a percentage point from the previous quarter. Between Q1:2011 and

Q1:2012 the majority of formal sector job losses were in the Construction (80 000).

Informal sector employment in the Construction industry increased by 35 000 during this period.

2.3.1 The position of the building industry

The BER indicated that the Building Industry undertakes the supply of residential and non-residential buildings and structures. In the case of residential industry, this comprises the building of inter alia low income housing, single stand alone residential buildings, flats and townhouses as well as additions and alterations to existing residential units.

Non-residential building work entails the erection of office and banks, retail and industrial space, as well as additions to such structures.

The building survey is conducted amongst architects, quantity surveyors, main contractors, sub-contractors (plumbers, electricians, carpenters and shop fitters), manufacturers of building materials (cement, bricks and glass) and retailers of building material and hardware . They are polled on issues such as demand levels, employment, intensity of competition and constraints hampering business activity. An important indicator obtained form this survey is business confidence. Business confidence can be regarded as a broad perception index and will amongst others, be influenced by demand conditions, availability or otherwise of inputs such as labour and materials, political development and crime levels.

Page 15 of 40



The results of the Q1:2012 composite FNB/BER building confidence index provide further proof that the building sector is indeed recovering. This recovery is increasingly being characterised by a very moderate rise in building activity and profitability, especially amongst main contractors, the biggest component of building.

2.3.2 The Building Confidence index

The FNB/BER building confidence increased from 29 in Q4:2011 to 34 in Q1:2012. The higher confidence is supported by meaningful increases in activity and profitability .

Confidence index of building material manufactures

The confidence of building material manufactures rose significantly by 25 index points to

37and at 37, the confidence is at its highest level since Q1:2008.

Confidence index of building merchants

The confidence of building merchants fell to 40 from 49 index points in Q4:2011. The decline in confidence coincides with an easing in sales values and overall profitability .

Confidence index of main contractors

The most notable feature if Q1:2012 results is the rise in the overall confidence of main contractors which jumped from 19 to 31 index points. In this quarter residential confidence showed a more moderate improvement, rising to 28 from 22 whilst nonresidential confidence showed a more meaningful 24 index point jump (from 14 in

Q4:2011 to 38 during this quarter.

According to the FNB/BER survey, Building work for both residential and nonresidential contractors is starting to show a more consistent increase, albeit off low levels.

However, there was a significant improvement in non-residential building work executed compared to residential work and this in part could explain the much higher confidence of non-residential contractors. The reason for that could be the high levels of consumer debt and tight credit conditions continue to weigh on residential building activity with

Page 16 of 40



very moderate relief coming from the affordable and low cost housing markets. At the same time, non-residential contractors continue to benefit from the building of shopping centres and government led work such as the building of hospitals and schools.

Confidence index of sub- contractors

The sub-contractor confidence, which is closely linked to that of main contractors, shed 7 points to register a value of 29, the first time since 1Q2007 that sub-contractor confidence was below that of main contractors. The “early” recovery in the additions and alterations market which saw clients opting to expand/improve on existing space rather than to build from scratch initially helped buoy sub-contractor confidence. This trend seems to be turning with increasing amounts on new building work coming on board.

The confidence of residential sub-contractors registered an index value of 33, from 39 in

4Q2011. Confidence of non-residential sub-contractors also dropped 6 points (from 32 in

4Q2011 to 26 in 1Q2012).

Confidence index of architects and quantity surveyors

The two sectors which give an indication of the robustness of the building pipeline provided mixed results during 1Q2012. The confidence of architects fell to 17 from 21 index points while that of quantity surveyors rose from 36 to 47 points (close to the crucial 50 index point mark). Even in terms of activity there was divergence, with architects experiencing renewed pressure in the 5 number of projects commissioned at sketch plan phase and in the number of contracts awarded. Quantity surveyors saw the exact opposite trend.

Page 17 of 40



CHAPTER THREE

The focus of the investigation, in line with the terms of reference, was to review minimum wages and conditions of employment in the civil engineering sector and further to establish the feasibility of extending the scope of application to include the building sector under the Sectoral determination 2 for the civil engineering sector.

This chapter deals with the current dispensation in the sectoral determination in relation to minimum wages and other related conditions of employment. In addition, it also deals with the inputs received during the public hearings, written inputs submitted to the

Department, proposals by the Department and recommendations of the Commission.

DISCUSSION AND PROPOSALS

3.1 Extension of scope to include building sector

In South Africa, collective bargaining has particular importance because it is the mechanism through which “regulated flexibility” will be achieved. In other words the ability of collective bargaining to set wages and conditions of employment that balance employee’s needs with those of employers is critical for the ability of new labour relations system to balance the imperatives of equity and economic development.

11

In economic sectors or areas that do not have collective bargaining agencies, the BCEA allows the Minister of Labour to make sectoral determinations which then govern the employment conditions of those sectors. The Building Sector’s collective bargaining has historically been divided geographically. Regional bargaining structures have, in some provinces, been sufficiently representative in the sector to establish bargaining councils.

In other provinces, bargaining councils have ceased to be representative or have not reached the levels of representativeness necessary for the establishment and continuation of bargaining councils.

11 http://www.commerce.uct.ac.za/research_units/dpru/Employment_Promotion_Program/PDFsEPP2/Repor t%202010%20Stadiums%20&%20Gautrain.pdf

.

Page 18 of 40



During the 1990s, there were ten regional building bargaining councils. Since then four have collapsed namely the Durban, Gauteng, Kroonstad and Pietermaritzburg councils.

Currently there are six regional bargaining councils; Bloemfontein, Cape of Good Hope,

East London, Kimberley, North and West Boland and Southern and Eastern Cape 12 .

The above Bargaining councils are operating differently with some having collective agreements that are extended to non-parties and some with agreements that are not extended to non-parties. Since Bargaining Councils do not cover the entire building industry in the country, bargaining is also held in the so called Voluntary Bargaining

Forums (VBFs). These are comprised of groups of employers that have voluntarily come together to bargain wage increases centrally with unions, but obviously any agreements reached at that forum are only binding upon the signatories.

In addition, plant level collective bargaining takes place between individual employers and the representative trade unions in regions falling outside the bargaining councils and

VBFs. Again there are many employees who are not members of the trade union parties to these voluntary forums and there are many employers, including many of the subcontractors, who are not members of these forums.

A study on the state of collective bargaining in South Africa 13 revealed that it is possible that more councils will collapse in the years ahead, particularly smaller local councils.

So, the bargaining council system in the building industry faces some serious challenges.

One major threat is the issue of representivity and the requirements in the LRA for extending collective agreements. The more employers and employees that do not join the employer’s organisations and trade unions that participate on councils, the harder it is for bargaining councils to maintain the necessary level of representivity to have their agreements extended to non-parties (i.e. the firms and employees who are not members of party employer’s organisation and unions).

12 www.lrs.org.za/docs/Bargaining_Monitor_Sept2009 .

13 http://www.dukeviuworkshop.org/images/stories/Godfrey_report1.pdf

.

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The study also revealed that if a council does not have its agreement extended to nonparties, there is a strong possibility that it will collapse in the short to medium-term.

Employers that are bound by the agreement through their membership of the party employer’s organisation will be undercut by non-party competitors. The obvious response of many will be to leave the employer’s organisation so that they are no longer bound by the council ’ s agreement. The logic of this process will be the eventual demise of the council.

A piece of research conducted on the industrial action in the construction of Gautrain and

2010 soccer stadiums

14

, revealed that the building sector’s recruitment policy which provides that 70% of employees must be drawn form the local area has some profound implications for industrial relations in the sector. The purpose of this policy requirement is to ensure that there is poverty alleviation in the local communities, but the local employees are generally unskilled or semi-skilled and therefore, appointed to the lower grades and on limited duration contracts (LDCs). The research also revealed that LDC employees are notoriously difficult to organise because they are in employment for a short period of time and they often do not see any benefit to joining a union or paying a subscription fee.

Views of employers

On its submission to the Department, SAFCEC recommended that under the current situation the building and civil engineering sectors should not be regulated in a single sectoral determination. SAFCEC proposed that a proper investigation should be done to give consideration to this highly sensitive and diverse market, and it should be done separately from the normal public hearings process or from the wage review investigation.

During the public hearings, employers throughout the country acknowledged that employees in the building sub-sector needed protection or a regulation tool, but

14 http://www.commerce.uct.ac.za/research_units/dpru/Employment_Promotion_Program/PDFsEPP2/Repor t%202010%20Stadiums%20&%20Gautrain.pdf

.

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maintained that the extension of the civil engineering determination to the building sector was not an option since the sectors are fundamentally different and the wage rates are very far apart at present. Employers warned that aligning the two sub-sectors would have unintended consequences, and it might lead to massive job losses in the building industry.

The Gauteng Masters Builders Association (GMBA) proposed that collective bargaining should be structured between these sectors before an extension could be considered. The

GMBA also mentioned that the civil engineering sector comprises mainly large scale contracts while the building industry deals mainly with smaller projects which rely on large numbers of workers with different skills, hence the different remuneration models.

The Master Builders Association (Eastern Cape) (MBA-EC) submitted their written inputs, which strongly contested the inclusion of the building industry under the civil engineering determination. They proposed that a full scale investigation on the conditions of employment in the building industry should be conducted and that a proper understanding is gained of the various collective bargaining regimes which are currently in operation throughout the building industry.

MBA-EC also argued that a merger of the two sectors would not be feasible because of the distinctions between the civil engineering and the building sector. They submitted that Civil engineering contractors generally rely more heavily on state work (public works projects) whereas the majority of employers in the Building industry rely mainly on private and residential sector building work. This has therefore made employers in the building industry to favour a more regional approach in determining collective bargaining in which client’s circumstances, availability of work and other local issues are taken into account when determining conditions of employment and setting minimum wages. They further submitted that over the years the Building and Civil engineering industry employers have on a number of occasions agreed upon demarcation principles in order to clearly define the distinction between the two industries.

15

15 Demarcation between the Building and Civil Engineering industries.

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The Kwa-Zulu Natal Masters Builders & Allied Industries Association mentioned that the rates stipulated in the civil engineering determination are way too high and the merger of the two sectors would be detrimental to the building sector. They warned that if the two sectors are combined, there would be an increase in building costs, which would ultimately lead to reduced demand, resulting in closure of many contractors and severe job losses. The association proposed a separate sectoral determination for the building sector if there was a need to extend protection.

The Master Builders and Allied Trades Association Western Cape (MBAWC) submitted that it represents the interest of the Bargaining Council of Cape of Good Hope and proposed that a sectoral determination could be considered as a measure of regulation for employers and employees not covered by a collective agreement concluded at a bargaining council. However, the bargaining council argued that the building sector should not be combined with civil engineering because the two sectors are different and have different challenges.

Views of the Building Bargaining Councils

The Bloemfontein Bargaining Council acknowledged that employees in the building subsector needed some sort of protection or regulation tool, but maintained that a separate sectoral determination should be established to cover the employers and employees that are currently not covered by a bargaining council. They further submitted that merging these two sectors will create problems because the civil engineering determination already stipulates high minimum rates than those paid in the building sector.

Views of employees

In their submission to the Department, NUM proposed for the merger of the two sectors.

The union alleged that most established companies have both Building and Civil

Engineering divisions, and that employers sometimes transfer workers to the lowest division in order to circumvent the rates of the civil engineering determination. They argued that the separation of these two sectors has serious consequences on the wages and conditions of employment for building industry workers and reinforces inequalities between the sectors amongst workers doing the same levels of work.

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The general feeling of employees throughout the country was that the scope of the civil engineering determination should be extended to include the building sector.

They mentioned that the skills levels that are needed from the two sub-sectors are the same; therefore there should not be a distinction in the conditions of employment and wages.

They also argued that employers draw employees from the same pool and utilise them either on civil engineering or building projects, performing the same work. Employees further alleged that employers would automatically categorise employees as building employees in order to circumvent the civil engineering determination rates.

Views of the Department

The Department would like to point out that the building sector has no standardisation when it comes to the collective bargaining process.

The building industry has some regionally specific bargaining councils with collective agreements about wages and conditions of employment that have been extended to non-parties in terms of section 32

(2) of the Labour Relations Act, but in many regions there is no bargaining council and wages and terms and conditions of employment are determined at site level.

In other regions there are voluntary bargaining forums where unions and some employers negotiate wages and terms and conditions of employment, but these are only binding on the parties. Due to the nature of these structures, parties can withdraw whenever they choose from the agreement. Again there are many employees who are not members of the trade union parties to these voluntary forums and there are many employers, including many of the subcontractors, who are not members of these forums.

Collective bargaining is a function of trade union strength and trade union strength is a function of there being significant number of workers in standard employment, massed together in the same workplace. The difficulties of organising in this sector are well known to the Department. The reasons relate primarily to the short duration of projects and the extensive use of Limited duration contracts (LDCs). The Department is also mindful of the fact that when trade unions are not strong enough to wield any significant

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bargaining power for the employees, employees are left susceptible to less favourable terms and conditions of employment.

As the public hearings did not provide enough information on the levels of vulnerability of employees in the building industry, and given the fact that the two sectors have different categories of employees, the Department recommends that a study of the building sector be commissioned in order to establish the following: i.

The levels of vulnerability within the building sector; ii.

The scope of the determination iii.

The impact that the conditions in the civil engineering sectoral determination will have on the sector without affecting employment levels; iv.

The current collective bargaining regimes in place in the building sector; v.

The level of wages currently paid in the sector; and

The study will further recommend the appropriate form of regulation for the sector considering the existence of different Bargaining Councils in the country.

3.2 Wages and annual increases

The current wage dispensation, including annual increases, was fixed for a period of two years; hence the new wage dispensation must be in place by 1 September 2012. The current wages in the sectoral determination are reflected in Table 5 below.

The table below indicates the minimum wages for workers in the Civil Engineering

Sector since 2008.

Table 5: Current minimum hourly wages in Civil Engineering

Grade % % % %

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1 14:00 12% 15.68 11.2% 17.43 8.8% 18.97 8.07% 20.50

8

9

6

7

4

5

2

3

14.40 12% 16.13

14.80 12% 16.58

15.30 12% 17.14

18.30 12% 20.50

20.80 12% 23.30

23.80 12% 26.66

26.70 12% 29.90

30.15 12% 33.77

9.5% 17.66

9.5% 18.15

9.5% 18.77

9.5% 22.45

9.5% 25.50

9.5% 29.20

9.5% 32.74

9.5% 37.00

8%

8%

8%

8%

8%

8%

8%

8%

19.07

19.60

20.27

24.25

27.54

31.54

35.36

39.96

The civil engineering sector previously had two sets of minimum wages, one for employees in the rural areas and another for employees in the urban areas.

The sector has since narrowed the gap between rural and urban wages in the country and came up with a single minimum wage for the entire sector.The sector also agreed on the grades which were ultimately published as part of the sectoral determination.

In order to maintain stability in the sector, the above grades were provided by the sector to the Department to publish from 2008. The grades range from a general worker as grade

1 up to an artisan as grade 9. The current minimum rate of a general worker (grade 1) is

R18.97 and artisan (grade 9) is R39.96 per hour.

Views of the employers

SAFCEC indicated in its submission to the Department that in addition to the increases negotiated with the unions, members of SAFCEC awarded their employees an additional

9.5% across the board increase in September 2011.SAFCEC urged the Department to note the historic changes in wages and conditions of employment that have been published in recent years. They submitted that major increases were granted in the past, even much higher for the rural areas in order to rectify certain disparities. The organization submitted that companies have endured extra ordinary increases in order to achieve an alignment between rural and urban areas but that future increases should not exceed the rate of inflation.

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The table below gives an indication of the impact of current employment, contract awards, turnover and salaries and wages.

Table 6: The impact of current employment, contract awards, turnover and wages.

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Employment

56 674

71 065

89 806

93 867

86 819

99 636

113 870

156 706

196 596

174 927

105 591

101 854

Turnover

(nominal)

Contract

Awards

Salaries and

Wages

Price

Index

8 669 595 494 5 978 561 149 1 918 581 483 100

11 723 000 614 11 354 639 627 2 594 300 036 108.9

17 138 501 083 17 853 493 240 3 792 750 290 126

17 701 840 728 16 115 728 749 3 917 417 353 129.9

17 180 281 073 18 472 212 159 3 801 996 201 133.8

20 999 901 277 22 938 418 409 4 647 278 153 143

25 783 535 490 31 732 192 509 5 705 896 404 153.1

38 472 602 944 40 972 794 543 8 513 987 032 166.1

58 063 639 993 67 874 089 264 12 849 483 530 199.7

51 147 261 584 34 379 086 476 11 318 888 989 197.7

32 744 103 366 33 364 001 767 7 246 270 075 203.3

36 888 136 573 55 704 877 126 8 163 344 624 216.1

SAFCEC argued that the implication of total cost of employment to company, as per collective agreement or determination, should be used as the basis to evaluate the impact that these processes have on the overall employment cost.

SAFCEC also believes that inflation linked principles must be applied to determine what the adjustment to total cost of employment should be. The organization further submitted that any consideration to total cost of employment increases must be considered in line with the specific and current global economic realities and with due cognizance of the employment and recessionary impacts thereof.

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The overall input from employers throughout the country was that wage increases should be pegged between 6% and 8%. Employers also proposed that consideration should be given to the fact that the non-wage demands are also further increasing the total employment cost, thus affecting the viability of the civil engineering industry. However, in most of the areas visited employers cautioned against a double-digit increment, arguing that it would have an adverse impact on the sector, resulting in major layoffs and closure of many businesses.

Views of the employees

NUM’s submission to Department was that the minimum wages should be increased by

15% across the board. BCAWU also submitted that a 15% increase across the board would be the ideal increment.

Some employees in Cape Town, Bloemfontein and Durban proposed that increases be pegged between 8% and 10%. They further indicated that increases for grade one should be pegged higher than the other grades due to fact that they are the most vulnerable.

In Durban, NUM proposed that the job grading system should be investigated and reviewed to cater for recognition of prior learning and employees with certain skills level and also to ensure that the gap between these grades is closed. They submitted that the minimum wages should be increased by 30%-40% for grade 1 and 20% for other grades.

Employees argued that the work they do is labour-intensive and does not match the rate of pay they receive in reality and most of them move to other provinces with their employers for projects, which means more costs. They also cited the rising cost of food, transport, school fees and the cost of living in general as the reason for their proposal.

They also mentioned that increases on electricity also add more financial burden on their budgets, which affect affordability.


The Department is mindful of the fact that the South African construction sector has been facing a recession due to completion of construction projects, several which were FIFA soccer world cup related. The challenge, however, remains the fact that employees are

Page 27 of 40



faced with an increasing cost of living, which can only be addressed through wage increases. We are also optimistic, however, that the South African Government’s infrastructure investment plans should provide significant headroom for the industry, particularly by the key parastatals such as Eskom and Transnet.Therefore setting the minimum wages at a reasonable level might be sensible in order to ensure that companies do not shutdown, downsize or retrench employees.

Given the above mentioned challenges that employers and employees are facing, in order to ease the financial burden from the employees and to ensure that employers still continue with their businesses successfully, the Department proposes that:



For the period 1 September 2012 to 31 August 2013, the wage for Task Grade 1 will be R20.50 per hour, which amounts to an increase of 8.07% as per the current sectoral determination.



For the period 1 September 2012 to 31 August 2013, the minimum hourly wage rate applicable for Task Grade 2 to 9, be increased by 8% as per table 8 below,

The table below represents the proposal by the Department on the new minimum wages.

Table 7: Minimum hourly rates proposed by the Department

Grade Current Rates

Task Grade 1/Patterson A1


Task Grade3/ Patterson A3

Task Grade4/Patterson B1

Task Grade 5/Patterson B2

Task Grade6/ Patterson B3



Task Grade 9/ Patterson C1

R18.97

R19.07

R19.60

R20.27

R24.25

R27.54

R31.54

R35.36

R39.96

01/09/2012 - 31/08/2013

R20.50

R20.60

R21.17

R21.89

R26.19

R29.74

R34.06

R38.19

R43.16

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3.3 Duration of the sectoral determination


Employers in general throughout the country indicated that the new minimum wages should be determined for two or three years period in order to ensure peace and stability in the industry and also to assist employers and project owners in their planning for costs and expenditure, particularly in the view of the National Infrastructure development programme.


The unions (NUM & BCAWU) present at the hearings indicated that minimum wages should be determined for one year in order for them to negotiate with employers on economic conditions of that particular year. They also indicated that if the CPI rate was above 10%, they could agree that the wages be determined for two to three years.

Views of Department

The Department notes that sectoral determinations are normally reviewed after three years but because of the pending application for the registration of a Bargaining council, the Department recommends that the sectoral determination be reviewed for a period of one year.

3.4 Minimum wage increases for years 2 and 3


In its submission to the department, SAFCEC cautioned that accelerated and additional improvements in employment conditions will adversely affect the civil engineering industry and specifically smaller and upcoming contractor sustainability, even more so, under current market conditions. SAFCEC further indicated its concern about the current economic outlook and the lack of consistent work for the SMMEs.

Employers throughout the country indicated that even though increases would improve the income of employees, high increases would also place a significantly increased liability on employers and the potential viability of their businesses. They therefore differed on their proposals with some proposing an increase of CPI only and others

Page 29 of 40



proposing that an increase of CPI or 8% if the CPI is less than 6% for years 2 & 3 of the review.


BAWUSA proposed that wages be increased by CPI plus 3% for year 2 and some employees proposed a 10% increase for years 2 & 3. They argued that the approach of using CPI and adding a small percentage rate on the inflation does not observe the criteria set out in the BCEA which compels the sectoral determination to address poverty and challenges posed by cost of living. They indicated that the wage increase should improve their living conditions and address the challenges posed by the cost of living.


The Department proposes that wages be increased for a period of one year pending the application for a civil engineering bargaining council.

3.5

Other basic conditions of employment discussed in the public hearings.

During the public hearings employees submitted other inputs on a number of issues. The issues include the following: a) Inclement weather; b) Family responsibility leave; c) Severance pay; d) Annual leave; e) Annual bonus; f) Maternity leave; and g) Provident fund.

Inclement weather

In terms of the sectoral determination, whenever the ordinary hours of work are reduced on account of inclement weather for the employee who has reported for work, the employee will be paid for eight hours increasing to nine hours effective from 1

September 2012.

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NUM and BCAWU submitted that there should be no loss of pay for employees due to inclement weather.


The Department supports the provision as per the current sectoral determination that whenever the ordinary hours of work are reduced on account of inclement weather for the employee who has reported for work, the employee will be paid for nine hours provided the employee has at the request of the employer, remained at the workplace during this period.

Family Responsibility Leave

In terms of the sectoral determination, employees who have been in employment for longer than four months with the same employer and who work at least four days a week are entitled to four days paid family responsibility leave per annum.


The unions proposed seven days paid family responsibility leave during each annual leave cycle. They argued that the employees have bigger families and have homes that are distant from their workplaces, therefore four days per year is insufficient.


The Department recommends that the four days family responsibility leave currently provided for in the sectoral determination should remain.

Severance package

In terms of the sectoral determination, employees are entitled to one week’s remuneration for every completed year of continuous service with that employer in the event of termination of employment based on operational requirements.


Page 31 of 40



Employees proposed two week’s severance pay must be given to employees on termination of employment based on operational requirements. They argued that the one week of severance pay is not sufficient because the employee is responsible for the termination of employment and that the employer is responsible for ensuring that all the employees that are to be dismissed are treated fairly.


The Department supports the provision to increase severance pay entitlement to two weeks’ salary for employees who have more than ten years of continuous service with the same employer and to retain the one week’s salary for employees with ten years or less continuous service as per the current sectoral determination.

Annual leave

In terms of the sectoral determination, an employer shall grant to an employee who has completed less than five (5) continuous years’ service but who has been in employment for longer than four (4) months in the aggregate, 15 working days leave. An employer shall grant an employee who has completed five (5) continuous years’ of service with that employer 18 working days leave from 1 September 2012.


Employees proposed 30 days of annual leave or four weeks per annum. They argued that the current provision is insufficient since they do not reside with their families, so they need extra days to travel to their respective homes. NUM and BCAWU on the other hand proposed 18 days annual leave.


The Department proposes that the parties re-negotiate the provision of annual leave upon the registration of the Civil engineering bargaining council, therefore the status quo on annual leave which provides that an employee who has completed less than five continuous years’ service but who has been in employment for longer than four months in the aggregate will receive 15 working days leave and an employee who has completed

Page 32 of 40



five continuous years’ of service with that employer will receive 18 working days leave should remain.

Maternity leave

In terms of the sectoral determination, an employee is entitled to at least four consecutive months’ maternity leave. The sectoral determination also provides that an employee must receive 20% of her normal weekly wage, provided she has been continuously in service for two years before the expected date of birth and must remain in service for 1 year after birth.


Employees proposed six months’ maternity leave with full pay. They argued that the industry has started to employ more women, but maternity provisions in the sectoral determination do not make conditions conducive for women. NUM & BCAWU on the other hand proposed four month’s maternity leave with full pay.


The Department proposes that the provision relating to maternity leave as per the current determination remain as is and be re-negotiated upon the registration of the Civil engineering bargaining council.

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CHAPTER FOUR

EVALUATION IN TERMS OF ECC CRITERIA

4.1 Ability of employers to conduct their business successfully and operation of small, medium or micro enterprises, and new enterprises.

South Africa’s construction companies had a profitable build up to the 2012 soccer world cup as the large number of large construction and infrastructure projects filled their order books. The new or upgraded stadia and airports provided the major construction companies with billion rand orders and allowed them to be successful. After 2010, the industry experienced delays in contract awards and a general slowdown in the sectors.

Government’s massive infrastructure development drive for the year 2012 and beyond is intended to underpin economic growth and job creation, to support enterprise development, and to enhance the transformation of the construction industry.

The construction industry is one of the largest employers in the country, which would explain why the figure of R846billion is being used to allay fears of workflow and job creation. But the number is shrouded in mystery, and sceptics are becoming increasingly vocal about the legitimacy of the figure 16 .

In Government’s Medium-Term Economic Framework (MTEF), last year’s R787billion budget was revised to the R846billion to be spent until 2013. This figure is made up of the infrastructure budgets of national, provincial and local government departments, as well as public-private partnerships (PPPs). According to the National Treasury, nonfinancial public enterprises, such as Eskom, Transnet and SANRAL, make up the largest share of the spending, contributing 53.6% (R453.7bn) of the total. Spending by municipalities is the second largest contributor, making up 17.5%

17

.

Given the government’s commitment to infrastructure projects and contracts currently underway such as Medupi coal-fired power plant, Kusile coal-fired power plant and the

Gauteng Freeway improvement programme, the industry is expected to recover and that

16 http://www.aveng.co.za/financials/annual_reports .


Page 34 of 40



has been revealed by the FNB/BER construction results for quarter 2 of 2012. The

FNB/BER construction confidence index rose for the 3 rd

consecutive quarter, from 34 index points to 38 during 2Q2012. This also marks the highest level of the index since the end of 2009. The results suggest that the recovery is gaining momentum with construction activity in particular picking up noticeably.

The results found that some of the biggest new projects came from public corporations including Eskom, Trans-Caledon Tunnel Authority, SANRAL and Transnet as they managed to secure financing and consequently award tenders for projects announced some time ago. Additional work was also commissioned by the government, more specifically the provinces and for smaller projects which will cater for the Small Medium and Micro Enterprise (SMME) employers.

The Commission is optimistic that its recommendation will not impede the ability of employers and SMMEs to conduct their businesses successfully. Furthermore the BCEA allows for employers to apply for a ministerial determination in the event that they may face economic challenges which will result into a negative effect in conducting their businesses successfully and therefore flexibility does exist to deal with these situations.

4.2 The impact of the proposed minimum wage on the cost of living and poverty alleviation

Rising food and commodity prices pose a threat to poor households, adding to social and economic strains in emerging and developing economies. Stats SA reported that the increase in SA’s consumer price index (CPI), which the Reserve Bank uses to target inflation, was 5.7% year-on-year in April 2012 from 6.1% y/y in March 2012. CPI increased 0.1% month on month (m/m) in May from 0. 4% in April.

The annual average consumer rate was 5.0% in 2011 from 4.3% in 2010. The Reserve

Bank expected inflation to average 6.0% in 2012‚ and to moderate to a 5.5% average in

2013. The food and non-alcoholic beverages index decreased by 0.2% between April and

May, while the annual rate decreased to 6.6% in May from 8.7% in April.

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Between April and May, the annual inflation rate for bread and cereals increased by 0.2% while milk, eggs and cheese increased 0.7% y. In the same period, inflation for vegetables decreased by 0.7%, while meat fell by 1.0%. The transport index on the other hand rose by 0.4% between the two months, mainly due to a 28c/litre increase in the price of petrol.

This therefore poses a challenge in trying to strike a balance when setting minimum wage in response to the challenges posed by the cost of living. The increase is intended to improve the lives of workers. Considering the current rise in food prices, electricity, and transport, the proposed increases pegged at eight per cent will attempt to address concerns faced by those earning low wages which reduces their standards of living.

The proposed minimum wage might not be able to deal with the challenges raised above but should be able to ensure that workers can afford to purchase basic foodstuff for their families as the bulk of their wage is spent on food.

4.3 Wage differentials and inequality

The sectoral determination introduced a grading system, which was long overdue in the sector. The grading system, although it creates a wage gap between the employees, is aimed at recognising the skills and the contribution of each employee. The current

Commission recommendation promotes just that, although different categories of employees have different responsibilities and skills, and this gap might seem excessive.

4.4 The likely impact of the proposed wages on current employment and the creation of employment

The Quarterly Labour Force Survey released by Stats SA indicated that eemployment in the construction industry reported an annual decrease of 45 000 employees (-4.4%) in

Q1:2012 compared with Q1:2011, suggesting that the government’s infrastructure spending programme has not yet had an effect on the labour market.

The FNB/BER results on the other hand reveal that employment levels in the construction sector have increased modestly in quarter two of 2012. This might indicate that the massive investment in the construction of roads, ports, railways and other

Page 36 of 40



infrastructure is starting to set in motion the creation of many construction sector jobs in various parts of the country. In his address to Parliament on infrastructure development cluster, former Transport Minister Sibusiso Ndebele, indicated that Government`s construction programme would sustain between 50 000 and 100 000 jobs in the construction sector in the next three years.

The increases as recommended are not likely to have a significant impact on employment levels, especially on small businesses and the proposed infrastructure programme is likely to assist in job creation in the sector. However, it should be noted with caution that the long lead times in awarding tenders and infrastructural development cost increases, including increased cost of employment, may have a negative impact on small businesses.

The Commission is therefore of the view that the proposed increases will not only assist in job creation and reduce staff turnover in the industry, but they will also have a major impact on staff retention.

Page 37 of 40



CHAPTER FIVE

RECOMMENDATIONS OF THE ECC

Minimum wages

The ECC recommends that the new minimum wages should be increased by 8.07% for task grade 1 as per the current sectoral determination and by 8.0% for task grade 2-9 as per the table below. The ECC further recommends that the new minimum wages should remain in place for a period of one year, commencing on 1 September 2012.

Table 8: Minimum hourly rates proposed by the ECC

Grade



Task Grade3/ Patterson A3

Task Grade4/Patterson B1


Task Grade6/ Patterson B3



Task Grade 9/ Patterson C1

Current Rates

R18.97

R19.07

R19.60

R20.27

R24.25

R27.54

R31.54

R35.36

R39.96

01/09/2012 - 31/08/2013

R20.50

R20.60

R21.17

R21.89

R26.19

R29.74

R34.06

R38.19

R43.16

Extension of the scope of the sectoral determination to include the building sector

The ECC recommends that given the information at hand, it is not appropriate for the scope of application of the civil engineering sectoral determination to be extended to include the building sector. The ECC recommends that a separate investigation should be conducted to establish the levels of vulnerability within the building sector; the impact that the conditions in the civil engineering sectoral determination will have on the sector without affecting

Page 38 of 40



employment levels, the current collective bargaining regimes in place in the building sector and the level of wages currently paid in the sector.

Duration of the sectoral determination and minimum wage increases

The ECC recommends that the sectoral determination be reviewed for a period of one year pending application for the registration of a Bargaining council.

Other basic conditions of employment issues: family responsibility leave; severance pay; annual leave; maternity leave, hours of work and inclement weather

The ECC is of the view that the conditions in the current sectoral determination on these specified basic conditions are adequate and there is no need to change the determination.

Page 39 of 40



Page 40 of 40

Report of the Employment Conditions Commission on the

Report of the Employment

Conditions Commission on the investigation into Civil

Engineering Sector, South Africa.

Table of Contents

Table of Figures

CHAPTER ONE

1.1 BACKGROUND TO THIS INVESTIGATION

1.2 METHODOLOGY

CHAPTER TWO

2.1 INTRODUCTION

2.2 SECTOR PROFILE: CIVIL ENGINEERING

2.3 SECTOR PROFILE: BUILDING INDUSTRY

CHAPTER THREE

DISCUSSION AND PROPOSALS

CHAPTER FOUR

EVALUATION IN TERMS OF ECC CRITERIA

CHAPTER FIVE

RECOMMENDATIONS OF THE ECC

Related documents

Products

Support

Report of the Employment Conditions Commission on the

Report of the Employment

Conditions Commission on the investigation into Civil

Engineering Sector, South Africa.

Table of Contents

Table of Figures

CHAPTER ONE

1.1 BACKGROUND TO THIS INVESTIGATION

1.2 METHODOLOGY

CHAPTER TWO

2.1 INTRODUCTION

2.2 SECTOR PROFILE: CIVIL ENGINEERING

2.3 SECTOR PROFILE: BUILDING INDUSTRY

CHAPTER THREE

DISCUSSION AND PROPOSALS

CHAPTER FOUR

EVALUATION IN TERMS OF ECC CRITERIA

CHAPTER FIVE

RECOMMENDATIONS OF THE ECC

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