South Africa’s metal and engineering industries account for about a third of all manufacturing in South Africa in terms of turnover and employment. They cover a wide variety of sub-sectors, including basic metals (such as iron, steel, aluminium and copper), metal products, automotive components, heavy and light engineering, machinery and equipment, electrical and electronic engineering and, oddly enough, plastics conversion.
The majority of the more than 8 000 companies in the sector are small — less than 20 employees.
Before World War II the metal industries acted largely as a support for the South African mining industry. But during and after the war the sector grew enormously. By last year it boasted an annual turnover of nearly R170-billion.
While the sector makes a significant contribution to South Africa’s gross domestic product, its workforce has stagnated for most of the past decade. In 1981 the metal and engineering industries employed more than 350 000 hourly paid shopfloor workers and a further 70 000 managerial, sales and support staff. Today this figure is about 270 000 shopfloor workers and another 50 000 managerial and support staff — a drop of 100 000.
Some trade unionists might argue that the drop in employment has been largely due to trade liberalisation and foreign competition since 1994. In fact, most of the job losses occurred before 1994, during the mid-1980s to early 1990s, when major restructuring took place and capital intensivity began replacing labour. In recent years there has been slight improvement in employment numbers.
This is borne out by a major industry study commissioned by the Department of Trade and Industry and Nedlac, and conducted by a consortium of Bentley West and the Congress of South African Trade Unions’s research arm, Naledi.
The final report aims to draw conclusions and recommendations about the future growth prospects of the industry sectors, including the possibilities for job creation.
An interesting finding was that the way the industry sources its workers has changed considerably over the years. It shows that employment grew by 1,9% compound annual growth rate (CAGR) between 1999 and last year. Nevertheless, over the same period permanent employment declined annually by 5,6%.
What this underscores is the growth of what the study calls “atypical employment” — casual, temporary and labour contracted through labour brokers. In fact, atypical employment increased from 3% to 10% of total, and was the primary driver of employment growth between 1999 and last year.
Among the major industry sectors, employment in metal products and fabrication experienced a CAGR of 8% between 1999 and 2000. At the same time the automotive components and plastic conversion sectors each experienced a 4% CAGR.
In contrast, the other major experienced negative growth. The CAGR in electrical engineering was -1%, in basic metals -3%, in machinery and equipment -5% and in electronic engineering -8%.
Much of this job loss has been driven by significant falls in permanent employment in each sector. This is especially true of larger companies.
The main drivers of growing atypical employment have been metal products and fabrication, and the machinery and equipment sector. The former is marked by a fairly high proportion of project work, resulting in demand peaks and troughs. This, in turn, has created a need for greater flexibility in the management of workforce numbers.
Both sectors are large employers that saw atypical employment increase to more than 10% of total over the survey period. The metal products and fabrication sector has the largest percentage of atypical workers. Nevertheless, permanent jobs also grew. In fact, they accounted for 18% of jobs created in the sector between 1999 and 2002.
The rise in atypical employment is the result of a range of pressures:
The outsourcing of non-core activities, such as cleaning, security and canteen services, to reduce costs and administrative burdens;
The necessity for managing labour costs in project-driven sectors or companies subject to large fluctuations in demand;
Exchange rate volatility, which has made it increasingly difficult for employers to forecast the sustainability of demand from export markets. In response, they have steered away from permanently employing people to minimise risk.
The study concludes that, while the potential for job creation varies from sector to sector, the potential for creating large numbers of metal and engineering jobs is limited. This is true of manufacturing industries throughout the industrialised world.
So, while permanent employment continues to predominate, atypical forms of employment have driven job gains in most of the metal and engineering sectors. They will continue to do so to maintain necessary flexibility in the workforce.
Michael McDonald is the Steel and Engineering Industries Federation of South Africa’s head of economic and commercial services