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Minimum wage disputes: Is it worth the fight in Newcastle?

Newcastle is a city trapped in its legacy. Home to over half a million residents, Newcastle has historically been an industrial giant of South Africa. But that is changing. The city is facing an identity crisis in its rapidly shrinking clothing and textile industry. Earlier in March, five Chinese and Taiwanese factory owners did the previously unthinkable – they won the right to pay their workers less than the national minimum wage. What kind of precedent this will set for the manufacturing industry as a whole remains to be seen.  

The story of Newcastle is not the story of a few individuals or one city – it is the story of a country.


Alice Li

There is nothing particularly impressive about Robert Han's office. A square room with stark white walls, the only indicators that this is the office of a factory owner is the glass plate on his cabinet that reads "Ithala Properties & Goldfinch Garments for six years" and the metal rack of children's clothing clustered close to the desk.

Just beyond his office, the warehouse that accommodates the 250 workers he employs is empty, save for one employee hemming away at an article of clothing in the middle of a cluster of abandoned sewing machines.

The rest of the workers have not shown up due to the strike by the South African Clothing and Textile Workers' Union (Sactwu), which is picketing the factory.

"I don't know what's going on today," Han says, squinting out through the bars on his office window. They were installed after a previous protest left rocks scattered throughout his office. "[Sactwu members] were supposed to be finished with the protest yesterday and back at work today."

He seems unperturbed by the illegal strike going on just outside his gates. If anything, he seems resigned. When showing me the grounds of the factory, Han stands next to the modest vegetable garden he tends himself, and stares at the workers in the street.

His factory, a cut, make and trim operation that specialises in clothing for different South African brands, is just one of 14 Chinese textile and clothing factories on Yellow Street in Madadeni.

About 20 minutes outside Newcastle's central business district, the township is a sprawl of tin shacks and warehouses.

Taiwanese and Chinese entrepreneurs have long been one of the largest groups of investors in Newcastle. Since their arrival en masse in the 1980s, this community has estimated it has invested more than R1-billion in the town.

Contentious issue
The rapport between the factory owners and the locals, however, is not as cut and dried as the operations they run. There have long been reports of human rights abuse cases taking place in various factories, as well as a persistent belief that the Chinese and Taiwanese are in Newcastle just to take South African money. The most contentious issue to date revolves around the national minimum wage debate.

In the early 2000s, the National Textile Bargaining Council, previously regulated by the department of labour, was extended to include nongovernmental bodies in the council and to cover industries beyond the company giants. Theoretically the council is a joint venture between unions and employers. In reality, the council is dominated by Sactwu and three major manufacturing firms, in which Sactwu is rumoured to hold shares.

The council criticised the factory owners for not meeting the minimum wage and threatened to shut down any factories that did not comply with the policy.

A number of large factories began to close, starting in 2003. Consequently, unemployment rates rose. In 2001, these manufacturing companies employed 13 000 workers. Today, that number has dropped to 4 000.

Five factory owners decided to pursue a court case against the bargaining council in 2011. The case lasted two years – two years in which the applicants contested the function of bargaining councils, the purpose of unions and the philosophy of South Africa's wage structure. What began as a localised issue quickly gathered momentum and became a national sensation.

In March this year, the Pietermaritzburg High Court ruled in favour of the five applicants. The mandate is nearly unprecedented in South Africa's democratic history.

"Existing government legislation makes it very difficult for employers – everything is swayed towards the employee," says Ferdie Alberts, the Newcastle municipality's director of economic development. "Employers rarely have any rights."

Sactwu is looking to appeal the mandate. The union staged a protest march and an illegal strike early last week.

The events had 120 to 200 participants, the majority of whom were Sactwu members. They handed over a memorandum demanding a wage increase and public holiday and sick leave wages to a representative of the noncompliant factories.

"The factory owners don't respect the rights of all these workers," asserts Patrick Vundla, the branch organiser of Sactwu in Newcastle. "They must respect the laws of this country."

Delani Thwala, the chairperson of Sactwu's Newcastle branch, puts it more bluntly: "The Chinese and Taiwanese owners are bringing workers back to apartheid conditions."

Unlike Han's factory, and most other clothing and textile factories in Newcastle, Alex Liu's operation is different. It functions as a co-op and its  workers are not unionised.

Liu's 120 employees are all present and bowed over their respective working space.

We Are Never Ever Getting Back Together by American country singer Taylor Swift blares from the speakers. One worker has his own headphones plugged in, blocking out her high notes. Managers, both Taiwanese and South African, walk up and down the rows, occasionally pausing next to a worker to assist in the process.

Cindy, a petite South African woman and one of the co-op managers, briskly walks the length of the factory floor while explaining how things operate there.

A co-op, explains Cindy, who does not want to give her last name, is the direct negotiation between factory owner and managers, who represent the interests of the workers and are often workers themselves who have been trained to deal with wage negotiations. This method removes the middleman and returns the power of negotiation into the hands of factory workers. As a result, the 120 workers are not a part of a union.

Geographical location
"There is no need," Cindy says, shrugging, before pointing out where the cloth is cut in the assembly line.

"The government keeps on talking about job creation, but the core of the problem is that there aren't enough employers in this country to create jobs," says Liu.

Sitting at his desk and surrounded by framed Chinese maxims, Liu expounds on what he sees as the current woes of South Africa's clothing industry – the unions and the current wage structure.

According to Liu, who also chairs  the Newcastle Chinese Chamber of Commerce, the practice of applying a national minimum wage to every factory in the clothing industry without considering factory size and geographical location is problematic.

Policies passed by the council cater to the employees without factoring in the limitations of smaller factory owners – factory owners such as Liu and Han.

The clothing industry is primarily made up of small factories.

In Newcastle alone, there remain 48 small and medium Taiwanese and Chinese companies. This is a drop from 2010, when there were 115 companies.

Sactwu is the big contributor to this decline, asserts Liu. "They keep talking about higher wages, but where do they think all this money is going to come from?" Liu says.

"Sactwu force their members to pay a weekly fee, yet they don't give a day's wage."

This sentiment is shared by many factory owners. They believe this belies a fundamental problem with the way in which Sactwu, along with other unions, is constructed.

"The problem with Sactwu is that they don't talk to the employees," Cindy says. "They just come to a decision and go to all the factory bosses saying 'we want this', but there is no discussion with the workers at all.

"There has to be more conversation," she maintains. "Some factories can afford to give higher wages, but others cannot. We have to have a method of proving that."

Despite the court mandate in favour of the noncompliant companies in Newcastle, it is unclear who the real winner is. The five applicants remain grim about the future of South Africa's clothing industry, and  believe it is dying.

A timeline of the court case

Spanning two years, the case concluded in the Pietermaritzburg High Court in March.

July to August 2010
Conflict was sparked during an incident between the sheriff and two medium-sized textile factories. The sheriff issued an execution writ on behalf of the bargaining council to noncompliant factory owners. However, the workers in those factories revolted when the sheriff attempted to remove the machinery and threatened to kill him if he took their jobs from them.

August 16, 2010
Alex Liu, acting as chairperson of the Newcastle Chinese Chamber of Commerce, met with the sheriff, the bargaining council and the South African Clothing and Textile Workers' Union (Sactwu) to address the incident. The council requested co-operation from the members of the chamber, and the chamber said it was willing to participate in the wage negotiation. In return, the chamber wanted the council to reconsider all the execution writs and find a better solution. The chamber also wanted to challenge the wage figures provided by council inspectors, citing them as incorrect and stating that inspectors frequently did not check the payroll.

September 2010
The director general of the department of labour invited both the bargaining council and noncompliant factories to a ­meeting in Pretoria to discuss a potential solution. The director wanted them to find an amicable solution and provided the chamber with one month to come up with a proposal to rectify the situation.

September 16 2010
The chamber sent in a proposal that was supported by the Apparel Manufacturers of South Africa (Amsa). However, the proposal received a strong objection from Sactwu. Sactwu allegedly promised Amsa more subsidies in return for their loyalty. The department of trade and industry budgeted R1-billion to clothing factories but the subsidy was primarily shared by the compliant factories.

October 2010
Liu flew to Cape Town for the annual wage negotiation and was refused entry. He sat in the waiting room and when Amsa members came out of the meeting they mentioned that the minister

of economic development was going to intervene. The meeting became a dead end for the chamber.

December 2010
Sactwu and Amsa issued a policy saying that noncompliant ­companies had to comply with 70% of the minimum wage immediately. They had one year to become 100% compliant.

March 2011
Five Chinese and Taiwanese companies, under advisement from the chamber, submitted an application to the Pietermaritzburg High Court to take the minister and the bargaining council to court.

The two parties submitted affidavits, documents and logged replies for the case.

July to August 2012
The first hearing was heard and the judge decreed that the final judgment would be passed in a year's time.

March 2013
The judgment was passed and the five applicants in the case won the right for noncompliant companies in Newcastle to be exempted from the bargaining council's policies regarding

minimum wage. Sactwu is considering appealing the court decision.

*Surname withheld for privacy reasons

Alice Li wrote for the Mail & Guardian under a grant from the Wits China-Africa Reporting Project, which is hosted within the Journalism Department of the University of Witwatersrand.

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