Strike action at Hulamin over employee benefits

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FIFI PETERS: Let’s get to some labour matters now, and the latest goings-on over at Hulamin, the aluminium supplier. They also export quite a bit of it. They’re listed on the JSE.

Some of their workers have been on strike since Monday over a dispute related to employee benefits. Yesterday, just shortly after the JSE closed, Hulamin issued a statement on the JSE’s news service informing shareholders that a strike was currently under way.

For more on this we have Geoff Watson, interim CEO of Hulamin. Geoff, thanks so much for your time, sir. Just give us an update on what is happening on the ground and what has been going on over at Hulamin since Monday.

GEOFF WATSON: Thanks Fifi, and thanks very much for the opportunity to talk to you. We were issued with a notification of strike last Friday, and that gave the Numsa the opportunity to take the workers out within 48 hours. They did that on Monday at eight o’clock in the morning. Since then there has been picketing at the entry to the plant. We have shut down the plant and sent everybody, apart from people who are monitoring procedures from a safety perspective, on leave. That’s where we are now on day four.

FIFI PETERS: So you have had your plant shut down essentially since Monday and operations are at a standstill?

GEOFF WATSON: Correct. In all of the businesses, in the containers business, extrusion business, and the roll products business.

FIFI PETERS: And what has been the cost of that, sir?

GEOFF WATSON: Look, it’s hard to estimate the cost, but it’s significant.

If you look at a business such as ours, just under 50% of our costs are fixed costs, so that if you shut the plant down you still incur those costs.

So four days down is a very significant period to not be producing.

FIFI PETERS: How many workers exactly are on strike?

GEOFF WATSON: In the area of about 1 000. But Numsa members are mainly in the operational area running the rolling mills, extrusion press containers, presses, that sort of equipment.

FIFI PETERS: Just in terms of the grievances, can you explain exactly where it is that you as a company and workers being represented by Numsa are not finding alignment right now?

GEOFF WATSON: Sure. Numsa has logged a dispute with the company over two issues. One is the pension. We have two funds – a pension and a provident fund – that have some history associated with them, and Numsa have a claim that the two funds should be equalised.

The second claim is around the issue of the medical aid, which has been capped by Hulamin for I think about eight years. As a result with health costs going up that contribution from Hulamin has lowered as a percentage of the total cost. However, it is important to remember that in the last few years there has been a topping of that up, also with just annual payments in recognition of that hardship.

So there are two substantive issues that have a significant impact on employment costs.

It’s very difficult to talk about those issues outside of the totality of agreement that you go to every year to put into place and understand all of your employment costs. In addition to those two issues, you have things such as the wage increase, what that will be, things such as short-term incentive bonuses, how that will work, and what sort of percentage is paid, how and when, and the procedures for working that out, the targets.

So those sorts of things all need to be wrapped up into a total agreement to understand all of the cost impacts of what you’re talking about. It’s very difficult to extract just two without looking at the totality.

FIFI PETERS: I’m just reading a statement from Numsa now in response to what you’re saying. They say that they do note that you want to combine these issues with the wage negotiations, but they are rejecting this because in the past this has been unsuccessful.

So perhaps you can give us a bit of colour as to what has happened in the past, and whether you understand their reservations [as] to repeating the same thing this time around.

GEOFF WATSON: Oh, certainly Fifi, I understand that those two issues have been tabled, I think, since about 2014. But again they’ve been within the totality of an agreement. So there has been an agreement on the outcome for both those two issues and all the other issues that go into the agreement every year. And Numsa has agreed to that and signed, as they did a year ago when those two issues were raised, plus all of the other issues. And so for them, again, you’ve got to look at the total outcome and what that outcome is for the employer – and is that fair? But it’s very difficult to just take two out.

FIFI PETERS: So, Geoff, what now? I imagine that it doesn’t give you comfort at night knowing that your operations are at a standstill. We’re looking at day four. But what now, and what do you think will be needed to be tabled to get a resolution to this?

GEOFF WATSON: Well, we remain prepared to sit around the table with Numsa on this issue within the totality of an agreement since it started or was first raised in May. We reiterated that over the last week and since the strike has started.

However, what I will say at the moment is that there are discussions going on between the Hulamin human relations executive and some senior officials within Numsa, and we’re hoping that we’ll be able to get a time and date to be able to sit around the table and start to talk about a resolution to this issue.

FIFI PETERS: In the meantime just how material could the four days or a protracted standoff between yourself and your workers be for your earnings? What should your shareholders know here?

GEOFF WATSON: Well, let’s take what’s happened so far – four days.

Like most prudent businesses in South Africa you need to be able to plan for disruptions to production. That could either be reliability of equipment or other issues, such as [with] power or port – or some of the other issues that can occur in South Africa. So you [need] safety stock in place to deal with that, and we have.

And so, while there are some customers that are being affected already, most are not. We have enough safety stock in place to cover us for at least those four days.

However, ultimately you run into stockouts at those plants and those plants either bring in more imports or shut down.

The length of that period would vary between the different customers.

The problem we’ve really got is in terms of timing. We’re trying to put together negotiations for long-term contracts for certain of our products because we want to match those to capital or money that needs to be spent to expand the plant and expand the capability of the plant.

It’s very hard to raise that capital unless you, number one, have bankable contracts in terms of customers and, two, are able to [predict] and budget what your costs of production are going to be.

And so in terms of trying to put those contracts together, and in the environment of our reliability being compromised during this period, those contract discussions are becoming very, very difficult.

And without those it’s going to be a very difficult conversation with shareholders to get the capital to sustain the business.

FIFI PETERS: Sure. Geoff, we hope that you’ll keep us updated on developments. We’ll certainly be monitoring this closely.

But thanks so much for giving us the time to explain the situation in your view as Hulamin. That’s Geoff Watson, the company’s interim CEO.