NO UNIFORM LABOUR COSTS IN SOUTH AFRICA
By Mark Mfikoe, National Director, ECA(SA)
In my previous article on the costs of labour, I explored how the real cost of labour is determined when pricing a job. In this article, I show you how being in a different part of South Africa makes the costs of doing the same job different – and it is law!
The costs of labour in South Africa – in the electrical industry – is not the same everywhere you go even though the work to be done is exactly the same. There is a gazetted phenomenon called ‘wage areas’ in the Main Collective Agreement of the electrical industry, which was published on 24 March 2017. A wage area defines the earnings or earnings potential of an employee in terms of the area in which he is employed.
For purposes of illustration, I will use the Witbank (area A), Rustenburg (Area B), Lydenburg (Area C) and Welkom (area D). An electrical contracting operative level 2 (Elconop 2), will be used as an example. An Elconop 2 is an employee who has attended and passed the prescribed formal training course at an accredited training centre, usually the ECA Training Centre, and who has undergone on-the-job training. He is to perform any of the following tasks only on new installations or in structures or buildings from which the power has been disconnected from the main supply and are carried out under the supervision of a master installation electrician, an installation electrician or an electrician or Elconop 3:
(a) Placing and drawing of conductors into wire-ways;
(b) Installing and connecting of lighting, cooker, water heater and low voltage systems;
(c) Connection of distribution boards;
(d) Jointing of cables using epoxy or other approved means, as well as the connection of such cables on installations where the supply has been switched off;
(e) Simple arc gas welding;
(f) Performing work of lower level schedules categories of labour; and
(g) Assisting all higher categories of scheduled labour up to a master installation electrician.
This definition and work description of an Elconop 2 is the same everywhere in South Africa. The Main Collective agreement, though, regulates the payment of this category differently in the different magisterial areas in South Africa.
The base hourly rate for an Elconop 2 in the areas used in this article is as follows:
|Wage Area||Hourly rate|
Please note that for each of these areas you still need to add other components to arrive at the total cost of labour. For now, we only use the hourly rate to demonstrate that these are significantly different.
As electrical contractors, we are not bound by magisterial boundaries in terms of where we can do business. If you are a Johannesburg-based electrical contractor and you are competing for work in Witbank, you can use your Johannesburg costs in Witbank because they are the same. They are both in wage area A. However, if you are tendering for a job in Welkom, you need to be sensitive to the fact that your local competition is potentially using much lower rates. This is ordinarily not too much of a problem if you are going to employ local labour at the site address. But if you are exporting labour from Johannesburg to Welkom, you may very well find yourself uncompetitive relative to local contractors. The converse is also true. A Welkom or Rustenburg contractor, in exporting labour into Johannesburg may find the labour rate cheaper but this may very well be eroded by other cost components like out of town allowance, which immediately become applicable.
Fortunately, the footprint of the bargaining council covers all these areas and if your operation straddles these areas, you would need to ensure that the applicable bargaining council offices register your employees correctly. In applicable circumstances, you should factor in wage areas as these may shrink margins or in other circumstances, give you room to improve margins in this competitive tender market.