Solidarity, Denel pay standoff headed for CCMA

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Solidarity, the trade union that represents 1500 of Denel’s 6000 employees is taking its fight for what it says is a fair salary increase at state arsenal Denel to the Commission for Conciliation, Mediation and Arbitration (CCMA), the labour dispute resolution tribunal.

The union says Denel will have to explain why it unilaterally imposed a zero to 4.8% increase, which both sides agree is below the prevailing inflation rate. Denel has said the increase is all it can afford.

The state arsenal is currently in a tough turn-around following years of losses. It ended R544 million in the red for the year-to-March 2009, which was a considerable improvement on the loss of R1.6 billion for the period ending in March 2006. The company last posted a profit – of R24.1 million – in 2001. The last profit before that was R81.5 million in 1997. It expects to report a loss of about R600 million for the year to March 2010 and return to profitability in early 2014.
“Wage negotiations at PMP, Denel Dynamics, Denel Aviation, Denel Saab Aerostructures, OTB, Denel Properties and Denel Integrated Systems Solutions got stuck because the Denel board earlier this year limited increases to a mere 4%,” Solidarity said in a statement last week. “Meanwhile a conditional agreement was reached at Denel Land Systems for a wage increase of 6%.”

Solidarity reacted strongly when it emerged that Denel had placed this limitation on wage negotiations because the entities are “supposed to function independently and also handle and implement wage negotiations independently.” However, trade unions started wage negotiations at the various entities, but it soon became clear that the limitations, as laid down by the Denel board, would hamper negotiations.
“Wage negotiations took place at each of the entities, but due to the Denel board’s decision to limit wage increases to just 4%, agreements could simply not be reached,” adds Solidarity spokesman Jaco Kleynhans. Solidarity and other trade unions in Denel therefore indicated that the final offers could not be accepted and that no agreements would be signed. The wage increases were eventually implemented unilaterally with effect from April 1.
“The way in which Denel hindered this year’s wage negotiations is cause for concern. Employees can under no circumstances be satisfied with a paltry 4% wage increase. This will in no way improve employees’ salaries. The CCMA will simply have to intervene,” Kleynhans emphasised.

He earlier said employees could not be “satisfied with very little while management award themselves large bonuses.” When management received bonuses amounting to R4.2 million last year, no mention was made of tight budgets that have to be adhered to, he said. “However, when wage negotiations take place there are plenty of excuses and this state of affairs will not be tolerated,” said Kleynhans.

If the dispute cannot be resolved at the CCMA, each of these Denel entities could face a strike, he added.

Denel denies the wage increase was implemented unilaterally. Patience Mushungwa, Group Executive for HR and Transformation at Denel says Solidarity took part in wage negotiations with the Denel entities where their members are represented. “The negotiations were guided by the Recognition Agreement that governs labour relations at each entity. The mandate for a 0 – 4.8% increase was given to management by the Denel Board and was based on the various factors which includes the financial state of Denel”.



Mushungwa says Denel understands that 4.8% may be below inflation “but the increase was based on various factors including the fact that the company is continuing to post losses and has not received further recapitalisation. As the company is embarking on a turnaround strategy, it is crucial that it is returned to profitability at minimum cost to taxpayers and minimal job losses.”