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Does Collective Bargaining Deter Foreign Direct Investment In The Vehicle Industry

2402 words - 10 pages



To understand the bases of my hypothesis, I first need to define what collative barraging is and the effect collective bargaining has on the South African economy, this will then put into perspective the impact collective bargaining has on the motor industry in the South Africa.
Collective bargaining by definition mean is the process “of good faith” that takes place between an organisation’s management and a trade union (representing the organisation’s employees) for negotiating:
o Wage/salary increase
o Working hours
o Working conditions
o Matters that affect relevant parties

Management sees this process as negotiating with one set of ...view middle of the document...


In September 2013 there was intimidation by the National Union of Metal Workers of South Africa (NUMSA) warning the motor sector of breaking down the process of collective bargaining. Employees of the vehicle industry, both the manufacturing plants and workshops did whatever they could to prevent the three week strike from ending. Even though there was a discussed settlement with NUMSA of “double-digit settlement” the production of vehicles was stopped and the motor industry lost twenty billion rand over the strike period and this also caused lose in wages for metal workers.
This is an example of not only the impact collective bargaining has on the motor industry but also the employee. This highlights the poor productivity related to strikes as a result of poor collective bargaining. This portrays a very poor imagine to foreign investors.
This was further confirmed by the BMW strike that the unstable labour affected South Africa’s opportunity to manufacture a new vehicle. In 2013 the BMW yearly manufacturing decreased by 15.8%. In order for manufactures to stay committed to the current investment reassures the (organized labour) to focus on important issues as it pertains to the vehicle sector. In Rosslyn, Pretoria; thirteen thousand 3series cars has decreased in production due to the continued eight week strike by NUMSA. It was announced by the German maker that South Africa is no longer considered for the manufacturing of the vehicle type (3series vehicle). Labour relations has costed South Africa jobs and has lead to fear of damage to South Africa’s reputation in the motor sector which constitutes 30% of “manufacturing output”. BMW has discussed how to improve South Africa’s chance in competing for contracts. The profits contributing to the multi-national corporation by South African citizens through tax has gone into the Motor Industry Development Program (MIDP), and the beginning of the Automotive Production Development Program (APDP) and the beginning of the Automotive Inceptive Scheme (AIS).


The effects of unsuccessful collective barraging means:
o Lower economic growth
o Lower domestic and export production and sales
o Reduced industry profitability
o Substantial loss of income to workers
o Loss of revenue to the fiscas
o Lower foreign direct investment into South Africa
o Decrease in employment

Ultimately there are no winners in a strike, especially in the motor industry which produces stable employment for South African citizens.

Even though collective bargaining has a negative effect on foreign investment, high cost of production is also a contributing factor. According to Toyota South Africa Motors President and CEO Dr Johan Van Zyl, the collective bargaining process in the motor industry requires structural reform where all stakeholders look at ways to achieve common ground to avoid extended negotiations without positive results. Dr Johan...


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