Riaan Carl Pretorius

Academic Essay

The Labour Broker Effect

How the proliferation of Labour Brokers relates to the shortage of Trade Artisans in South Africa
The common thread binding South Africans during the 1990s was the idea that the new political
landscape would bring about practical changes and opportunities not previously available. While this is
true in most sectors of our society twenty years on, some of these changes have not had a positive
contribution to the sustainability of certain industries. The Basic Conditions of Employment Act of 1997
has gone a long way to entrenching the rights of workers and protects employees from abuse. However,
whilst protecting the rights of employees, it forced companies to seek alternatives to employing labour
resources on a permanent basis; contributing to the rise in recruitment companies and labour brokerage
firms over the past few decades. This has ultimately led to the shortage of Trade Artisans currently
experienced in the South African Energy Sector and has subsequently put pressure on our Utility giant
Eskom in their bid to supply a stable power grid.

Analysis of current data from Department of Labour1 shows evidence that the growth rate of qualified
artisans available has been severely stunted over the recent past. During the period from 1970 1990
most trade artisans were employed directly by large companies as well as government parastatals. Some
of these companies were construction conglomerates such Murray & Roberts and Group 5, and
parastatals like Transnet (previously Spoornet), Eskom and Sasol. Artisans such as Welders, Boilermakers,
Builders, and Electricians were all employed with full benefits according to the law. This meant that they
would receive basic salary, allowances and pensions according to South African Employment Regulations
of that period.

While this suited some of the race groups, primarily White2, and Cape Coloured2 artisans to an extent, it
disadvantaged Black2 artisans to the point where they were forced to work informally or without the
protection of legal employment. Black workers were often marginalized and abused by being hired and
dismissed unfairly, which in part influenced the rise of trade unions and the alignment of these trade
unions to the Black Liberation Movement. In 1997 these factors culminated with the revision of the
employment and labour laws of the country. The base from where we get the BCEA of 973, the South
African Constitution, has been lauded as one of the most admirable constitutions in the history of the
world.4

Moving forward a few years into democracy the country faced an unfortunate backlash as a result of
progressive employment laws. With government setting up the Commission for Conciliation, Mediation
and Arbitration5 or CCMA, companies were finding it extremely difficult to lay off workers, whether
warranted or unwarranted, especially in economic downturn. Companies essentially were obliged to keep
employees at a premium cost and pay their benefits regardless of profitability and/or sustainability. A
victory for democracy and employment right it was but the challenges of this was soon to be apparent.
Essentially having to keep artisans on their books indefinitely, companies soon were fiscally challenged
resulting in many going under. Obviously the running costs of the business increased annually while
competition drove tender prices lower and lower.

Labour Brokers were seen as the light at the end of the tunnel for many business owners. Their core
business was to supply skilled employees who were signed to a short-term or limited duration contract

Riaan Carl Pretorius

Academic Essay
which usually ran concurrent to the scope of work outlined by their clients. In other words, if Company A
had a contract to build a stadium over two years, then Company A would approach Company B, a Labour
Broker, to supply artisans, to work for Company A for the prescribed period. These contracts were initially
welcomed by employees because a limited duration contract usually meant that the employee would earn
his cost-to-company salary directly. The salary earned would include all benefits (such as pension,
unemployment, sick leave, annual leave) in a combined rate of pay. The Labour Broker would charge the
client a percentage of this rate (8%-20%) to administrate the contract. Labour Broking still is one of the
most profitable business today since there is minimal set-up cost and no equipment or asset expenses
required to start. One could in fact set up a Labour Brokerage in a bedroom of your house which was
literally what happened in some cases.

Fast forward 10 years what was once perceived as the savior of big business has now become one of
democracys illegitimate children. As time went on artisans grew weary of the limitations of the contracts
they were presented with. Benefits were routinely being stripped away and employees rights violated as
long as employee agreed to it by signing these contracts. Over the course of ten years less and less artisans
were in favor of companies who used labour brokers. Trade Colleges and Schools found it difficult to lure
school-leavers into the various trades. Most parents, especially those who were artisans themselves,
started encouraging their children to steer clear of trades altogether. The net effect of this was not
immediately seen since in the early 2000s there were not many major government infrastructure projects
on the go as well as the fact that there was still a good crop of artisans still available. But in late 2008 the
famed Medupi Power Project started construction and it was quickly discovered that the pool of skills that
South Africa prided itself on had quickly eroded. Qualified workers had immigrated to the likes of Australia
and Canada where they were offered permanent employment in the Oil and Gas Industry.

The challenges of Eskoms two major projects, Medupi and Kusile, are well documented. These challenges
range from labour unrest and mass action to low quality of work and poor productivity. Much of these
problems could be directly related to the use of Labour Brokerage and the poor regulation thereof. The
Government has done some work to address these issues by subjecting companies to a high level of
scrutiny.

In conclusion it is worth pointing out that 2013 had been dubbed The year of the Artisan6 by the
Department of Trade and Industry. This indicates governments commitment to developing trade artisans
by offering apprentice training and scholarships to anyone embarking on a career in tradecraft. This
initiative coupled with increased regulation of labour broker agreements should address the shortage of
skilled artisans in the years to come.

References
1

Dr. Jeffy Mukora, Human Sciences Research Council (2008), Professions Case Study Report: Artisans/Trades, Department of
Labour Report.
2 Parliament of South Africa (1950), Basic Racial Classifications, Population Registration Act, 1950.
3 Parliament of the Republic of South Africa (1997), Basic Conditions of Employment Act, No. 1997.
4 Cass R. Sunstein (2001), Designing Democracy: What Constitutions Do.
5 Parliament of the Republic of South Africa (1995), a dispute resolution body established in terms of the Labour Relations Act, 66
of 1995
6 Dr. Blade Nzimande (2013), South African Government News Agency, Feb. 2013