Planning for – and surviving – a strike - The Finance Team

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Planning for – and surviving – a strike

R6.1-billion. That’s the amount of money South Africa lost in 2014 due to strikes, according to the Department of Labour’s most recent Industrial Action report. It represents the man hours and productive days lost, and doesn’t take into account the cost of burnt or destroyed property, related law suits or the costs incurred related to injuries.  The number of “down days” was 10.26-million.

South Africa has a strong history of labour protest, and since the Marikana tragedy in 2012, strikes have assumed a new ilk. Some argue that the labour movement has become stronger, and certainly there is a new level of competitiveness amongst labour unions in certain sectors. The last few years have been characterised by some unions announcing radical, unyielding promises of unrealistic wage increases to their members even in the face of difficult economic circumstances. For example, the Association of Mineworkers and Construction Union has been promising since 2012 that it will negotiate a basic monthly minimum wage of R12 500 for all its members, even entry-level mineworkers. For many, that would mean a wage increase of more than 60%.

It’s no wonder then that those companies operating in strike-prone (labour intensive) industries anticipate “strike season” with consternation every time it rolls around.

If your company could stand to lose substantially from a strike, or has already done so, we recommend bringing on specialised interim financial management to anticipate your needs when planning for strike season. This is how interim financial management could help your company navigate the perils of a strike:

  1. Help you determine the level of likelihood that your company faces a work stoppage. Has your company faced retrenchments or cutbacks over the past year? Have you had to scale back on employee perks in order to meet stricter budget requirements? Your interim financial management can look at these and other factors to determine how likely your workforce might be to take mass action.
  2. If a strike does take place, how much of your workforce will participate? Your interim financial management can work with labour specialists and your own top management to understand how many of your staff members might be involved if a strike ensues. Typically, more junior levels of employment are prone to striking, which means larger portions of the operational workforce but at a lower salary. In many industries, junior and senior employees are in fact represented by different unions. Are these unions in consultation or fighting for similar causes? If so there is more chance that they will all go on strike simultaneously. If, however, the more senior portion of your workforce is content with pay and working conditions then they are unlikely to join hands with the rest of the workers in downing tools.
  3. If a strike takes place, how long will the anticipated negotiation period be? In other words, your interim financial management needs to help determine how quickly the strike will be resolved. This will be based on factors such as the bargaining power behind the unions, their motivation for holding out on their demands, and the financial circumstances of the workers (employees in precarious financial circumstances cannot afford to go for months without an income, unless there is a highly motivating reason to do so, such as the historical five-month standoff in the mining sector following Marikana).
  4. Ensure that you have the financial resources to weather a strike. Your interim financial manager will use the variables from points 1-3 in order to calculate what the likely cost of a strike would be for your company. Using this information, he or she will then identify how much money needs to be set aside in order for your company to survive a strike. If you’re wondering where your company will source the money in an already straitened financial year, rely on your interim financial management to come up with solutions.

An unexpected strike can wreak havoc on your company’s finances. A strike that is more intense or takes longer to resolve than you anticipated, can do the same. Proactively anticipate and plan for the unique challenges of strike season by bringing on an interim financial management to help work out the likely financial effect of a strike, and identify how you can set aside the resources you need to make it through.

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