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Construction in dire straits, more lay-offs forced by 10% minimum wage increase

Construction in dire straits,  more lay-offs forced by 10% minimum wage increase

Retrenchments in the beleagured construction industry will continue as a result of the enforcement of the 10% increase in the minimum wage. Construction companies are at the edge of the precipice, many of them being forced to lay off more people so that they can pay the few remaining workers 10% more.

The industry which is already in turmoil due to government budget cuts last year, is now at the point where skilled labour will be lost indefinitely. The 2-year collective agreement which stipulates a 10% increase in minimum wages is now threatening the employment status of all those in the industry.

The Economist spoke to co-owner of OJ Construction, Andre Oosthuizen this week, to get an inside track how dire the situation is. Oosthuizen said that jobs are set to be lost as most of the construction companies do not have the money to meet the 10 % wage increase.

We expect more retrenchments in the industry in the near future. The industry is becoming more and more difficult, with government projects on hold. Unlike the Chinese construction companies who are excempt from minimum wages, our companies bear the brunt of the effects,” he said.

Oosthuizen said that despite the difficult current situation, his company will definitely go by the government gazette stipulation and increase the wages. “But like I said, we will have to retrench because currently the money needs to come from somewhere and we simply do not have it.”

Last week, the Construction Industries Federation of Namibia (CIF) said that according to the Collective Agreement between the CIF and the Metal and Allied Namibian Workers Union (MANWU), which had been signed on 24 July 2015, and then promulgated in Government Gazette No. 5917, Government Notice No. 319, on 31 December 2015, employers would be required to adhere to minimum wages and minimum employment conditions in the construction industry.

The Government Gazette No. 5917 stipulates the adjustment to the minimum wages, which had to be increased by 10% for the first year (i.e. from 1 January to 31 December 2016) and by a further 10% for the subsequent year (i.e. 1 January to 31 December 2017). The current minimum wage for a labourer in the construction sector is now N$16.04,” Ms Bärbel Kirchner, Consulting General Manager of the CIF said.

Kirchner said, “We realise that during an economic slowdown, it would be difficult for employers to further increase the minimum wages in the construction sector. Unavailability of work in the sector and serious cash flow crises, already forced businesses to cut costs and make retrenchments. In order to adhere to the legislated minimum wages and minimum employment conditions, with limited scope to reduce salaries, businesses cannot avoid but retrench more individuals.”

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