Some 434 Estcourt mill workers have been dismissed by hardboard manufacturer Evowood following protracted illegal strike action and a subsequent production stoppage costing the company more than R2-million a day.
The workers were dismissed following a disciplinary process and a February 27 Labour Court interim order preventing employees from continuing with the illegal strike, with the final order issued last week.
The accrued costs of the strike, which occurred three weeks ago, may prove a major setback in the implementation of a comprehensive business turnaround plan aimed at returning the company to profitability, said Evowood CEO Louis Marais.
The former Masonite mill was brought out of business rescue in August 2016 by its new owners, a black empowerment consortium comprising Black Bird Capital and Jacobs Capital, which developed a comprehensive business plan to turn the embattled business around and create a sustainable long-term future that included reducing spiralling costs and improving efficiencies at the mill.
This included the signing of an agreement with the 733-strong workforce in November for a 12% reduction in the basic salary of every employee from February 1 – leaving room for a 7% wage hike in July – to avoid retrenchments.
However, a faction within the workforce reneged on this agreement, leading to the illegal strike, explained Black Bird Capital director Nkosinathi Nhlangulela.
“With costs building up and now jeopardising the viability of this rescue plan, the company’s shareholders are now investigating longer-term options, which could include scaling down production at the Estcourt operation and insourcing some materials to ensure consistency of supply,” he added.
The planned turnaround strategy included a short-term capital injection and the development of a long-term capital investment programme to enable the company to reach its full potential through improving processes, products and service.
This included a more than R50-million injection by Black Bird Capital and Jacobs Capital to rebrand the business and upgrade the plant at the mill during December.
The shareholders are now seeking possible solutions to resume production at the mill as soon as possible.
“We are not taking any decisions lightly, as we are aware of the potential negative impact on the local economy. We remain committed to building sustainable businesses and to economic growth in KwaZulu-Natal. Because of this, we are open to continued communication with key stakeholders who are able to work with us to develop a viable plan,” said Nhlangulela.
Despite the disruption at the mill, Evowood’s head office, regional branches and distribution centres remain fully operational and contingency plans are already in place to minimise the impact of the production stoppage on valued customers and suppliers, the company assured.