EXCLUSIVE S.Africa in talks with Huawei subsidiary to settle lawsuit over hiring

  • Govt says Huawei unit employed too few South Africans
  • Rules require foreign firms to hire 60% locals

JOHANNESBURG, Feb 23 (Reuters) - South Africa's labour department is negotiating a possible out-of-court settlement with a subsidiary of China's Huawei Technologies Co Ltd (HWT.UL), which it accuses of failing to comply with local hiring quotas, Huawei and a government official told Reuters.

South Africa is facing its highest unemployment levels since the end of white minority rule in 1994. Authorities took Huawei Technologies South Africa to court this month, stating it had not met a requirement that 60% of workers must be South African. read more

Fikiswa Mncanca-Bede, a lawyer at the labour department, told Reuters its officials met with Huawei Technologies South Africa's representatives on Monday.

"We are still negotiating a settlement out of court with some conditions," she said. "(The) case has been stayed until we reach an agreement or not."

Mncanca-Bede said the department was aiming to conclude negotiations by Friday.

Huawei's Shenzhen-based parent company referred a Reuters request for comment on the allegations and talks with the labour department to its local subsidiary.

Huawei Technologies South Africa confirmed it had "entered into talks to reach a settlement agreement" and that the court case had been stayed pending an outcome.

"Discussions are ongoing, Huawei is committed to being fully cooperative with the Department and we are positive that this matter will be concluded shortly," it said via email in response to questions.

During the Monday meeting, Huawei "demonstrated its "extensive ICT skills transfer and training programs that are aimed at reducing the ICT skills gap and fostering a strong digital talent ecosystem for South Africa to further embrace 5G, Cloud, AI and other 4IR technologies," the company said in a separate statement, referring to information and communications technology.

This was acknowledged by the department of labour, which advised Huawei to expand this further in its employment equity plan, it added.

The company declined to address the allegations, stating it could not comment on an ongoing legal matter.

Citing a 2020 audit, the labour department says foreign nationals make up nearly 90% of Huawei Technologies South Africa's workforce.

It had been seeking a fine of 1.5 million rand ($99,547) or 2% of the local firm's annual 2020 turnover for the alleged rule breaches.

Huawei and ZTE Corporation, another Chinese company partially owned by the state, have built the bulk of Africa's existing telecommunications infrastructure. Experts generally agree they will play a critical role in the continent's future digital transformation.

'NON-COMPLIANT'

Court papers seen by Reuters showed the authorities filed their case after accusing the company of failing to take steps required to bring it into compliance with local employment rules.

In December 2020 and January 2021, the court filings show the labour department requested that Huawei Technologies South Africa develop a plan to address the under-representation of locals and groups discriminated against under apartheid.

Despite securing an extension to ensure that plan met the labour department's requirements, the company was "still found to be non-compliant," according to a final notice from the department dated May 18, 2021, and attached to court papers.

The labour department submitted to the court what it said was the revised 2020 to 2022 hiring plan Huawei Technologies South Africa was required to draft.

The document showed the company planned to hire 44 South Africans, roughly 60% of the projected hires for that period. That would result in a workforce comprised of 652 foreign nationals and 112 locals by September 2022.

The plan stated the company would "ensure that effective recruitment is done" and added it would seek to train and promote South Africans and members of previously disadvantaged groups to senior positions.

In a separate letter sent to the department in February 2021, Huawei Technologies South Africa explained its foreign workers were needed to ensure the rollout of "cutting edge technologies," including 5G, artificial intelligence and robotic process automation.

It reiterated their "skills will be transferred to the designated groups through the company's skills transfer plan," according to a copy of the letter included in the department's court filings.

The company had not filed any papers in court in response to the lawsuit before settlement talks began.

($1 = 15.0683 rand)

Reporting by Nqobile Dludla in Johannesburg Editing by Promit Mukherjee, Mark Potter and Matthew Lewis

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