South Africa faces strike wave as labor strife widens

Reuters News
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Posted: Aug 22, 2013 8:50 AM
South Africa faces strike wave as labor strife widens

By Sherilee Lakmidas and Ed Stoddard

JOHANNESBURG (Reuters) - South Africa faced a strike wave across leading sectors of the economy on Thursday and the labor unrest threatened to hit its struggling gold industry, already squeezed by rising costs and falling bullion prices.

Despite appeals from President Jacob Zuma and other government leaders for peaceful wage negotiations in Africa's largest economy, the National Union of Mineworkers (NUM) said its members in the construction sector would down tools from Monday.

The NUM was also consulting its membership on a strike in the gold industry, which could start next week following an impasse in salary talks with mining companies.

Although South Africa has fallen in the world ranking of gold producers, gold remains its main mineral export and the industrial action, including an auto industry strike already underway, will inflict more damage on the struggling economy.

Violent wildcat strikes in the mining industry last year cost billions of dollars in lost output, dented economic growth, and led to damaging downgrades of South Africa's credit rating. More than 50 people died in protests at the mines.

The strife has also battered the rand, which dropped to a new four-year low against the dollar early on Thursday.

"We trust that working together, all parties will cooperate and see value in promoting lasting labor peace in our crucial mining sector," Zuma said on Thursday.

He was addressing a gathering of the 85,000-member SACTWU textile workers' union, which is also considering a strike.

Increasing wage claims and militancy among workers struggling to make ends meet as their living costs rise, are a major problem for Zuma's African National Congress (ANC) government before elections scheduled for next year.

It faces accusations that since apartheid ended in 1994, Nelson Mandela's liberation movement has paid more attention to the interests of a wealthy elite than to the country's workers, unemployed and poor.

Trade Minister Rob Davies recognized "a deteriorating labor relations environment, rooted in deep inequalities, rooted in insecurities arising from changes in the fortunes of the mining industry, insufficient career pathing, high levels of worker indebtedness".

"All of this, we think, has created a situation where there are very high wage demands and a loss of patience with more moderate negotiating frameworks," he said in Cape Town.

Kevin Lings, chief economist at Stanlib, said more strikes would frighten away potential investors and increase the cost of international borrowing for South Africa, if they led to further credit downgrades.

"Overall, it has already done South Africa quite significant damage and obviously ongoing strike action will continue to undermine the ability of South Africa to prosper," he told Reuters.

GOLD STRIKE COULD START WEDNESDAY

The NUM represents about 64 percent of the roughly 140,000 miners in the South African gold industry, where major operators include AngloGold Ashanti, Gold Fields, Harmony and Sibanye Gold.

The opposing sides in the gold sector remain far apart after the weeks of talks, with virtually no narrowing of the gap between the unions and employers, whose latest offer was a 6 percent wage increase for some categories.

The NUM, which is seeking a 60 percent increase, walked out of the talks along with a smaller union UASA and applied for what is known in South Africa as a "certificate of non-resolution" from the government mediator, which was granted. This effectively allows them to strike.

"The earliest we will issue companies with notice of the strike is Monday next week," NUM spokesman Lesiba Seshoka said.

With such notice normally being given 48 hours before any action, this meant a stoppage in the gold industry could start on Wednesday.

The NUM's more hardline rival, the Association of Mineworkers and Construction Union (AMCU) which represents about 17 percent of the gold labor force, has submitted wage demands as high as 150 percent, but is still engaged in negotiations.

A membership turf war between NUM and AMCU was behind last year's mine violence.

The stoppage in the construction sector which has already been announced would affect major companies such as Wilson Bayly Holmes Ovcon, Aveng Ltd and Group Five Ltd.

South Africa's faltering economy is already losing an estimated $60 million a day to a strike by 30,000 workers in the car manufacturing sector that accounts for 6 percent of gross domestic product.

This strike entered its fourth day on Thursday and has affected global firms operating in South Africa, including Toyota, Ford and General Motors.

In the gold sector, companies are being squeezed between growing worker militancy which has pushed up wage costs and falling bullion prices.

Labor accounts for over 50 percent of costs and gold's spot price is 30 percent lower than the record peak of over $1,920 an ounce it reached almost two years ago. About half of the country's shafts are losing money at these levels, the industry says.

(Additional reporting by Dave Dolan, Peroshni Govender and Benon Oluka in Johannesburg; Writing by Pascal Fletcher; Editing by David Stamp)