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Strikes update

Johannesburg - South Africa is in its mid-year labour bargaining session known locally as "strike season", with unions seeking wage hikes about two to three-times the country's 5% inflation rate.

The following are some questions and answers about the strike season and its impact on Africa's largest economy.

Who is on strike and what do they want?

  • The Chemical, Energy, Paper, Printing, Wood and Allied Workers Union (Ceppwawu), which represents about 70 000 workers, has been on strike for about two weeks. It is seeking 11% to 13% pay increases. Industries affected included petrol, paper and pharmaceuticals.
  • South African workers at diamond producer De Beers will strike on Friday, seeking a 15% rise in wages. De Beers is offering 7.5% and a one-off payment of R2 500 ($367).
  • The National Union of Metalworkers of South Africa (Numsa), which represents about 220 000 workers, ended its strike in mid-July with a 10% raise.
Who is threatening to strike?

  • Three unions representing employees in the coal mining sector, including the National Union of Mineworkers (Num) which is the largest, have threatened to strike. They want a 14% raise.
  • The Num is threatening strikes at gold and platinum miners.
  • The Num, seeking 16% increases, is threatening a strike at power utility Eskom.

How will the strikes be settled?

The typical increase so far this year is 7.5%, up from 8.2% a year ago, according to the Andrew Levy labour survey group.

Despite unions' demands for double-digit increases, most unionised workers will likely settle for about 7% to 10% and may also receive non-salary benefits such as housing allowances.

Employers see the above-inflation settlements as the cost of doing business in the country and have been shedding jobs over the past few years to keep staff costs under control.

There is little political will to rein in unions with the African National Congress in a governing alliance with the country's biggest labour federation Cosatu, which has supplied it with millions of votes.

What immediate impact have the strikes had on the economy?

The strikes have cut production and caused fuel shortages that slowed commerce, but most economists see the losses being made up once the strikes end.

Strikes at gold and coal mining companies may cut production figures but will not impact global commodity prices if they are short-lived.

However, a strike in the platinum sector, with South Africa the largest producer of the precious metal used in catalytic convertors and jewellery, could affect the metal's price.

Since the strikes are an annual event, most companies have well-developed contingency plans in place.

Prolonged strikes of more than a month are the biggest worry. These could drive up global prices for commodities and slow growth in the country. Strikes at Eskom could cause blackouts that slow the energy-intensive mining sector, which accounts for about 6% of the overall economy.

What are the long-term risks to SA?

South African labour is already costly and inefficient compared to other emerging economies, with the typical South African factory worker making about six times more than the average Chinese factory worker and being less efficient.

South Africa already has some one of the world's most rigid labour markets, according to the World Economic Forum, and the government is proposing a raft of legislation that will drive up personnel costs for employers.

The higher wage settlements make the country less competitive, increase joblessness and curtail foreign investment. Treasury and central bank officials have said they add to inflationary pressures and squeeze the national budget.

The state is the biggest employer in the country and in 2009/10, 47% of tax revenue went to wages and benefits for civil servants.
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