Share

South Africa enters economic deep freeze

Johannesburg - Winter arrived in South Africa this week, covering hills and highlands with snow in a fittingly chill metaphor for an economy beset by everything from labour unrest and flat-lining output to rising inflation and waning external confidence.

South Africa's problems are many and complex, but at their root is the collapse of the balance struck in the dying days of apartheid between the predominantly white world of business and the predominantly black one of organised labour.

The deal that underpinned the mechanics of the "new" South Africa until a 2009 recession saw strong unions, allied to the ruling African National Congress (ANC), delivering workplace stability in return for wage increases slightly above inflation.

Now, weak growth, ideological turf wars in the ANC, cynicism and neglect by union bosses and management, and fallout from events such as the police killing of 34 strikers at a platinum mine in 2012 have left that model in tatters.

"It's as bad as it's ever been - probably the lowest point of our labour relations," said Andrew Levy, a labour consultant at Andrew Levy Employment in Johannesburg.

"We've lost all sense of good-faith bargaining. The bargaining is in the utmost bad faith."

Recession fears

Front and centre is the longest and costliest strike in the 130-year history of South Africa's mines, a five-month walkout by 70 000 members of Amcu that triggered a first-quarter decline in national output.

The first GDP contraction since 2009 sparked a rare sense of urgency from President Jacob Zuma's new administration but efforts to end the strike failed again this week.

The local economy in Rustenburg, the 'platinum city' whose growth since the end of apartheid in 1994 has been likened to the Klondike gold rush, is collapsing with dramatic effects.

Nationwide business confidence slumped to its lowest since the start of the millennium in May, while consumer data such as vehicle sales have shown 10% year-on-year declines in the last two months.

Meanwhile, the increasingly militant Numsa metalworkers union, South Africa's largest, is threatening a strike that would hit auto production - 6% of the economy - and the construction of two huge and desperately needed power stations.

SA Reserve Bank governor Gill Marcus played down the threat of a full recession but was hardly sanguine about the outlook for an economy overtaken this year by Nigeria as Africa's largest.

"Even if a recession is avoided, it will be cold comfort if the growth rate is a weak positive number," she said on Tuesday.

"It behoves us all - government, business and labour - to rebuild the confidence and trust that is an imperative to change the negative trajectory that the economy is presently on."

Her deputy, Lesetja Kganyago, put it more bluntly last week.

"Monetary policy can help staunch the bleeding but it cannot heal the patient," he said.

Weak

On top of it all, a weak rand has pushed inflation above the top end of the central bank's 3% to 6% target band, just as ratings agencies Standard and Poor's and Fitch draw up their latest views on the economy and government finances.

Pretoria's credit rating is still two pips above investment grade, a consequence of sound fiscal management over the last 20 years, but most analysts are predicting downgrades.

In the short-term, the ANC is inoculated from fallout from the poor state of the economy thanks to the 62% majority it won in May's election.

But it knows that without strong growth it cannot afford the social and healthcare policies it wants to roll out to address the inequalities left by decades of white-minority rule.

The May elections also brought the ultra-leftist Economic Freedom Fighters, led by renegade ANC youth leader Julius Malema, into parliament - to the disdain of Zuma, who snubbed the EFF at the vote count in Pretoria.

However, it is Zuma who is showing the strain.

The 72-year-old was admitted to hospital on Saturday after being told by aides and the ANC's top brass that he needed to rest after the exertions of the election.

Quickly discharged after "routine" tests, he is nevertheless missing a cabinet meeting this week, allowing his deputy, respected unionist-turned-tycoon Cyril Ramaphosa, to preside.

If Zuma's energy levels are lagging, he is even less likely to push for fundamental changes - from executive pay to strike laws to a migrant labour system in the mines that has changed little since the end of apartheid.

"Zuma's style, right from the start, has been characterised as 'soft-in-the-middle', based primarily on not making decisions and satisfying different constituencies to keep the political balance," said Cape Town-based political analyst Nic Borain.

White monopoly capital

Zuma's strategy so far has been to talk vaguely of "radical socio-economic transformation" while pushing a National Development Plan (NDP) drawn up in his first term as a blue-print for reviving growth through infrastructure investment.

Even this relatively innocuous attempt to create jobs and make a dent in 25% unemployment has raised union hackles.

Outlining last week its reasons for a strike, the 220 000-strong Numsa dismissed the NDP in a tone notable for its belligerence, even by the standards of the Marxist sloganeering favoured by South Africa's unions.

Alongside references to "white monopoly capital", Numsa expressed "militant solidarity" with the platinum strikers, suggesting it could be readying its members for prolonged action in pursuit of a wage demand 2½ times the rate of inflation.

Its conclusion was stark: "It is a sacrifice they are ready to make, conscious of the fact that their united power can shake the bosses and halt production."

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.24
-0.4%
Rand - Pound
23.90
-0.3%
Rand - Euro
20.47
-0.4%
Rand - Aus dollar
12.31
-0.1%
Rand - Yen
0.12
-0.6%
Platinum
948.90
-0.2%
Palladium
1,025.50
-0.4%
Gold
2,386.88
+0.3%
Silver
28.29
+0.2%
Brent Crude
87.11
-0.2%
Top 40
67,190
+0.4%
All Share
73,271
+0.4%
Resource 10
63,297
-0.1%
Industrial 25
98,419
+0.6%
Financial 15
15,479
+0.6%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders