Strikes take toll on SA economy

2011-08-10 15:35

Johannesburg - A wave of strikes in South Africa has cost gold miners around $190m in lost output, curtailed the already struggling manufacturing sector and possibly trimmed third-quarter economic growth by up to 0.6%, analysts have said.
SA is nearing the tail end of its annual strike season which saw gold, coal and diamond miners and fuel, paper and pharmaceutical workers all downing tools for higher wages.

Although most industries have reached settlements - well above the annual inflation rate of 5% - tens of thousands of municipal workers will strike from August 15, and power utility Eskom is in talks with unions in a bid to avert industrial action in the key electricity sector.
Analysts say this year’s wage talks across all sectors were more severe than in previous years, and recruitment group Adcorp said the number of work days lost to strikes in 2011 could jump over 20% to nearly 18 million from 14.6 million last year.

Unlike other years when the majority of industrial action took place in the public sector, 68% of strikes this year were in the private sector, Adcorp said.

“The strikes in 2011 represents a worrying trend for businesses and investors as the ’strike season’ now seems to have become an annual event with strikes also taking place in a number of sectors in both 2009 and 2010,” said Mike Davies, associate director at London-based risk analysis group Maplecroft.

Fuelling inflation?

A worrying trend is that wage settlements this year again overshot inflation. In some sectors increases were double the inflation rate and analysts fear this could stoke inflation when the central bank is concerned the rate could breach its 3% to 6% target range.

“The wide differential between inflation figures and the increases demanded by unions and the weak relationship between wage increases and productivity gains are also concerning,” Maplecroft’s Davies said.

Quantifying the direct cost of the strikes is difficult, especially when the global economic slowdown and sluggish South African domestic recovery need to be take into account.
Nomura International emerging markets economist Peter Attard Montalto said the industrial action could shave off 0.3% to 0.6% of headline economic growth in the third quarter.

Gold mining companies lost close to 118 000 ounces in production during the miners’ strike - worth about $190m based on an average spot gold price of about $1 600/oz.
With a sluggish economic recovery and unemployment sticking at around 25% of the workforce, the outlook for the labour market is not encouraging.

Employers have responded to increasing wage bills by shedding jobs. Despite record high precious metals prices, the mining sector in South Africa - the world’s largest platinum producer and fourth-largest gold producer - lost 31 000 jobs in the second quarter, government data said.
Attard Montalto wrote in a recent blog post that wage growth should be kept down to encourage job growth at this stage of the economic cycle.
“But this is the fundamental issue - unions in South Africa do not care about the unemployed and do not care about the fact that they negotiate wages above the market clearing rates. Restrictive labour laws allow them to get away with this and government is happy to let this happen,” he said.
Labour is already costly and inefficient compared with other emerging economies, with the typical South African factory worker earning about six times more than the average Chinese factory worker and being less productive.

The country has some of the world’s most rigid labour markets, according to the World Economic Forum.
The strikes also took their toll on the manufacturing sector, the second-biggest contributor to gross domestic product with about 17%.
The purchasing managers’ index fell for a fourth straight month in July and sponsor Kagiso Securities said the business activities component fell nearly 20 points - mainly due to the strikes.
Moody’s Analytics economist Mekael Teshome said the prospects for an improvement in manufacturing is waning.

“The July strikes will likely weaken demand for factory goods going into August. Even though major union strikes have recently been resolved, spillover into other sectors cannot be ruled out.”

  • Realistic - 2011-08-10 15:47

    We knew this before the strikes started. Now the unions wonder why there are job losses. what strike is next? Viva automation!!!

  • John Nel - 2011-08-10 15:56

    Thanks JM and nationalisation - definitely 1 of the causes.

      PB - 2011-08-10 16:30

      Wonder how successful miners' strikes are going to be after nationalisation ........

  • DeonL - 2011-08-10 16:18

    Striking yourself out of a job in future comes to mind.

      X-Ray - 2011-08-10 18:19

      You are so right. That is why there are so many job loses. Business can not afford the high labour cost anymore. Will they nationalize a bankrupt mine? Most probably.

  • Nasdaq7 - 2011-08-10 17:08

    We demand equal pay for equal loafing.

      Benmica - 2011-08-15 08:42

      My doctor's fees are up 16 %. Last year I paid R300, this year R350. They did not consult with me, they just put it up. Their fee is now R1400/hour, just a bit more than the lowest monthly wage....

  • Madelane - 2011-08-10 17:31

    The Unions are parasites and the host here is not only the working class they supposedly represent but the entire economy and like all parasites they will eventually weaken the host to the point of collapse.

  • colin.dovey - 2011-08-10 17:32

    With high wage costs, coupled to low productivity, South Africa is fast becoming a poor destination for foreign direct investment. This, in turn, together with the fact that our port charges are the highest in the world, make forward economic prospects very worrying.

      AA - 2011-08-10 22:21

      Agreed Colin. Why come to Africa when Asia offers high productivity, low entry barriers, a rich local market and a highly productive and hard working labour force. You want something, you have work for it and that goes for a country too.

  • Ya Beauty! - 2011-08-11 03:05

    Unions need to understand that SA is not made of Gold and if you chase investors by rising wages then their memebers will be the biggest lossers. Stop these strikes please!!

      LBS - 2011-08-11 14:51

      Why would the Unions stop? They are lining their own pockets as long a employers give in. While the going is good....

  • Pietpetoors - 2011-08-11 07:38

    The whole world is in financial problems, companies close, people loose their jobs but what does the South African unions make their people do ? STRIKE ! Are these crazy or brainless. When will people realize that they should be grateful for having a job and stop thinking it is somebody else's duty to supply employment. Hold unions accountable for all damages and loss of income and if an employee loose his job because of the unions, force the unions to look after those people because millions of people are loosing their jobs because of the trade unions.

  • bheki.dingiswayo - 2011-08-11 08:03

    So I heard a Professor yesterday claiming that our labour has increase productivity- He was comparing pre-1994 to current situation. He attribute this to high labour productivity not to automation. Employers are looking at the ways to automate in order to reduce outages in their production so labour (we) will be hard hit ion future- increase in number of unemployed.

  • Benmica - 2011-08-15 08:41

    My doctor's fees are up 16 %. Last year I paid R300, this year R350. They did not consult with me, they just put it up. Their fee is now R1400/hour, just a bit more than the lowest monthly wage....

  • pages:
  • 1