Cape Town - The imminent resolution of the devastating platinum-sector strike has proved too little, too late to stave off a negative assessment of the economy by international rating agencies – piling pressure on the government to help lift the gloom.
Days before a recuperating President Jacob Zuma is to spell out his government’s plans in his second State of the Nation Address for the year on Tuesday, rating agency Fitch revised its outlook for South Africa from stable to negative, though it kept its credit rating at BBB, while S&P downgraded long-term foreign currency rating to BBB-.
This will immediately drive up the cost of borrowing for the government – amid of a multi-billion rand infrastructure build programme – said economist Iraj Abedian, of Pan African Capital Holdings.
The double whammy from the two agencies on Friday the 13th amounted to a “perfect storm” of bad news, despite the chink of light provided by the news on the platinum strike.
Lower-than expected growth recorded in the first quarter, when the economy shrank by 0.6 percent according to the latest figures, will dent the government’s income from tax collection – increasing its reliance on borrowing.
As the cost of servicing this debt – already the fastest-growing component of government spending – climbed, other programmes, like the infrastructure projects, would have to be revised, said Abedian.
“They have to go back to the drawing board. They have to get technical advice and either they have to cut back on the infrastructure spend, or they have to reconfigure the spend and repackage the financial or capital structuring part of it – make a lot more room for private-sector participation and a lot less involvement by the state,” Abedian said.
While resolving the platinum strike earlier would probably have averted the ratings changes, it was not the only, or even the most important, factor bogging down the economy.
The energy crisis was a more significant, structural brake on growth, given that Eskom was struggling to keep the lights on even when the three biggest platinum producers were out of action thanks to the strike.
Ending the strike would improve growth prospects but, “if you don’t have power and you have other structural bottlenecks your growth cannot resume its potential trajectory”.
“We are now, unfortunately, into a vicious downward growth spiral, because we’ve lost our reputation, we’ve lost our ratings and we don’t have a credible solution for those structural bottlenecks,” Abedian said.
He said Zuma’s speech had “first and foremost” to put paid to “ideologising and throwing around political messages that are poor substitutes for credible programmes of action”. His government had spent five years peddling “concepts that are confused and unworkable”.
It was time for the “mumbo jumbo” to be replaced by “a clear, effective, professional approach to running a modern economy”, Abedian said.
The Treasury said in response to the Fitch move the government was “alive to the growth challenges”.
Amcu members, meanwhile, were weighing the gains of the new offer against the loss of income they suffered in the almost five-month strike, with the platinum producers putting total lost wages at R9.9 billion by Friday and revenue losses to the industry at R22.35bn.
Amcu president Joseph Mathunjwa said on Friday night the union had consulted all its members and they were “not entirely against the proposal”. There were a few issues raised by members that had to be taken back to employers, however.
He said given that the National Union of Mineworkers had settled for a R400 increase and the offer Amcu was considering would entail a pay rise of about R1 000, he believed the strike had been worthwhile, despite the sacrifices.
The union was not giving up on its demand for a R12 500 basic minimum wage.
Labour analyst Tony Healy said the strike had been a “catastrophic failure”. While Amcu had won “reasonable, but not spectacular gains”, its members had sacrificed almost five months’ wages and would never recover these losses.
“Financially they would have been better off accepting the platinum miners’ offer before they went on strike and not had the strike at all,” said Healy.
Impala Platinum Holdings Limited, Anglo American Platinum Limited and Lonmin Plc tabled an offer of a 7.5 to 8.5 percent increase before the strike – upping it to between 7.5 and 10 percent (depending on the level of the worker) in April. The latest offer is for a R1 000 a month increase in basic pay for the lowest-paid workers for the first two years of a five-year deal and R950 thereafter.
Implats spokesman Johan Theron said this amounted to a 13 percent increase for entry level workers – putting the gain since February at 4.5 percent for these workers. If Amcu members accept the deal, the entry level basic wage of R5 500 will rise to R7 500 after two years (backdated to July last year when the increase was due), and R8 450 in the third year – still short of the R12 500 basic minimum wage initially demanded by Amcu.
Workers have forfeited the R29 837 in basic wages they would have earned if they had accepted the first offer. Healy said the strikers had been “starved back to work”.
“It sounds harsh, but you simply cannot sustain a strike for this duration, it’s unprecedented in our country and it ranks among the biggest strikes globally in history.”
Amcu’s goal of permanently shifting the low-wage structure was “honourable”, but it hadn’t come close to achieving its demands and had paid a heavy price.