Johannesburg - It is difficult to quantify the impact of the strikes on growth this year but economists are making ballpark estimates of potential losses to the economy – due to lost production and slower spending.
In a difficult global environment, supply disruptions have added substantially to the challenges facing local mining companies, manufacturers and other sectors of the economy.
Mike Schussler, the chief economist of Economists.co.za, said an indication of the extent of the damage inflicted on growth was the 25 percent year-on-year decline in production by the strike-bound automotive sector in August.
Due to problems in this subsector, total manufacturing output fell 3.6 percent month on month in August, cutting the annual growth rate to 0.2 percent from 5.5 percent in July.
Schussler noted that September figures for the automotive sector would be even worse, possibly a decline of 75 percent, followed by shrinkage of 25 percent in the current month. Problems in the subsector would reduce the manufacturing sector’s contribution to total gross domestic product (GDP). And he noted that manufacturing made up about 15 percent of the economy.
Nomura strategist Peter Montalto said strikes were always factored into analysts’ growth forecasts because they happened every year.
However, strike activity this year had been above forecasts and he estimated “the whole strike season may shave off some 0.8 to 1.2 percentage points off growth”.
Citi economist Gina Schoeman said strike impact was both direct and indirect. So losses would relate not only to production foregone but also to spending that did not take place because mineworkers were not being paid.
She also cited the indirect impact from mining strikes on other sectors “such as manufacturing and transport”. She calculated that, if the three sectors were excluded from the calculation, GDP in the first half would have grown 2.3 percent year on year instead of the 2 percent achieved.
Schoeman warned: “The concern for the second half is that strikes extended to manufacturing and transport, while remaining in the mining sector. These three sectors make up one-third of GDP.”
Absa Capital economist Peter Worthington estimates the combined strike activity this year will take 0.5 percentage points off GDP growth.
In addition to the immediate impact, the consequences of the unrealistic wage demands and the protracted and often violent strikes will have a long tail.
Investors are reluctant to take their chances in the local economy. BMW South Africa has already lost the opportunity to bid for the production of a new car model for the global market due to strikes, while the Renault-Nissan alliance and west African conglomerate Stallion Group have announced plans to launch vehicle assembly in Nigeria.
These moves are a sign of what lies ahead in terms of jobs lost or jobs not created. While workers are free to withhold their labour, investors are free to withdraw their capital. - Business Report