Work stoppages in South Africa may reach record levels this year as unions demand inflation-busting pay increases that threaten to deter investment and worsen the 25 percent unemployment rate.
Strikes by petroleum, chemical, engineering and packaging workers curbed factory production and interrupted supplies from refineries owned by Sasol, Royal Dutch Shell and BP this month, causing fuel shortages. Tens of thousands of coal miners have also downed tools and gold and platinum miners have threatened to follow suit.
“For some of the labour leaders to be absolutely insistent and inflexible about double-digit salary increases is not sustainable,” Bonang Mohale, the chairman of Shell’s South African unit, said last week. “We end up having fewer, not more jobs. In this ultracompetitive environment, if you as a country aren’t growing, you’re dying.”
Workers won average pay raises of 5.2 percentage points over the inflation rate last year and 3.2 percentage points in 2009, more than in Brazil, the US or any country in the EU except for Bulgaria. Pay increases have outstripped productivity gains for three years, adding to industry costs, even as a 38 percent surge in the rand against the dollar since the start of 2009 damps exports.
The rand was steady yesterday, and was bid at R6.7692 to the dollar at 5pm.
The jump in costs has made companies, which fired a million workers following the recession in 2009, reluctant to rehire.
Pick n Pay Stores this month said it planned to fire 3 137 workers, or 8.6 percent of its workforce, to trim labour costs.
The 25 percent jobless rate, the highest of 61 countries ranked by Bloomberg, is little changed from a peak of 25.3 percent in the third quarter of last year, even though the economy has expanded for seven successive quarters. The number of people in work fell by 14 000 to 13.1 million in the first quarter, Statistics SA said.
Unions representing about 320 000 workers in the metals and engineering industries agreed to 8 percent pay increases for the next two years on July 17 after downing tools for two weeks.
Oil industry workers, who are demanding pay raises of at least 10 percent, have been on strike since July 11. The inflation rate is 5 percent.
Coal miners
Coal miners, who are demanding a 14 percent increase, went on strike on Sunday, said National Union of Mineworkers spokesman Lesiba Seshoka.
Managers have offered 8.5 percent, according to Frans Barker, the lead negotiator at the Chamber of Mines, who estimates the labour action may involve about 30 000 workers.
De Beers has been contending with a separate strike since Friday, when some of its local employees walked off the job after failing to win raises of as much 10 percent. The company, which said it was still assessing how many workers had downed tools, is offering 7 percent increases.
Wage talks affecting 160 000 gold industry workers resumed yesterday and unions said they would strike if their demands for a 14 percent increase were not met. Employers, including AngloGold Ashanti and Gold Fields, are offering maximum 5.5 percent increases.
Labour relations
“Companies are very quietly agreeing to high wage settlements and then just laying off workers,” Loane Sharp, an analyst at Adcorp, said on July 15. “They are not going to stop.”
South Africa lost a record 14.6 million days to strikes last year, compared with a peak of about 9 million under apartheid in the 1980s, Jackie Kelly, an analyst at Andrew Levy Employment, said last month.
Strike action was expected to escalate 22 percent this year, Sharp said.
The adoption of the Labour Relations Act in 1995, which promoted collective bargaining, has fuelled strike action, according to Adcorp. The World Economic Forum’s 2010 Global Competitiveness Report, which ranked 139 countries, found South Africa had the eighth-highest level of industrial conflict.
“Labour relations are much more contentious in South Africa than other emerging market economies,” the World Bank said in a report last week. “This is an implicit tax on investment, partly explaining why global investors, armed with options, have eschewed long-horizon opportunities in South Africa.”
Investment record
Investment as a percentage of gross domestic product (GDP) was 21.7 percent in South Africa last year, compared with 48.8 percent in China, 37.9 percent in India and 32.5 percent in Indonesia, according to the International Monetary Fund. Foreign direct investment in South Africa was R11.4 billion in 2010, 0.004 percent of GDP.
“Businesses can make do with less labour,” Jac Laubscher, the group economist of Sanlam, said this month. Strikes and rising labour costs “just make it more attractive for them to mechanise”.
Unions point to pay awards for managers that outstrip anything workers are receiving to justify their demands.
A study by accounting firm PwC found the median salaries of executive directors of the 40 biggest companies on the Johannesburg exchange rose 23 percent to R4.8 million last year, while their short-term bonuses surged 58 percent to R3.8m.
South Africa’s Gini coefficient, a measure of income inequality, is 0.68, according to the Treasury, one of the highest in the world and higher than at the end of apartheid. A reading of zero means complete equality, while a reading of one means complete inequality.
“Wage negotiations should not be viewed in isolation, but treated as one of the tools to be used to address the triple crisis of poverty, unemployment and inequality,” Cosatu said. “The most concrete way to address this inequality is to close the wage gap.” – Bloomberg