Bloomberg News

South African Wage Disputes May Stoke Inflation, Affect Mines

July 08, 2011

July 8 (Bloomberg) -- South Africa will probably be hit by a wave of strikes over the next few weeks as mine and factory workers demand wage increases that are more than double the inflation rate.

Petroleum, chemical and packaging industry workers plan to down tools on July 11, according to two unions that say they represent more than 70,000 workers. Stalled wage talks threaten to spark separate labor action by coal and gold miners, while steel and engineering workers have been on strike since July 4.

The pay settlements required to avert or end the strikes are likely to push up consumer prices and increase pressure on the central bank to raise interest rates from a 30-year low. Inflation accelerated to a 12-month high of 4.6 percent in May from 4.2 percent the month before, led by rising oil and food costs.

“Inflation is rising and there are upside risks,” Adenaan Hardien, chief economist at Cadiz Asset Management in Cape Town, said in a telephone interview today. “A key risk is wage increases. If strike action is perpetuated” output and growth could also be affected.

Wage settlements negotiated on an industry wide basis averaged 8.2 percent in the first quarter, according to data collated by Andrew Levy Employment Publications, a Johannesburg- based advisory service and research company.

The Chemical, Energy, Paper, Printing, Wood and Allied Workers Union and the General Industries Workers Union of South Africa are demanding increases of between 11 percent and 13 percent and improved benefits, while employers are offering between 4 percent and 7 percent.

‘Intransigence and Greed’

Hundreds of companies will be affected by the strike, including Sasol Ltd., the world’s largest producer of motor fuel from coal, and Sappi Ltd., the world’s largest maker of glossy paper, the unions say. They also plan to curb production at refineries owned by Engen Petroleum Ltd., a unit of Malaysia’s Petroliam Nasional Bhd and Royal Dutch Shell Plc.

“The strike comes as a direct result of the intransigence and greed of the employers,” the unions said in an e-mailed statement yesterday. Given the “rising cost of living, increasing poverty and inequalities, our members, though employed, cannot even afford the basic necessities.”

Anglo American Plc, Xstrata Plc and other coal producers may also soon face labor action that threatens to disrupt production at mines that supply the fuel to Europe, India and China.

The National Union of Mineworkers is demanding 14 percent wage increases. It is one of three unions opposing the Chamber of Mines’ proposal to raise coal miners’ wages by 5 percent to 6 percent, depending on skills.

Avert Strike

The Commission for Conciliation, Mediation and Arbitration may issue a certificate of non-resolution on or after July 20, a procedural step necessary before unions are allowed to strike. The Johannesburg-based chamber said in an e-mailed statement yesterday it was hopeful a settlement could be reached that would avert a strike.

The NUM is also demanding 14 percent increases for its members employed by gold producers, including AngloGold Ashanti Ltd. and Gold Fields Ltd., who are offering 5 percent raises. Negotiations are due to resume on July 13.

“We have already begun the mobilization for a massive strike action by over 250,000 of our members in both the gold and coal mines,” said Frans Baleni, the union’s general secretary, in an e-mailed statement yesterday. “A real war has just started, a war over a living wage.”

The NUM is also canvassing whether workers employed by Anglo American Platinum Ltd. favor striking to pressure the world’s largest producer of the metal into meeting their demands for 20 percent wage increases. The company is offering 4.6 percent.

Meanwhile, talks aimed at ending a strike by steel and engineering workers are due to resume later today, according to Karl Cloete, deputy general secretary of the National Union of Metal Workers. The union is demanding 13 percent increases, while the Steel and Engineering Industries Federation of South Africa, which represents employers, is offering 7 percent.

Editors:

--Editor: Gordon Bell

--Editor: Gordon Bell

--With assistance from Lauren van der Westhuizen in Cape Town Nef and Carli Lourens in Johannesburg. Editors: Gordon Bell, Vernon Wessels

To contact the reporter on this story: Mike Cohen in London at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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