Looming strikes threaten South Africa’s economy

Looming strikes in the steel sector and concerns that Eskom employees will soon follow suit will have a disastrous impact on South Africa’s already bleak economic growth.

This month (April 2023), wage negotiations kicked off in the steel and energy sectors – both of which involving South Africa’s biggest trade union, the National Union of Metalworkers of SA (Numsa).

Numsa said that it’s mobilising for the “mother of all strikes” at ArcelorMittal SA (Amsa) – Africa’s largest steelmaker – after wage talks reached a deadlock at the beginning of the month.

According to Numa, the parties reached consensus for a 2% increase in employer contributions to the pension fund and for 70% and 80% contributions on medical aid in 2024 and 2025, respectively; 90-day paternity leave per occurrence; and an R20,000 increase for funeral benefits.

However, Numa rejected the 6% wage increase attached to this deal, which resulted in Amsa retracting the rest of its offer.

Due to Amsa negotiating team’s “arrogance and immaturity” in wage talks, Numsa reverted to its initial demands for a 15% pay increase, including all the revised abovementioned benefits, said Numsa.

“We are currently convening general meetings in all Amsa centres as part of giving feedback to our members to mobilise them for industrial action. We are in contact with our global partners throughout the world in order to amplify the message that Amsa is a brutal employer,” added Numsa.

Similarly, Eskom unions are also demanding a 15% wage increase for the embattled power utility employees, including performance bonuses, housing, electricity and cellphone allowances, and a once-off danger allowance, among others.

Wage negotiations took place from 19 to 21 April, and the unions have since rejected the utility’s offer of a 3.75% wage hike, accusing Eskom of approaching the talks in a ‘shambolic and unprofessional’ manner.

They will recommence talks on 8 May 2023, but already things seem to be going pear-shaped.

This year’s wage negotiations follow an impasse in 2022 that led to an unprotected strike, forcing the power utility to agree to a 7% wage increase agreement after a week of protests that pushed load shedding to stage 6 for the first time in years.

This raises concerns that the wage negotiations will reach a deadlock, resulting in protests like those experienced in 2022, dealing a heavy blow to Eskom’s already fragile capacity to generate electricity which will likely cause higher stages of load shedding in the country.

This would compound the effects caused by a likely strike in the steel industry, which contributes about 1.5% of GDP and employs almost 200,000 people.

“If the unions follow through on the strike threat, these labour disruptions would add massive downside pressure on Q2 economic activity stemming from the high intensity of load-shedding so far in April,” said the Bureau for Economic Research (BER).

South Africa at a tipping point

Growth prospects for South Africa in 2023 now range from 0.1% to 0.9%, with most expectations on the lower end of the range. The IMF has the least optimistic outlook at 0.1%, while the National Treasury’s expectation of 0.9% is largely out of date, having been pencilled in at the time of the Budget in February.

The economy is far from heading in a positive direction, with clouds already gathering for second quarter data, said the BER, and strike action will certainly exacerbate this.

The potential of an Eskom strike and, therefore, worsening the levels of load shedding is alarming when you consider it has already done considerable damage to South Africa’s economy.

Energy expert Clyde Mallinson said load-shedding has crushed South Africa’s economic growth and has made the country much poorer, adding that the country’s gross domestic product (GDP) is around 20% lower than it should be because of a lack of electricity supply since 2008.

The latest World Bank data shows South Africa’s GDP declined from $458 billion to $419 billion over the last decade. In comparison, Kenya’s GDP increased from $47 billion to $110 billion over the same period.

This shows that while Kenya’s economy grew 134% from 2011 to 2021, South Africa’s economy shrunk by 9%. South Africa’s population also increased from 52 million to 59 million over this period, which means citizens are now significantly poorer than ten years ago.

“The long-term effect of load-shedding on South Africa’s macro economy is horrendous. It has been devastating,” said Mallinson, and with such meagre growth prospects for 2023 and beyond, strike action could push South Africa into a technical recession.

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