Mercedes S.Africa Strike Ends, Union Demands Sector Pay Hike

by
Reuters
A two-day wildcat strike at a Mercedes Benz plant in South Africa ended on Tuesday but industrial union NUMSA demanded a hefty pay hike for the sector, raising the prospect of labour unrest in factories alongside turmoil in the mines.

* Auto sector 20 percent wage rise demands hit rand

* Currency tumbles for ninth straight session

* Rate cut hopes dashed

A two-day wildcat strike at a Mercedes Benz plant in South Africa ended on Tuesday but industrial union NUMSA demanded a hefty pay hike for the sector, raising the prospect of labour unrest in factories alongside turmoil in the mines.

The German luxury car maker said Friday's unscheduled walkout had nothing to do with wage demands but the stoppage served as further evidence of the fragility of labour relations in Africa's biggest economy, hitting the rand.

The currency tumbled for its ninth straight session, breaching the 9.50 level against the dollar for the first time since early 2009 after the National Union of Metal Workers of South Africa (NUMSA) threatened widespread walkouts if its pay demands were ignored.

"We are demanding a 20 percent increase across the board," NUMSA national treasurer Mphumzi Maqungo told Reuters. "If our demands are not met we will have no option but to go to the streets."

South Africa's annual mid-year wage negotiations - known locally as "strike season" - normally start with lofty wage demands that are then whittled down to something slightly above inflation, now around 6 percent.

However, the union-management choreography has been derailed by a vicious union turf war in the mines that spilled over into violence and the deaths of 50 people last year, including 34 shot dead by police, the bloodiest security incident since the end of apartheid in 1994.

The turmoil is far from over, with a wildcat strike at platinum firm Lonmin <LMI.L. and a union official shot dead in a bar by an unknown gunman.

On Tuesday, security guards fired rubber bullets at stone-throwing strikers at chrome mine near the platinum belt town of Rustenburg, 120 km (70 miles) northwest of Johannesburg, the company said.

South Africa's car makers saw minor labour disruptions in 2012 but investors fear a repeat of wage-related strikes that crippled the sector in 2010 as the economy was struggling to emerge from recession.

Car industry bosses made clear they would not entertain NUMSA's demands, setting the stage for a showdown when a three-year wage deal worth around 10 percent a year expires at the end of next month.

"It is common cause that the employers will not settle at 20 percent," said Thapelo Molapo, chairman of the Automobile Manufacturing Employers Organisation.

RAND ON ROPES

The dramatic slide in the rand in the past two weeks is likely to stoke inflation and has put paid to any hopes of a growth-boosting interest rate cut from the central bank at its two-monthly policy meeting on Thursday.

Rising prices, union turmoil and a limping economy - 2013 growth is forecast at 2.7 percent - may damage the African National Congress (ANC) in an election due early next year.

However, there is almost zero chance of the party that has ruled since the end of white-minority rule losing its outright majority in parliament.

Mercedes said its strike related to a company investigation into work stoppages in its paint division, and analysts had painted the swift resolution of the walkout as positive for the economy and currency, which has lost more than 10 percent against the dollar this year.

However, the threat from NUMSA, which claims 230,000 members, quickly put paid to the optimism.

"It is only a matter of time before they also feel the pinch and excessively high wage settlements will put the sector under pressure," said Merina Willemse, an economist at the Efficient Group.

South Africa produces less than 1 percent of the world's cars but the sector employs 35,000 people.

The industry, centred on Johannesburg, Durban and the coastal cities of East London and Port Elizabeth, has also been attracting billions of dollars in new investment to boost capacity and production.

It includes a number of original equipment and component manufacturers such as Toyota, Nissan, Volkswagen and Ford.