July 1 (Bloomberg) -- South Africa’s economy, set to miss its growth target this year, is under threat from an indefinite strike in the steelmaking and engineering industry that’s affecting construction of power plants.
About 220,000 members of the National Union of Metalworkers of South Africa, the country’s biggest labor group, stopped work to support their request for more pay from companies including Bell Equipment Ltd., Evraz Highveld Steel & Vanadium Ltd. and Aveng Ltd.’s steel unit. While Numsa lowered its wage demand to 12 percent last week from 15 percent, employers are offering as much as 8 percent in the first 12 months of a three-year deal. South Africa’s consumer-price index rose 6.6 percent in May.
“The strike is indefinite,” Numsa President Andrew Chirwa said on Johannesburg-based Talk Radio 702 today. “The only way to end the strike is to have a reasonable offer on the table. It’s a fallacy in this country that anybody will live with any wage increase that’s related to CPI.” Numsa members held marches in Johannesburg, Cape Town, Durban, Port Elizabeth and East London today.
About 10,500 companies may be affected by the stoppage, accounting for about 4 percent of gross domestic product, Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said yesterday. The stoppage may last at least a month, and if it does, third-quarter GDP may shrink, she said. A strike by more than 70,000 platinum mineworkers caused the economy to contract in the first three months of the year.
Work on boilers at the Kusile coal-fired power plant being built by utility Eskom Holdings SOC Ltd.’s has stopped because of the strike among contractors employed by Murray & Roberts Holdings Ltd., the country’s biggest construction company. M&R employs 1,400 people at the site of what will be South Africa’s largest electricity facility, Ed Jardim a company spokesman, said by phone. At Eskom’s Medupi station, about 1,000 workers didn’t clock in, he said from Johannesburg.
Eskom is building the facilities, which will each have the capacity to generate about 4,800 megawatts of electricity, to relieve power shortages that have constricted the economy.
About 10,000 contractors reported for duty today at each site, compared with the usual 15,000, Eskom spokesman Andrew Etzinger said by phone. “We’re expecting additional industrial action tomorrow,” he said. “Today seemed more like mobilization.”
Gross domestic product contracted 0.6 percent in the three months through March as the mineworkers strike shut shafts owned by Anglo American Platinum Ltd., Lonmin Plc and Impala Platinum Holdings Ltd. Mining accounts for 5 percent of GDP and manufacturing about 15 percent.
South Africa will probably miss this year’s economic growth target of 2.7 percent, because of the strike, Finance Minister Nhlanhla Nene said in the capital, Pretoria.
“The only thing we can do to find each other is to appeal for these to be resolved much more quickly, in an amicable way,” he said at a separate event in Johannesburg, referring to work stoppages. “In the end, no one benefits; if you look at the long, protracted mining strike, we all stand to lose.”
Steel and engineering companies employ in excess of 300,000 workers, according to the Steel and Engineering Industries of Southern Africa. In 2013, the industry accounted for 283 billion rand ($26.7 billion) of output, representing about 17 percent of manufacturing.
The strike, which Numsa says will be it’s biggest to date, has garnered support from the National Union of Mineworkers.
Labor Minister Mildred Oliphant met with Seifsa and Numsa yesterday and a follow-up has been tentatively scheduled for July 4, the federation said in an e-mailed statement. The union gave the federation a memorandum in Johannesburg today, it said.
“We hope that it will be possible for us, employers and labor to find one another over the next few days,” Seifsa Chief Executive Officer Kaizer Nyatsumba said in e-mailed statement.
Last year, automotive companies including Toyota Motor Corp., Volkswagen AG and General Motors Co., lost about 20 billion rand in production revenue after a Numsa-led strike. About 30,000 employees stopped work for 15 days, demanding higher wages.
Some motor manufacturers may be forced to stop production from the end of next week if part suppliers continue to be affected by the stoppage, Business Day reported today.
The strike won’t directly affect projects by members of the South African Forum of Civil Engineering Contractors because Numsa isn’t affiliated to it, Safcec President Norman Milne said in an e-mailed response to questions. It may affect supply of reinforcing or other steelwork-type items, he said.
--With assistance from Rene Vollgraaff and Kevin Crowley in Johannesburg.