Numsa, the biggest union for manufacturing, plans to launch an open-ended nationwide strike on Monday in the auto sector in a dispute over pay affecting over 30 000 assembly line workers.
The strike in the car industry, which contributes at least 6% to the country’s GDP and 12% of its total exports, could compound the woes of South Africa’s economy, reeling from strikes in mining that have slowed growth.
“The national executive committee will formalise the strike notice tomorrow for the start of the national strike on Monday,” Alex Mashilo, chief negotiator in the auto sector for the National Union of Metalworkers of South Africa told Reuters today.
Mashilo said the strike would continue until a wage settlement was reached. Labour has revised its initial demand for a 20% increase to 14%, well above the central bank’s projected inflation rate for the year of 5.9%.
Major car makers in South Africa, including Toyota, Ford, General Motors and Nissan, were only prepared to offer 6% during negotiations to replace a three-year wage deal ending on June 30, Mashilo added.
Toyota, which reported strong third-quarter sales growth, is also the market leader at about 25% of all vehicle exports from South Africa, shipping 6 668 units in July.
BMW’s South African operations have already been hit by a strike that started last week when 2 000 workers walked off the job over pay. The company has made up for lost production by rolling off more cars at its other factories.
A prolonged and massive auto strike threatens to erode some of the recent gains made by the industry as it tries to match a pre-recession historic export peak of 284 000 units in 2008.
“The impact would be extensively negative and the biggest issue is a loss of reputation that takes a long time to recover,” said Thapelo Molapo, chairperson of the Automobile Manufacturers Employers’ Organisation, which represents car makers.
Besides the loss of production and revenue, a strike similar to the last one in 2010, which lasted eight days, could send ripples through financial markets.
“More strike action will keep negative sentiment towards South Africa elevated and we can see that impact on the rand currency underperforming and investment flows slowing,” said Gareth Brickman, market analyst at ETM Analytics.
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