South Africans call it the strike season. It happens every two years when wage negotiations take place in different economic sectors and cripple them with labor walkouts. This year, strike season is affecting the mining, construction and automobile sectors. The only thing out of the ordinary this time is the exceptionally high pay demands from competing unions, at a time when companies are struggling in a tough international environment.
The confederation of South African trade unions, COSATU, has long been a key player in national politics. It is now going through a difficult transition, however, with increased infighting. At the top, its longtime secretary-general and president are at loggerheads, while some of its member unions are losing ground in several sectors, from mines to transportation.
Vic Van Vuuren, the director of the International Labor Organization in South Africa, explained.
“There is a move at the shop floor level, where workers are disillusioned about what is happening within COSATU, and are starting to form their own breakaways. That in itself is leading to a shop floor debate where the unions are trying to get better deals with their members and leading to very high demands,” said Van Vuuren.
Surging pay demands
Wage demands are, indeed, especially high this year. In the gold mining sector, for example, the COSATU affiliate - the National Union of Mineworkers - is seeking a 60-percent pay raise, while a rival union - the AMCU - is demanding a 150-percent increase.
Corporate management is sticking to its offer of a 6.5 percent wage increase and seems to be reactive rather than proactive in what is becoming an entrenched fight. Van Vuuren suggested that companies are missing an opportunity to bring some stability to the mining sector by failing to take a long range view.
“They seem to be like rabbits in headlights, not knowing whether to move left or to move right, and waiting to see how the unions play out against each other. That is very dangerous," said Van Vuuren. "Management seems to have rested on their laurels, and say, 'OK, for social dialogue we need to focus on it only when we do our wage bargaining.' And it isn't the case because poverty levels and the wage gap is so high that it's going to be on the agenda continually."
But the mining sector finds itself in an especially difficult position this year. Charmane Russell, spokesperson for the gold sector at the Chamber of Mines, said it is particularly true in her industry.
“The costs in the industry have risen quite significantly. Labor costs certainly, and administrative costs, things like electricity, that has gone up several hundred percent, input costs like steel. At the same time, production has gone down. Currently, in the industry, about 60% of gold producers are not profitable,” said Russell.
South Africa once was the world’s largest gold producer. Falling gold prices, however, combined with costs of mining some of the earth’s deepest gold reserves and a lower grade ore has taken its toll. Add chronic strikes in the gold and platinum sectors, along with poor working conditions, and production has plummeted.
The situation is adding pressure to Africa’s largest economy, already struggling with sluggish growth.
Since last year several mines already have announced retrenchments and restructuring plans.
The situation compounds one of South Africa’s most serious and chronic issues: an unemployment rate of more than 25 percent. With so many out of work, each worker often supports his or her extended family. And some have made the case that these very large union wage demands often are based on exceptionally high need rather than productivity increases.
Innovative ideas sought
The ILO's Van Vuuren said a complete overhaul of the current system is needed in order to get out of this vicious circle.
“Government should sit with business leaders and come up with some social pact that is radical and futuristic. But I just don't see the same creative kind of solutions that we found in the 90's and the 2000's. We desperately need something that says to the South African masses: “We care, we're here to work with you, this is what we're prepared to put on the table," said Van Vuuren.
Vanessa Phala, executive director of the employer's group Business Unity South Africa, said employers are ready to engage in wide-ranging discussion.
“You can't have a situation where unions come in and they demand 120% increase. That's not possible, and that means they are negotiating on bad faith. Even employers should bargain in good faith. The business community in South Africa is willing and able to come up with whatever alternative to make sure we are not going to sink the economy. But we have to be realistic as well. We are operating in a global market and we need to remain globally competitive,” said Phala.
Government, unions and business are preparing a first-of-a-kind summit to be held by the end of the year where each side can sit down and talk after tensions surrounding wage negotiations have subsided.