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South African Economy Hit by Metalworkers' Strike


Members of the National Union of Metalworkers (NUMSA) march on the first day of a nationwide strike in Johannesburg, July 1, 2014.

Members of the National Union of Metalworkers (NUMSA) march on the first day of a nationwide strike in Johannesburg, July 1, 2014.

A strike by 220,000 engineers and metalworkers has dealt major blow to South Africa's economy.

The labor dispute has been marked by violent clashes between police and striking workers and reports of looting and intimidation by union members.

The strike comes just a week after settlement of a five-month-long strike by platinum workers. The walkout cost three main platinum mining firms $2.25 billion in lost revenue

The latest action was called by the National Union of Metalworkers of South Africa, or NUMSA, the country’s largest union. NUMSA is demanding a 12 percent pay raise and better housing allowances for workers.

The strike affects around 10,500 companies, including steel producers, foundries, construction companies and automotive suppliers.

General Motors South Africa (GMSA) suspended vehicle assembly in Port Elizabeth on Thursday, saying that the strike left “no other option.” The company builds around 50,000 vehicles a year.

“The ongoing labor disruptions are harming the South African economy and affecting the country’s image around the globe," said Gishma Johnson, General Motors SA's communications manager. "We recommend that government, business and labor need to work together in a constructive manner to implement solutions which are in the best interest of the country as a whole.”

A protracted strike could also exacerbate construction delays at two badly needed power stations being built by Eskom, the state utility.

On Thursday police fired rubber bullets at workers who were blocking an entrance to the Eksom Medupi power station construction site.

Local radio reports said striking workers assaulted people and looting offices in Johannesburg. NUMSA denied the allegations.

Ratings agency Moody’s warned that this strike, combined with a weak investment climate, could lead to another credit downgrade. That would increase loan costs for borrowers and likely damage investor confidence, which has already been bashed by the country’s lingering “strike season."

Negotiations have been unsuccessful so far, but discussions are expected to continue through the weekend.

For businesses in South Africa, a settlement cannot come soon enough. The stoppage is estimated to be costing around $28 million a day.

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