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S. African Engineering Strike Latest Blow to Sickly Economy

Members of the National Union of Metal Workers of South Africa, NUMSA, hold banners as they protest with others during national strike action in Cape Town, South Africa, July 1, 2014.
Members of the National Union of Metal Workers of South Africa, NUMSA, hold banners as they protest with others during national strike action in Cape Town, South Africa, July 1, 2014.
Reuters

More than 220,000 South African engineering and metal workers launched a strike over wages on Tuesday, hot on the heels of a crippling platinum dispute and dealing a further blow to an already weak economy.

Members of the National Union of Metalworkers of South Africa (NUMSA), the country's largest union, and other smaller unions marched in cities including the commercial capital Johannesburg, Cape Town and Durban, NUMSA spokesman Castro Ngobese said.

"There are no talks at the moment and none are scheduled," he said. Workers are demanding a 12 percent wage hike, double the inflation rate, while employers are offering 8 percent. Local media reports earlier said NUMSA had revised its demand down to 10 percent and employers had raised their offer to 8.5 percent but Ngobese said this was not true. South Africa is still reeling from a five-month strike in the platinum mines that ended with a wage settlement last week, but not before dragging the economy into contraction in the first three months of the year.

Steel and metals manufacturing directly accounts for a fifth of the factory sector, and the impact on the economy of the NUMSA action will be heavier than that of the platinum strike, Barclays Africa said in a note.

The latest strike will likely hit companies such as construction and engineering firms Murray & Roberts and Aveng Ltd , both involved in building two crucial power stations for state-owned utility Eskom.

Murray & Roberts, which is helping build steam generators for both power stations, said no work was taking place at parts of the Kusile plant and only minimal work was being done at parts of the Medupi station.

"Approximately 1,400 scheduled employees are not at work at Kusile. We have decided to not send in any other employees to the site until we have further clarity," said Ed Jardim, a spokesman for Murray & Roberts.

Eskom expects to get the first unit of Medupi operating early next year but the strike could delay that.

Auto parts makers such as Dorbyl will also be hit, raising fears that a prolonged stoppage could affect production in the important automotive sector. As many as 20 companies supplying Toyota Motor Corp, Ford Motor, and General Motors are affected, said Ken Manners, vice president of the South African national automobile components industry body NAACAM.

"We have taken contingency plans, looking at stocking up on parts and there has been greater inter-company cooperation to try and create a buffer from the strike. The impact will really be felt if the strike is prolonged, more than a week or two," Manners told Reuters.

A four-week strike in 2013 by more than 30,000 NUMSA members at major auto makers cost the industry around $2 billion.

Eskokm targetted

NUMSA will also picket Eskom headquarters on Wednesday to press for wage increases. Eskom supplies almost all the electricity for Africa's most developed economy and is deemed an essential service, making strikes illegal.

But NUMSA General Secretary Irvin Jim hinted at the weekend that workers would defy the ban, saying the union might have "no option but to allow our members to liberate themselves".

Other companies that could be affected include Africa's biggest packaging firm Nampak, electrical cables maker Reunert and unlisted steel maker Scaw Metals.

Scaw Metals, one of the biggest steel makers in South Africa, said no production was taking place at its plants because attendance was "very low".

"We are talking about probably 80 percent of employees not reporting for work," said Bheka Khumalo, head of Human Resources. Khumalo said the strike could result in revenue losses of about 33 million rand ($3.1 million) a week and 20,000 tonnes worth of output losses.

The rand was little changed while the share prices of companies affected had also moved little in afternoon trade. NUMSA, once a political ally of the ruling African National Congress, fell out with President Jacob Zuma's government over policy last year.

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