The road since the end of apartheid in 1994 has not been a smooth one, but in the two decades that followed, it has been characterized by foreign investment and considerable optimism across all sections of society.
But the government of Jacob Zuma has struggled to maintain the momentum started by Nelson Mandela and the last 12 months have been plagued with growing unrest, strikes and violence.
The last thing South Africa needed was another wave of strikes: the country was voted this year into the top 15 global destinations for foreign investment, according to Grant Thornton’s Emerging Economies report, but a falling currency, weak commodity prices and – crucially – a wave of worker unrest is undermining investment and stifling growth.
A Reuters article recently reported the National Union of Mineworkers (NUM) is consulting its membership on a strike in the gold industry, which could start this week following an impasse in salary talks with mining companies. Gold and precious metals remain South Africa’s largest export in spite of wildcat strikes last year that cost the country billions and cost the lives of more than 50 people.
Gold Sector Under Pressure
85,000 textile workers are likely to walk out next week and 30,000 auto workers at Ford, Toyota and General Motors (plus a host of sub-contractors) have been on strike this week, said to be costing the country $60 million a day. As Reuters points out, a mining strike would heap further pressure on the declining gold industry, where about half of South Africa’s shafts are losing money as producers are squeezed between growing worker militancy that has pushed up wage costs and falling bullion prices.
Reports state that labor accounts for over 50% of costs and gold’s spot price is 30% lower than the record peak of over $1,920 an ounce it attained almost two years ago. The NUM represents about 64% of the roughly 140,000 miners in the South African gold industry. The opposing sides in the gold sector remain far apart after the weeks of talks with the employers offering just 6% wage increases for some categories.
While inflation and rising living costs, coupled with a growing dissatisfaction with inequality and the slow growth in living standards have created the seed bed for unrest, workers’ agitation has been exacerbated by the rivalry between the NUM and the hard-line startup union, The Association of Mineworkers and Construction Union (AMCU), which represents about 17% of the gold labor force. The AMCU has submitted wage demands as high as 150%, making compromise on the part of the NUM near-impossible without being seen to be weak compared to the AMCU.
As strikes spread across the economy, you have to wonder if the wheels are coming off the BRICs’ emerging market bus – of them all, only China is still posting respectable growth and positive PMI figures.