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Strikes stoke worries for S Africa's economy

In what has become an annual ritual, thousands of striking workers have taken to the streets in South Africa this month, adding to fears that the economy's tepid recovery could slow even more.

business Updated: Jul 15, 2011 08:26 IST

In what has become an annual ritual, thousands of striking workers have taken to the streets in South Africa this month, adding to fears that the economy's tepid recovery could slow even more.

The mid-year winter months are known as "strike season" in South Africa, where contract negotiations around the end of the fiscal year on June 30 are routinely marked by strike calls from the politically powerful unions.

The sight of thousands of workers marching through the streets -- singing labour anthems and carrying posters demanding double-digit increases -- has become a sign of the season.

This year, 180,000 workers in various industries, including the oil refineries, pharmaceuticals, industrial chemicals and engineering, have gone on strike.

The stayaway, which began July 4 and added two new unions Monday, has started to pinch with some petrol stations hit by shortages as strikers block tanker trucks from leaving fuel depots.

Marches have also turned violent in some areas, with reports of strikers burning tyres, throwing rocks at cars, attacking non-striking workers and clashing with police.

And the threat of a stayaway is also looming in the key coal and gold mines, whose workers are currently locked in messy negotiations with employers.

So far this year's strike isn't as bad as 2009, when 1.3 million public-sector workers walked off the job for three weeks and ground many government services to a near-halt.

But it has added to fears of a slowdown in Africa's largest economy, which posted 2.8% growth last year after shrinking 1.7% in 2009.

South Africa's finance minister has forecast 3.4% growth for 2011.

But analysts warn that economic gridlock caused by the strike, combined with a bleak overall business picture, threatens to push that figure lower.

"The hiatus in activity because of the industrial action can't be seen to be good for economic growth," Razia Khan, head of Africa research at Standard Chartered bank, said.

"Clearly it doesn't help in terms of boosting investor sentiment."

"Within a context of a weak economy, crises abroad, unemployment, low labour market penetration, (the strike) is in relative terms potentially more disruptive than we've experienced in previous years," said George Glynos, an economist at research firm Econometrix.

Glynos criticised the powerful trade union movement, a close ally of President Jacob Zuma's African National Congress, for creating a rigid labour market with annual above-inflation raise demands -- which he said slows job creation in a country with 25% unemployment.

"It's a tragedy that this is unfolding in a country that's got such high levels of unemployment, where a number of people would probably happily accept lower wage levels," he said.

Unions are demanding increases well above the 4.6% inflation rate posted in May.

Engineers and metalworkers want a 13% raise, while workers at oil refineries and related industries want 11 to 13%.

But unions say the increases are needed to close massive wage gaps inherited from apartheid, leaving South Africa with the world's largest divide between rich and poor.

The minimum salary at petrochemicals firm Sasol, for example, is 4,000 rand ($580, 410 euros) a month. Executive directors at Sasol on average make 400 times that amount, unions say.

"Our members are producing every day, but here they are unable to earn a living wage that can afford the basic necessities," John Appolis, a spokesman for the Chemical, Energy, Paper, Printing, Wood and Allied Workers Union, said.

"But on the other hand, CEOs, executive directors, are earning obscene salaries."