As wage negotiations gather momentum, economists are warning of increasingly unstable labour relations and more strikes as workers demand higher pay to cope with the soaring cost of living.
The Reserve Bank’s monetary policy committee is expected to hike interest rates by at least 50 basis points this week, increasing the pressure on consumers. Economists say rampant fuel and food inflation are the biggest concerns for the lowest-paid workers because these items account for the biggest portion of their costs.
Last week, the National Union of Metalworkers of SA (Numsa) confirmed it was demanding a 20% pay rise in the automotive sector. This follows Eskom recently agreeing to a 7% increase for most of its workers.
The Public Servants Association is also pursuing industrial action at the SA African Revenue Service, which has tabled a 1.39% offer. The PSA is instead demanding 11.5%. The union is also in dispute in separate public-sector wage talks, demanding a 10% increase after rejecting the government’s 2% offer.
PSA spokesperson Reuben Maleka described the government’s 2% wage offer as an “insult”.
Ratings agencies have expressed doubt about government’s ability to rein in its wage bill, which is a significant contributor to public debt.
Azar Jammine, chief economist at Econometrix, expects to “see more strike action” in SA, saying wage negotiations in the public sector posed the “biggest challenge of all” since they have “enormous implications for how investors and ratings agencies see us”.
“For the last year-and-a-half or so ratings agencies and investors have been impressed by the manner in which [the National] Treasury has been able to constrain public-sector remuneration, but this week we saw the Public Servants Association declaring a dispute,” Jammine said. “Eskom granting workers that 7% pay increase has created an unfortunate precedent for unions in many other areas of the economy, including the public service.”
This trend is spilling into the private sector, with the pay demand in the automotive sector being one example. Jammine believes the 20% increase Numsa is demanding is extreme and probably a tactical starting point in negotiations.
Stanlib chief economist Kevin Lings also expects to see more strikes because “it does feel like the unions and companies are going to be quite far away from each other as a starting point”.
Lings agreed that though interest rates are part of the mix piling pressure on consumers, the biggest impact is rising inflation, particularly the “inflation rate on the two key items of food and fuel — because the lowest 40% of income earners spend 45% of their money on public transport and food”.
Lings said SA had a “very desperate labour market” and was “1.4-million jobs below where we were before Covid”. Those still working often subsidise household members who have been retrenched, further fuelling the demand for higher wages.
One factor he said could mitigate the potential for strikes is that until recent inflationary pressure, unions had been “arguing for the retention of jobs and broader employment benefits with less focus on outright salary adjustments”, as they recognised the economy was struggling.
Businesses are complaining they are going through a tough time, but their tough time does not compare at all to the tough time that workers and their families are experiencing .....
— Numsa national spokesperson Phakamile Hlubi-Majola
“I believe an element of this persists among the unions, so I don’t think this [round of negotiations] will be about wages at all costs. If wages are forced substantially higher, the net result is that companies will look to cut costs through further retrenchments.”
Numsa national spokesperson Phakamile Hlubi-Majola is predicting more strikes, saying there is “fertile ground” for unrest in a country with such high levels of inequality.
“Businesses are complaining they are going through a tough time, but their tough time does not compare at all to the tough time that workers and their families are experiencing ... SA’s biggest crisis has always been inequality, and in countries where there are extremely high levels of inequality there is fertile ground for revolution. That’s where we are headed — unless radical changes in the structure of economy are made,” she said.
Hlubi-Majola said the double-digit increase Numsa is demanding in the automotive sector are a “direct response” to the socio-economic conditions workers are facing. Some union members had to resign or take pensions early because they “are in such deep financial distress”.
Connie Mulder, head of the Solidarity Research Institute, said while the union would make sure its members wouldn’t fall behind in wage terms, it didn’t believe in making extreme demands that would severely affect employers also struggling to recover from the pandemic.
Mulder believes there “should be a middle ground where we can find one another”.
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