South Africa Labor Woes Hit Key Auto Manufacturing Sector

About 30,000 workers in South Africa's auto manufacturing industry downed tools this week in a stoppage that would cost the industry about 60 million US dollars a day in lost production, according to union officials. Analysts say the labour unrest in the auto industry was unlikely to reach the level of violent strikes seen in the mining sector but still poses massive economic risks.

DURBAN, SOUTH AFRICA ) (REUTERS) - South Africa's auto strike entered its fourth day on Thursday (August 22) and has affected global carmakers operating in the country, including Toyota, Ford and General Motors.

The car manufacturing industry came to a near standstill when about 30,000 workers downed tools on Monday, adding to the labour woes of the continent's largest largest economy which has been hit by violent unrest at its mines.The stoppage would cost the industry about 600 million rand ($60 million) a day in lost production, the National Association Automobile Manufacturers of South Africa (NAAMSA) said.

South Africa faces a strike wave across leading sectors of the economy, including its struggling gold industry, already squeezed by rising costs and falling bullion prices.

The escalating industrial action spells more trouble for Africa's largest economy, which was hit last year by a wave of violent wildcat strikes in the mining sector that cost billions of dollars in lost output, dented growth, and triggered damaging sovereign credit downgrades.

Labour analyst Loane Sharp said the strike could go on longer than expected, but may not be as violent compared to the mining strikes.

"I think the strike will last three to four weeks, NUMSA wants to demonstrate it's power so it wants a longer strike with more participation in the strike but ultimately we don't have the same dynamics as we had in mining. We are not going to see the strike last indefinitely, we are not going to see huge amounts of violence, intimidation, what we are going to see is the auto manufacturers capitulate relatively quickly in the strike and exceed to workers demands," said Sharp.

The labour strife has also battered the rand, which dropped to a new four-year low against the dollar early on Thursday (August 22) after wage talks in the gold sector stalled and the main mine union said it planned to ask members to vote on a strike.

Labour analyst says the cost of the strike will be carried most of all by the consumers.

"Ultimately the motor manufacturers are not going to pay for these increases in wages, consumers will pay. The motor manufacturers will simply transfer to consumers increasing wage costs, so workers will win, the car makers will win and consumers will suffer," added Loane Sharp.

South Africa's car manufacturing sector accounts for 6 percent of gross domestic product.

The strike was called last week by the National Union of Metalworkers of South Africa (NUMSA), its largest manufacturing union, which wants pay hikes of 20 percent for its members, compared with inflation at 5.5 percent. Companies have offered 6 percent.

"In relation to wages we have submitted that we want a double-digit. When the disputes arose we started at 14 percent, we are clear now, in order for us to revert the strike we believe that anything from 10 percent and above can revert the strike. The second demand that we placed to employers for consideration is in relation to the night shift allowance where we are demanding that it must be improved. The third one is in relation to medical aid where we think that the employers once again they need to subsidise at 70 percent," said Mphumzi Maqungo, National Treasurer of the National Union of Metalworkers.

Toyota said 80 percent of its 8,000-strong South African workforce had not turned up for work.

Guy Kilfoil, a spokesman for BMW in South Africa, said the strike was costing it 345 cars a day.

Wages in the auto sector range from about 850 US dollars a month for basic workers to 1,800 US dollars a month for qualified technicians.