Buyer Community> Trade Intelligence> Financial Markets> Q+A-What is at stake in S.African state workers' strike?
Source: Reuters

Q+A-What is at stake in S.African state workers' strike?

Published: 19 Aug 2010 17:23:30 PST

JOHANNESBURG, Aug 19 - South African police fired rubber bullets to disperse crowds blocking roads and health workers prevented patients from entering hospitals as a strike by more than a million public sector workers spread on Thursday.

The following are some questions and answers about the strike and its impact on Africa's largest economy:

WHO IS ON STRIKE?

The stoppage is by a coalition of more than a dozen unions who represent 1.3 million state employees including teachers, police, nurses, customs officials and office workers.

WHAT IS THE DISPUTE ABOUT?

Unions want a pay rise of 8.6 percent and 1,000 rand a month for housing, compared with 500 rand now. The governmment has offered 7 percent and 700 rand.

The lowest paid public servants make 40 percent less than the average worker, who earns 6,383 rand a month in salary and benefits. Mid-range public servants make about 40 percent more than average and those at the top of the ladder earn nearly seven times as much.

HOW LONG COULD THE STRIKE GO ON?

It is likely to stretch into next week, but analysts expect a deal by September. The government and the unions will face mounting pressure to reach a settlement, as a longer strike will spark public anger over the loss of services.

HOW MUCH WILL THE STRIKE HURT THE ECONOMY?

Finance Minister Pravin Gordhan said he saw no significant damage coming even from a protracted strike, but there will be knock-on effects.

Parents will miss work to care for children who would normally be in school, productivity will be lost because of a lack of basic medical care and trade and commerce could be slowed with customs workers and clerks on the picket line.

Investors have reported no impact yet on markets but the longer it lasts, the more the strike will damage sentiment.

HOW HARD WILL THE GOVERNMENT BUDGET BE HIT?

Meeting union demands could mean an extra 10 billion rand or more on the 880 billion rand state budget. Agreeing to a 1,000 rand housing allowance alone would add nearly 8 billion rand.

The government had previously budgeted for pay rises of 5.2 percent, meaning even its offer of 7 percent would add billions.

Any deal will make it harder to bring down the deficit from 6.7 percent of gross domestic product, leading to increased borrowing or higher taxes that would crimp consumer spending and hurt a fragile economic recovery.

WHAT PRESSURES ARE THE TWO SIDES FACING?

The ruling African National Congress has a long-standing alliance with organised labour and has in the past struck deals in favour of unions, which supply it with solid blocks of votes.

President Jacob Zuma, criticised for ineffective leadership, would be in a stronger position heading into the ANC's main policy-setting meeting next month if he reached a deal to end the strike. The party does not want to risk a prolonged strike that could hurt it ahead of local elections next year.

But pressure will grow on rank and file union members as they lose pay from being off the job, making the government's offer look more attractive. Public opinion could turn against them the longer services are halted.

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