The South African economy may be hitting a snag.
Recently, South Africa's government workers went on strike, and industry unions are calling for other members to join the strike.
This came after news that South Africa's trade revenues declined by 16 percent and its businesses received 25 percent less purchase orders in April, according to a monthly survey sponsored by ABSA, a large commercial bank, and the South African Chamber of Business (SACOB).
Richard Downing, an economist at SACOB, suggested that the decline in South Africa's trade could not be attributed only to seasonal factors, but did not offer up a more logical explanation.
The common reason cited by the media for the economic slowdown is that South Africa is having a difficult time keeping up with China's and India's more skilled and cheaper labor forces. More multinationals are sending production to China and India, bypassing countries such as South Africa.
More South African businesses are losing confidence in the country's business prospective and blame "regulatory red tape, bad infrastructure management, poorly and inappropriately trained workers and high unemployment," according to a SACOB press release.
Automobile sales have hit the lowest point since May 2003, and many dealers are stuck with old inventories. One likely reason for this trend is the ever-increasing gasoline prices at the pump. In addition, the South African real estate sector has also been steadily declining since 2005.
Today, South African businesses have another reason to worry. "The present strike action by various unions and the way in which strikers conduct themselves in some instances does not encourage business confidence," declared SACOB in a recent economic commentary release.
Biggest Government Employee Walkout Ever
A great number of South Africa's government workers—among them nurses, teachers, bus drivers, and train conductors—heeded COSATU, South Africa's largest trade union, when it called for a strike throughout all nine South African provinces.
As of last week, the strike was nearing its third week with no end in sight. The strikers and the government are digging in their heels, each vowing not to give in.
South African streets were filled with strikers, their families, and sympathizers, vowing to stand in solidarity. Press releases indicate that industry unions are also sympathizing with the government employees unions.
South Africa's largest labor Union, The National Union of Mineworkers (NUM), said in a press release, "The National Union of Mineworkers deplores Eskom's [South Africa's public utility company] reluctance to offer its employees a 12 percent increase as demanded by the NUM and its allied partners. Eskom employs the same outdated public sector negotiation tactics of spending numerous months without agreement and denying workers the right to strike in the form of a 'minimum service disagreement.'"
PSI, a France-based global union federation for public-sector trade unions, announced on June 15 to all members worldwide: "PSI has received a request for political support from its affiliates in South Africa. Public sector trade unions in South Africa called a general strike on June 1 following a break down in negotiations with the government."
With hospitals short-staffed, courts shut down, schools closed, and public transportation becoming erratic, South Africa's government decided to get tough. It first called for striking nurses to return to the hospitals or lose their jobs. The call went unheeded, and according to South African media, about 600 essential service workers had been fired by June 11.
Demands May Bankrupt South African Government
COSATU demanded across-the-board, 12-percent wage increases. The government came back with a counter proposal of 6 percent. By June 13, COSATU lowered its demand to 10 percent and the government edged up their increase to 7.25 percent. By June 15, negotiations have reached a deadlock, due to the firing of the 600 health workers.
According to media reports, the South African National Congress, South Africa's ruling party, can ill afford a large pay increase for thousands of government workers. To date, government employees make about 8 percent of South Africa's gross domestic product (GDP). If the government accedes to the strikers' demands, government employee compensation would increase to 20 percent of GDP.
"The offer on the table must be sustainable," said Geraldine Fraser-Moleketi, South Africa's Minister for Public Service and Administration, according to media reports. "We cannot move to a situation where the wage bill represents 20 percent of (GDP). That is completely unsustainable."
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