South Africa Strike Cripples Power Plants as Talks Scheduled

A strike by South Africa’s largest labor union entered its second day after disrupting construction work at power plants needed to relieve electricity shortages in the continent’s second-biggest economy.

About 220,000 members of the National Union of Metalworkers of South Africa, or two-thirds of its affiliates, stopped work yesterday to support their request for pay increases from companies including Bell Equipment Ltd., Evraz Highveld Steel & Vanadium Ltd. and Aveng Ltd.’s steel unit. The protests come as Finance Minister Nhlanhla Nene said the nation will probably miss this year’s growth target of 2.7 percent after a platinum-mining strike caused the economy to shrink in the first quarter.

Building work was hampered at two of Eskom Holdings SOC Ltd.’s facilities, which will each have the capacity to generate about 4,800 megawatts of electricity. While Numsa lowered its wage demand to 12 percent last week from 15 percent, employers are offering as much as 8 percent in the first 12 months of a three-year deal. South Africa’s consumer-price index rose 6.6 percent in May.

“We will meet on Thursday with the sole purpose of trying to end the strike” after three months of talks failed to reach a resolution, Numsa General-Secretary Irvin Jim said in an interview with Johannesburg-based Talk Radio 702 yesterday. The union won’t settle for increases of less than 10 percent, the banning of companies that provide contract workers and the reconsideration of a government subsidy for inexperienced young workers, he said.

Nationwide Marches

The union won’t be intimidated if Eskom threatens mass dismissals, saying there will be blackouts if that happens, the South African Press Association reported, citing Steve Nhlapo, Numsa’s head of collective bargaining. A union memorandum of demands handed to Eskom gives the utility 48 hours to respond, SAPA reported.

Numsa members held marches yesterday in Johannesburg, Cape Town, Durban, Port Elizabeth and East London.

About 10,500 companies may be affected by the stoppage, accounting for about 4 percent of gross domestic product, Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said June 30. The stoppage may last at least a month, and if it does, third-quarter GDP may shrink, she said.

Growth Effect

“It is going to have an impact, there is no doubt about that; We have not quantified that number yet,” Minister Nene told reporters in Cape Town. “I would imagine government would step in at the right time but we would allow the processes to take their course.”

Work on boilers at the Kusile coal-fired power plant being built by Johannesburg-based Eskom stopped because of the strike among contractors employed by Murray & Roberts Holdings Ltd. (MUR), the country’s biggest construction company. M&R has 1,400 people at the site of what will be South Africa’s largest electricity facility, said Ed Jardim, a company spokesman.

About 11,000 contractors reported for duty yesterday and today at each site, compared with the usual 15,000, Eskom spokesman Andrew Etzinger said by phone. Eskom got a labor-court order preventing Numsa members from not working at the utility, Eye Witness News reported today, citing Etzinger.

GDP contracted 0.6 percent in the three months through March as 70,000 striking mineworkers shut shafts owned by Anglo American Platinum Ltd. (AMS), Lonmin Plc and Impala Platinum Holdings Ltd. (IMP) Mining accounts for 5 percent of GDP and manufacturing about 15 percent. The rand weakened a third day, retreating 0.7 percent to 10.7457 per dollar by 2:40 p.m. in Johannesburg.

Winning Support

Steel and engineering companies employ more than 300,000 workers, according to the Steel and Engineering Industries Federation of Southern Africa. In 2013, the industry accounted for 283 billion rand ($26.4 billion) of output, representing about 17 percent of manufacturing.

The federation received Numsa’s demands and remains determined to work toward a resolution, it said in an e-mailed statement yesterday. The industry will lose 300 million rand a day from the stoppage, the federation said.

The strike, which Numsa said will be its biggest to date, has garnered support from the National Union of Mineworkers.

Last year, automotive companies including Toyota Motor Corp., Volkswagen AG and General Motors Co., lost about 20 billion rand in production revenue after a Numsa-led strike. About 30,000 employees stopped work for 15 days, demanding higher wages.

To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net; Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net; John Viljoen at jviljoen@bloomberg.net Vernon Wessels, Ana Monteiro, John Bowker

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