South Africa Employers Offer 10% Deal to End Metals Strike

South Africa’s biggest employers’ group in the metals and engineering industries agreed to offer a 10 percent pay increase to low-level earners over three years to end a strike that’s entering its fourth week.

The Steel and Engineering Industries Federation of Southern Africa, a Johannesburg-based group whose members employ the most workers in the sector, “reluctantly accepted” the proposal from the Labor Ministry at a meeting yesterday, it said in an e-mailed statement today. The offer has been approved by a “slim majority of employer associations,” it said.

More than 220,000 workers have been on strike since July 1, affecting about 12,000 companies including Nampak Ltd. (NPK), Africa’s biggest beverage-can manufacturer, and carmakers such as Toyota Motor Corp. (7203) and General Motors Co. (GM) The walk-out is being led by the National Union of Metalworkers of South Africa, the country’s biggest labor group. The country’s inflation rate was 6.6 percent in May.

“Seifsa is presenting the offer to the unions, including Numsa today,” Ollie Madlala, a spokeswoman for the group, said by phone. The labor organizations have until the close of business on July 25 to accept the offer. The deal requires that future employment issues be negotiated at national rather than company or plant level.

Offer Discussion

“Numsa’s National Executive Committee will meet later on today to discuss the new offer,” spokesman Castro Ngobese said by phone, declining to comment further. General Secretary Irvin Jim said July 17 that the union is willing to accept a two-year wage deal with a 10 percent annual increase.

The rand advanced for a third day, gaining 0.3 percent to 10.5765 per dollar by 3:50 p.m. in Johannesburg, the strongest level since June 30.

The pay increases proposed by Labor Minister Mildred Oliphant will probably lead to “massive job losses” as companies seek to reduce costs that can’t be passed on to customers, Seifsa Chief Executive Officer Kaizer Nyatsumba said in the statement. The industry employs about 1.8 million people, according to Statistics South Africa.

Fewer Positions

“We expect manufacturing employment to fall by 220,000 over the next three to five years as a result of these excessive wage increases,” Loane Sharp, an economist at Adcorp Holdings Ltd. in Johannesburg, said by phone. “Manufacturing employment is very sensitive to wages because the workers are not particularly skilled and competition among workers is significant.”

The Labor Ministry mediated talks for the second time after the first round of negotiations failed as Numsa rejected Seifsa’s three-year offer.

The strike is costing the industry about 300 million rand ($28 million) a day, according to Seifsa. The walkout may lead to a slowdown in economic growth if it isn’t resolved, Reserve Bank Governor Gill Marcus said July 17.

Seifsa, which says most of its members employ fewer than 50 people, “found the unions’ reluctance to comprise very disappointing,” it said in the statement.

South Africa central bank cut on July 17 its forecast for growth in the economy, the continent’s second-biggest, to 1.7 percent this year from 2.1 percent. A protracted strike would “potentially have much wider ramifications because of the direct linkages to other sectors of the economy, Reserve Bank Governor Gill Marcus said.

Bayerische Motoren Werke AG’s South African unit is running on two shifts from three, according to spokesman Guy Kilfoil. ‘‘We will analyze on Friday morning what the status is and make a decision as to what we do next week,’’ he said.

Numsa led a strike of about 30,000 workers in the car industry in 2013, costing carmakers about 20 billion rand in lost production. Employees resumed work after a three-week stoppage and accepting a wage increase of 11.5 percent.

To contact the reporter on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net John Bowker, Ana Monteiro, Ben Holland

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