South Africa Construction Strike Ends After 12% Wage Rise

A three-week strike in South Africa’s construction industry ended after 90,000 workers accepted wage increases of as much as 12 percent, almost double the country’s inflation rate.

The National Union of Mineworkers called the strike off after building companies represented by the South African Federation of Civil Engineering Contractors yesterday offered wage increases of 11 percent to 12 percent, union spokesman Lesiba Seshoka said today in a phone interview.

South Africa has been plagued by labor disputes for more than a year, weighing on economic growth. Mining stoppages shaved an estimated 0.5 percentage point off expansion in the economy last year, according to the government. Gross domestic product will probably grow 2 percent this year, the slowest pace since a recession in 2009, according to the central bank.

“This is a major victory for us,” Issac Ntshangase, a NUM coordinator, said in an e-mailed statement. “Our members stood firm and we congratulate them.”

Safcec’s offer covers two years. An interim increase of 1.45 percent to 2.14 percent will be given in the first year to lower grades workers, in addition to a 10 percent pay rise, the federation’s communications manager, Annemie Cowley, said in an e-mailed response to questions.

“Safcec awaits a formal response from NUM,” the builders’ federation said in an e-mailed statement. “Safcec received notice from NUM that some employees have started to resume their duties on Thursday, 12 September and confirmed that the construction industry can expect 100 percent turnout by Monday.”

Fewer Hires

Inflation in Africa’s biggest economy accelerated to 6.3 percent in July, breaching the central bank’s 3 percent to 6 percent target for the first time in 15 months. The rand is the worst performer against the dollar this year of 16 major currencies tracked by Bloomberg, falling 15 percent. The currency traded little changed at 9.9677 a dollar by 12:26 p.m. in Johannesburg.

“The 10 percent wage increase in relatively high,” said Avior Research Pty Ltd. analyst Dirk Noeth in a phone interview from Cape Town today. “It means that down the line, companies will hire fewer people or fire existing workers to compensate for the wage increase. The increase in strike action is a major deterrent to future job creation in the sector.”

Safcec members include Murray & Roberts Holdings Ltd. and Aveng Ltd., the country’s two biggest builders by market value. For the 12 months ending June, labor unrest cost Murray & Roberts about 350 million rand ($35 million), according to Chief Executive Officer Henry Laas.

Murray & Roberts shares fell 0.7 percent to 28.70 rand a share while Aveng declined 0.6 percent to 26.84 rand. The 7-member FTSE/JSE Africa Construction and Building Materials Index retreated 0.6 percent, data compiled by Bloomberg show.

(Updates with analyst comment in eighth paragraph.)
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