South Africa Union Predicts ‘Tough’ Negotiations With Automakers

  • Formal negototiations to begin June 21, Numsa’s Jim says
  • Union wants one-year agreement, seeks 20 percent pay rise

The local units of automakers including Ford Motor Co. and Volkswagen AG start wage negotiations next week with South African workers, hoping to avoid a repeat of crippling, weeks-long strikes that have paralyzed the industry in the past.

While the two sides have held informal discussions for months, formal bargaining between the National Union of Metalworkers of South Africa and the Automobile Manufacturers Employers Organization will begin June 21, Numsa General Secretary Irvin Jim said by phone.

“I think we are heading for very tough negotiations,’’ Jim said. “We hope we can resolve these negotiations without repeating the past.’’

The industry, while small by global-production standards, is an increasingly important contributor to South African exports and among few bright spots in an economy that’s growing at the slowest pace since a recession in 2009. While BMW, Ford and Volkswagen have announced 13 billion rand ($854 million) of investment in South Africa in the past year, executives have warned repeatedly that the industry won’t emerge unscathed from another extended stoppage.

Numsa plans to argue for a one-year agreement, instead of the usual three years, and 20 percent wage increases, it said in a statement after its national bargaining conference in April. The union is aware that the negotiations are a “give and take,’’ Jim said.

‘Tough Economy’

“We know that we are negotiating under very tough conditions given the state of the economy,’’ he said on Friday. “We take a very firm view that capital goes through booms and busts and workers should not be paying for difficult times because when things are good the bosses still make money.’’

Representatives of AMEO weren’t immediately available to comment.

Despite a small pool of domestic customers and its location thousands of miles from key markets, South Africa has attracted billions of rand of investment from U.S., European and Asian manufacturers through its automotive-incentive program, which encourages vehicle production in the country through tax breaks. The industry contributed 7.5 percent to gross domestic product last year and while local demand for new vehicles is shrinking, the industry predicts exports will increase by about 25 percent from 2015 to 2017.

If the negotiations were to break down, leading to a strike, the effects wouldn’t be limited to the vehicle industry, said Iraj Abedian, chief economist at Pan African Advisory in Johannesburg.

2013 Strike

“Any form of disruption to any industry or sector of the South African economy at this point in time, when the economy is on a contractionary track, is clearly a negative development,’’ he said by phone on Friday. The motor industry is a foreign-exchange earner for the country, which means that an interruption in exports could result in a widening of the current account and add to pressure on the rand, he said.

A two-week strike in 2013 cost the sector at least 20 billion rand in revenue, the National Association of Automobile Manufacturers said at the time. The stoppage was followed by a strike in the car-parts industry the same year and workers in the metalworkers sector also downed tools in 2014, forcing some carmakers to stop production because of component shortages.

The 2013 interruptions did “incredible harm to South Africa’s reputation as a reliable supplier to global markets,’’ Naamsa director Nico Vermeulen said in a May 26 speech in Johannesburg. A repeat “would be a disaster, for the manufacturers, we would lose investment, we would lose production and we would lose employment,’’ he said. Vermeulen referred questions on Friday about the negotiations to AMEO.

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