South Africa’s Showdown With Unions Gets Ugly 

(Bloomberg) --

A showdown between South Africa’s government and its workers whose salaries are straining the national budget just got ugly -- and looks set to get a whole lot worse.

Two unions representing more than 3,000 staff at South African Airways have said they’ll go on strike Friday to protest the carrier’s failure to meet their pay demands and plans to fire 944 employees. The two sides held last-minute talks Thursday in an effort to make a deal, but the labor groups rejected an offer and the walkout will go ahead.

SAA has canceled almost all its flights scheduled for Nov. 15 and 16.

“It’s going to be a very difficult and messy fight between the airline and the unions,” said Mike Mabasa, chairman of the Air Services Licensing Council, which regulates domestic air services within South Africa.

For the workers, “it’s a double edged sword,” he said by phone. “On one hand the unions are demanding a wage increase and on the other they want to save their jobs.”

The airline, which has lost more than 28 billion rand ($1.9 billion) over the past 13 years and relies on financial support from the government to remain solvent, says it has no option other than to restructure or place the entire business at risk. The unions counter that their members shouldn’t have to pay the price of years of mismanagement and misappropriation of the airline’s funds, and that alternative solutions need to be sought.

They want job security for at least three years, 8% salary increases and a halt to the hiring of outside contractors to provide services such as security and cleaning.

Read more about the market response to the planned strike.

The upheaval at SAA is likely to be a precursor to labor action at other state companies that are trying to trim their bloated wage bills.

Eskom Holdings SOC Ltd., the loss-making utility that supplies about 95% of the nation’s power, says it has about 16,000 staff more than it needs. Unions have pledged to bring the entire country to a halt should widespread job cuts be instituted.

Labor groups representing workers employed directly by the state have similarly warned of “war” should the government seek to unfairly limit salary increases or try to roll back an inflation-busting three-year pay deal that expires in 2022.

Debt Trap

Finance Minister Tito Mboweni has cautioned that state coffers are almost bare and with the economy barely growing, the government risks falling into a debt trap unless spending is cut.

Treasury data shows that compensation for state employees accounts for 35% of national expenditure and that the average remuneration in the public service rose 66% over the past decade after accounting for inflation. National and provincial government employees on average earn about 393,000 rand a year, or 44% more than those who work non-agricultural sector jobs in the private sector do, it said.

Even so, President Cyril Ramaphosa will have a hard time facing down the unionists, who supported his rise to power and are among his staunchest backers within the deeply divided ruling party.

--With assistance from John Bowker.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Karl Maier, John Bowker

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