Tuesday, October 9, 2012

Strike Nation - Largest African economy crippled by series of strikes

South Africa, the largest economy in Africa, is suffering a series of strikes that is not only crippling its economy but also how the world views the country. Starting within the mining industry, the strikes have now spread to the public sector and the trucking industry. The possibility of it spreading to rail and port workers is strong as the South Africa Transport and Allied Workers Union has applied for permission to expand the strike to these workers.

After Asia, Africa is the fastest growing region in the world and is home to a growing middle class. South Africa is considered an entry-point for many international companies interested in expanding into Africa. However, the risks surrounding the current turmoil and rising costs have resulted in growing concern for many companies contemplating such a move.  In fact, the strikes have exposed South Africa’s persistent issues of widespread poverty and unemployment despite the end of apartheid over eighteen years ago. It also raises a question concerning the region overall - how much will this affect the growth of the overall region?

Every industry has been affected by the strikes, including the automobile industry which represents 10% of South Africa’s manufacturing segment. After a three day strike by The National Union of Metalworkers, Toyota agreed to increase wages by a reported 5.7%. During the strike, the company lost 2,428 vehicles worth of production, about 14% of its monthly average. Despite this and to show its commitment to the country, Toyota opened a new parts distribution warehouse in Ekurhuleni, Gauteng, South Africa. The facility holds more than 2.2 million parts pieces worth more than 350 million rand ($42 million) and supports 268 local suppliers.

Now in its third week, strikes by more than 20,000 truck drivers demanding higher wages has halted the delivery of goods across the country. According to General Motors, “the transport workers strike has disrupted material supply activities in our vehicle assembly facility.” The trucking strike has halted the delivery of goods throughout the country and as a result food and fuel shortages have been reported. Shell noted that it would not be able to honor contracts to deliver fuel near Johannesburg because of the trucking strike. If rail and port workers strike, the situation will only worsen.

South Africa faces a complete collapse of its economy if the issues surrounding the strikes are not resolved soon. Prior to the strikes, the economy was already suffering due to declining demand from its largest trade partner the European Union. Now, it faces a direr situation as its currency plummets and manufacturing comes to a halt.

Although little word is coming from the logistics community, one would suspect that many of these providers are in constant contact with customers but also at a standstill particularly as the country’s entire transportation infrastructure is likely to come to a halt.

An update: It was announced on the 9th that about 15,000 truck drivers will return to work on Wednesday. This, after employers agreed to raise wages by at least 10%. However, members of the South African Transport and Allied Worker's Union will not resume work and are still in negotiations.

Second update: Good news, it appears the trucking strike is now over per this article from Mail & Guardian.