Strikes Crippling Our Economy

Private Property South Africa

Currently, strikes appear to be the order of the day in South Africa. Worryingly, there doesn’t appear to be any end in sight. So says Roy Lazarus, CEO of Park Village Auctions.

“South Africa has been grappling with numerous social imbalances for some time now which have now seemingly come to a head, resulting in increasingly militant strike action across the public sector. Unfortunately, the fact that there doesn’t appear to be any really resolution in sight is putting off investors,” notes Lazarus.

The recently released Grant Thornton International Business Report lends credence to Lazarus’ comments. The report revealed that 48% of executives say they are looking at investing offshore rather than in South Africa while 27% are contemplating selling their businesses. Another 14% reported that they were seriously considering emigrating.

South Africa’s car manufacturing industry is also reeling from strike action which kicked off around mid-August. According to the National Association of Automobile Manufacturers of South Africa (NAAMSA), the stoppage in the manufacturing industry cost the country approximately R600m a day in lost production. While car manufacturer workers have since returned to work, South Africa’s petrol station and car dealership workers are now running amok.

“While the workers’ short term goals might be achieved through striking, long term, it could backfire. Firstly, it’s going to take some time for the manufacturing sector to recover; secondly; any wage gains stand to be eroded by accelerating inflation (caused in part by the strikes and a volatile rand) and thirdly; the strikes could compromise the country’s reputation overseas which puts future investment and job creation at risk.”

The volatile exchange rate has already pushed up prices across the board which, combined with subdued economic growth doesn’t bode well for South Africa.

Strike action has also been felt in the energy sector. Last week, City Power workers went on the rampage following proposed changes to work shifts. According to reports, disgruntled workers tampered with substations which led to suburb-wide blackouts and revenue losses totalling R100m per day.

The construction sector is also embroiled in strike action which will, in all probability have a knock-on effect on future new property prices as companies attempt to absorb higher wage costs. Meanwhile, existing construction projects have ground to a halt.

“Record-high unemployment levels, infrastructure bottlenecks, political instability, ballooning inflation and a widening current account deficit are not helping matters and its time these issues were tackled decisively if investor confidence is to be restored,” adds Lazarus.

It’s not all doom and gloom though. Growth reportedly accelerated in the second quarter thanks to expansion in South Africa’s manufacturing sector. Although lower than economists expectations, the news was well received and buoyed sentiment to an extent.

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