South Africa to talk with unions

Unions representing striking South African civil servants plan talks with the government on Friday as investors worry about the damage of a prolonged walk-out on Africa's largest economy.
The strike by more than 1 million state workers seeking higher wages started on Wednesday. It turned violent on its second day with police firing rubber bullets to disperse protesters blocking busy roads and preventing patients from entering hospitals.

Any agreement will likely swell state spending by about 1 to 2 percent, forcing the government to find funds to pay for the deal as it tries to bring its deficit down from 6.7 percent of gross domestic product.

Chris Klopper, a spokesman for the Independent Labour Caucus union federation, expects the government to repeat a threat to unilaterally impose its wage raise offer and not to bring any new deal to the table.

'Hopefully the discussions will be more positive than that,' he said.

The strike is likely to stretch into next week but analysts see a deal coming before September, which would limit the damage of the walk-out by police, teachers, healthcare workers, customs officers and government clerks.

Finance Minister Pravin Gordhan said on Friday he did not see even a protracted strike as having a major economic impact.

Traders say the strike has not hit daily activity in the rand or bonds but they are worried about a labour stoppage that extends into September.

'It just slows down business in general because lots of businesses rely on state entities to get their funds,' said Ion de Vleeschauwer, chief dealer at Bidvest Bank.

'It might not be evident now, but a couple of months down the line we will see the effect of the slowdown in economic activity affecting us,' he said.

Unions are demanding an 8.6 percent pay rise, more than double the inflation rate, and 1,000 rand ($137) a month for housing.

Last week the government raised the housing allowance to 700 rand from a previous offer of 630 rand, but refused to increase its wage rise offer of 7 percent. Annual inflation now stands at 4.2 percent.

The housing allowance alone would be equal to about 1 percent of all budget spending and the government has said it does not have the money to pay more.

The unions have taken hits in public opinion after hospital managers attributed several deaths at clinics to the strike and domestic media reported a man with a severed hand being refused treatment at public hospitals because there was no one who could care for him.

Separately, automobile manufacturers and a union representing thousands of auto workers have reached a deal on wages, ending a costly eight-day strike in the country's car industry, employers' body AMEO said on Friday.

The Automobile Manufacturers Employers Organisation said it and union Numsa signed a wage agreement. The 3-year deal will see workers getting a 10 percent increase this year, and 9 percent in the next two years.