Labour Watch

Fractious, fighting trade unions a threat to SA economy

COSATU in the eye of the labour storm
Cosatu split.jpg

The fractious organised labour scene in the country, plagued by continuous politically infected turf wars, is becoming a major threat to the South African economy.

As a threat to the economy the deteriorating labour relations terrain is almost rivalling the electricity crisis, which Minister of Finance, Nhlanhla Nene, last week described as a critical challenge.

In an interview last week with MoneyWeb, Old Mutual Investment Group’s chief economist Rian le Roux said: “...  if I were to at this stage highlight two things that can make a significant difference to South Africa’s economic fortunes it will be number one better electricity situation, and number two a far better labour environment.”

This sentiment, shared by a number of other commentators on the state of the South African economy, is reflected in what is expected of the soon to start of wage negotiations in what has become known as South Africa’s ‘strike season’.

Two key sectors in the South African economy that are especially vulnerable at present in the face of a still sluggish global economy is mining and manufacturing. And the coal and gold mining sub-sectors in particular are again expected to be seriously impacted this year by political undertones and turf wars among competing trade union groupings. The effects of this already are also felt by Eskom as it battles to complete the construction of major new power stations.

This process is closely related to the process of political realignment taking place in the country that we reported on last week, and that is also impacting on attempts to arrive at focused turnaround strategies for Eskom, reported on last week.

Crumbling COSATU

In the wake of the disintegration of the Congress of South African Trade Unions (COSATU) and against the background of it being an ‘alliance partner’ of the ANC-led government, labour negotiations are increasingly running the risk of becoming more politicised.

Given the declared intentions of COSATU’s breakaway unions and hereto independent Association of Mineworkers and Construction Union (AMCU) to establish both an independent labour federation and political front/party, there is intensifying rivalry and completion for members.

Under these circumstances labour negotiations in several sectors can hardly escape having serious political undertones, likely to play a significant role in wage negotiations about to start in the gold and coal mining sectors.

Robert Besseling, an Africa analyst at IHS Global in London, told Bloomberg last week that rivalries between labour unions might contribute to further violent industrial action this year, while credit-rating companies, such as Moody’s Investors Service, have warned for some time now that social tensions are a risk to the economy and restrict the sovereign rating.

Charles Laurie, head of Africa at Verisk Maplecroft global risk analysis company in London, is quoted as saying about the South African business environment that it is “already reeling from the country’s third-rate electricity system, volatile labour pool and rancorous political environment”.

In an article for Biznews, under the heading “Trade union rivalry could set country on fire”, the general secretary of independent union Solidarity, Gideon du Plessis, writes: “A new federation with the populist Numsa as South Africa’s largest trade union and the Association of Mineworkers and Construction Union (Amcu), the radical and growing trade union in the mining industry at the forefront, will have a growing impact on labour relations, as Numsa is already dominating the metal, engineering and manufacturing sectors, and Eskom and the mining sector could well follow suit.”

Warnings that others like the chemical and petroleum sector might follow, foresee that the “shaky National Economic Development and Labour Council (Nedlac) will also have to undergo a shake-up as the new federation would challenge the key role Cosatu plays in that council, thereby constraining the dominance of government and Cosatu in this institution.”


When the ANC won the first fully democratic election in 1994 with the strong organisational and political backing of the broad labour movement, mainly represented by COSATU, it prioritised the labour terrain for transformation and stabilisation.

One of the first major pieces of legislation to be piloted through parliament by the new government was the Labour Relations Act of 1995. Creating institutions to manage labour relations and mediating employer/employee conflict, it was hailed as a model dispensation of international class.

However, by pulling COSATU into the political structures of the ANC and turning it into a ‘partner’ government, it became inevitable that the labour scene would not only be politicised but would also rob government of the capacity to be an independent broker and mediator in labour market disputes and clashes of interests.

The good intentions of extending gains to all workers in any given sector via deals reached by the majority union in that sector, proved to have been counterproductive in many ways.

It created a rigidity in the labour market that hampered job creation, among other things by inhibiting the development of small business enterprises, and in the process also contributed to the spawning the system of labour brokers.

SA losing out

According to Old Mutual’s Le Roux, what worries him most in the present economic climate are the very problematic labour relations.

The key sectors of mining and manufacturing which are struggling quite badly “because commodity prices are lower, because electricity costs are streaming up, because wage costs are going up fast because you consistently have labour disruptions and it interrupts the production ...” (Our emphasis).

There is also another, maybe less noticed, impact on the economy. New data published by the Department of Labour found that R6.7 billion in wages were lost in 2013 due to striking workers. This is not only a loss to the affected workers, but also to the economy in the form of reduced consumer spending.


It is clear that the South African labour relations regime, 21 years down the line since the election of 1994, is due for a good overhaul. It is, however, not likely to happen without the restructuring – that seems to be taking place on the political front – also taking firmer shape.

In the meantime there is likely to be turmoil on both fronts, and this year’s ‘strike season’ will probably be no exception, especially in the mining and manufacturing sectors, with the future of Cosatu in the eye of the storm.

by Piet Coetzer

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