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To strike while inflation is hot
Is there a German cure for SA's labour conflict?
There is hope that a brutal Transnet strike may subside after an agreement with a key union. But one thing remains clear: the experience of Covid-19 and the risk of global economic meltdown has failed to deliver a more harmonious bargaining environment.
What is particularly concerning about the latest industrial action is the potential for disaster that comes with it. While strikes always cause economic damage, SA is on a knife edge right now with far too much at stake. There was a real threat that food and fuel supply chains, for instance, could collapse amid fraught relations between the unions and Transnet.
Worryingly, this schism between business and labour is seen everywhere, with increasing acrimony in negotiations between unions and organisations run by the state and the private sector. Commentators can be forgiven for thinking unions live on another planet when their starting points in wage negotiations are north of 30%, as seen recently in the automotive sector. But it can’t be that unions are just being unreasonable. Something is also wrong on the side of management – perhaps when it comes to communicating with labour - or else we wouldn’t have such a divide. It also doesn’t help that there is such a massive gap between what executives are paid at JSE-listed companies and the lowest-paid workers at these firms.
The biggest challenge for unions is that their members are coming under increasing pressure with the price of staples going through the roof thanks to rampant inflation. The worst part is that the poorest of the poor are affected the most, as the prices of bread, rice and transport are spiralling. With consumer price inflation north of 7%, unions understandably insist on a wage hike that is not lower than inflation.
But unions should also be willing to compromise to some extent. Economists expect inflation has peaked and that prices may cool fast. This means we could start seeing inflation heading back towards the 6% mark and even lower, making Transnet’s offer of 6% seem more reasonable than it does right now.
Management at Transnet could do more to communicate this, but nonetheless, asking workers to compromise and hang in for eventual price drops will be difficult to sell.
Perhaps a longer-term solution is for a greater push in SA to adopt the German model of labour relations, where unions have places on company boards. This gives unions a clear line of sight to what is happening to a company’s bottom line, including the potential fallout from wage increases that can’t be afforded. This structure has been very successful in Germany, a famously stable labour market. Could this be the way forward for all concerned in SA?
No Ikea
What’s Schadenfreude in Swedish?
"Redistribution of wealth would be good. So too a reliable power grid, a spirit of racial reconciliation and, some would argue, a president who shows leadership. But what South Africa truly needs, my exhaustive research has determined, is Ikea," the Guardian’s Africa correspondent wrote more than a decade ago. He criticised the furniture on offer in South Africa as either "expensive or tat".
He’s right, of course. The Swedish retailer, known for its well-designed and affordable flat-pack furniture, would find an enthusiastic market in South Africa. Quality furniture remains prohibitively expensive. Also, many South Africans end up buying a massive loan with a nasty lounge suite attached, as the country's furniture-on-credit retailers do brisk business. Cheaper, well-made furniture would have saved South Africans millions in interest a month.
But while Ikea is currently quickly expanding across the world, it remains uninterested in South Africa.
More than 20 years ago, when other international brands entered South Africa, local journalists started pestering Ikea about launching here. At the time, it was focused on expanding to India and Russia instead. It didn't work out that well.
This past week, in a devastating development for its staff, Ikea fired 10 000 workers in Russia and prepared to exit that market.
On paper, of course, Russia was a much better bet than South Africa. But after 20 years in Russia, Ikea has now lost its business there – while suffering many challenges, including a bribery scandal, along the way.
India posed its own difficulties. After a long struggle, Ikea was forced to abandon plans to build a business there in 2009, as India’s government refused to relax strict foreign ownership limits. After almost two decades, Ikea finally open its first store in 2018 after local laws changed at long last.
If Ikea invested in South Africa, its furniture would probably have been stuck outside Durban harbour as the Transnet strike raged on this week. It would have had to spend millions on diesel for its generators, and its Fourways store may not have had running water.
Still, chances are, it would have made a killing in South Africa. Its Swedish compatriot H&M has been a hit – at one point its Cape Town story was its third-busiest outlet worldwide, and local stores performed better than many other countries during the pandemic. In an Ikea-adjacent industry, French DIY group Leroy Merlin is seemingly doing good business in South Africa. The country has also been lucrative for other foreign groups – particularly Uber, which turned a profit 14 months after launching in Johannesburg. Over the past seven years, this was the fastest a city outside the US became profitable.
South Africa is a tough, risky market. But for the risk averse, it can pay off, big time.
Quote of the day
Chart of the day
The bond bubble continues to lose more air. The value of global bonds has lost another $614.4bn in the past week mainly driven by fresh inflation numbers which suggest more Fed tightening. Fed rate cycle ceiling has jumped to almost 5%. It was 9th neg week for bonds in a row. pic.twitter.com/5BTpJFclWY
— Holger Zschaepitz (@Schuldensuehner) October 16, 2022
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