Escalating SAA strike to test Ramaphosa’s will

Labour unions are threatening to bring air travel in South Africa to a near standstill to force the loss-making state carrier to meet their demands for higher wages and job security, testing the government’s resolve to get its finances back on track.

Two labour unions representing more than 3 000 workers at South African Airways have been on strike since November 15 after the airline rejected their demand for 8% raises and announced plans to cut 944 posts, forcing the cancellation of most flights. Now the National Union of Metalworkers is engaging its members at other airlines and companies that service the industry on whether they should stage sympathy strikes.

The government’s approach to resolving the standoff could indicate how President Cyril Ramaphosa’s administration will tackle the thorny issue of bringing bloated wage bills at other state-owned companies under control. Public Enterprises Minister Pravin Gordhan indicated last week that it intends taking a hard line, saying SAA isn’t too big to fail.

“‘What began as a strike for higher pay at SAA has morphed into an ideological clash and a direct challenge to the government,” said Gary van Staden, an analyst at NKC African Economics. If Ramaphosa buckles to the union’s demands, “he will find it that much harder in future to demonstrate his determination to take the tough decisions that any prospect of economic recovery requires,” he said.

The metalworkers’ union said it has started consulting workers at maintenance companies and carriers including Mango Airlines, Safair Operations and SA Express with a view to intensifying the strike. While the union called for an urgent meeting with Gordhan and Finance Minister Tito Mboweni to discuss how to save the airline, they haven’t indicated whether they’ll accept.

SAA, which has lost lost more than R28 billion over the past 13 years and has offered workers 5.9% increases, has warned that the strike is costing it R50 million a day and is placing its entire business at risk. The unions argue that their members shouldn’t be held responsible for the corruption and mismanagement that have dogged the airline for years.

Last month the government said it will repay SAA’s outstanding government-guaranteed debt of R9.2 billion, support that Mboweni said the country could ill afford and had to come to an end.

The burden that SAA and other state companies, especially embattled power utility Eskom, are placing on the state’s finances contributed to a decision by Moody’s Investors Service – the only major rating company that assesses the nation’s debt as investment grade – to revise its ratings outlook to negative.

‘Wider implications’
“There are now serious wider implications on the political economy front here for South Africa, in that the unions probably see the SAA saga as a tipping point in their opposition to how government wants to restructure state-owned entities generally to ensure their survival and sustainability,” said Raymond Parsons, a professor at North-West University’s Business School in Potchefstroom, west of Johannesburg. “There remain tough decisions to be taken.”

Officials at the Department of Public Enterprises, which oversees SAA, and the metalworkers’ union didn’t answer their phones or respond to messages seeking comment.

Lumkile Mondi, an economics lecturer at the University of the Witwatersrand in Johannesburg, sees a symbiotic relationship between a government that he says still believes in state ownership, and unions that are prioritising the needs of their members above those of the country.

“The government is forcing a crisis so that it can save SAA through a deal that they’ll cut together” he said. “Get ready for the downgrade — there’s no imagination in this regime whatsoever.”

© 2019 Bloomberg L.P.