Strike impact will drag down GDP

As the public sector returns to work following weeks of strike action, economists are warning that the continued flexing of muscles by workers in the country could have long-term economic consequences for the country. According to Nicola Weimar, a senior economist at Nedbank, the most recent civil servant strike has definitely affected the economy. “The effect on GDP will not be as bad as if it had been the mining or manufacturing sector that had gone on strike, but we will produce a weaker number for the month of August.” The impact of the strike has yet to be quantified, but economists agree that while the social impact might be worse than the economic, the country faces the risk of severely damaging its business reputation. “Government activity is also measured in GDP and if they do not render a service over a prolonged period, then GDP will be dragged down,” says Weimar. “Obviously the economic impact would have been much worse if the mining or manufacturing sectors for example had gone on strike.” Weimar says it is already clear that the strike has had a damaging social impact on the country. From an economic perspective though the continued demand on government to increase wages will cost the economy. At the offered 7.5% increase to civil servants government will have to increase debt and cut spending elsewhere. Says government spokesman Themba Maseka: “Simply put, government will be borrowing money to pay wages and debt service costs. This is not only unsustainable but will require future generations to pay for our current spending.” In the meantime the South African Chamber of Commerce and Industry has said it is concerned about the high demands being made on employers at a time when liquidations of businesses are still unacceptably high – and indications are that the country is still not over the consequences of the global downturn. “The strike has negatively affected the ease of doing business in the country as well as productivity as the services of officials in departments such as Home Affairs and customs have a direct bearing on the conduct of business,” says Sacci CEO Neren Rau. Weimar says it is important that South Africa addresses the bigger picture. With Transnet still bearing the brunt of workers’ action earlier this year, metal workers have this week gone on strike demanding a 15% wage increase. “There are issues and problems in the labour market that need to be addressed. If one just looks at the placards at the marches and rallies, one gets a real understanding of the resentment brewing in the labour market while the reports of corruption and selfenrichment are not helping the situation,” she says.