South African unions use World Cup as wage tool

(Reuters) - South Africa's labor unions are using the hosting of the World Cup as a bargaining tool to press for above-inflation pay rises that could undermine the economy's recovery from a sharp downturn.

The maneuver could backfire on workers if struggling companies in Africa's biggest economy are forced to shed more jobs after nearly 1 million were lost during last year's recession, the first in nearly two decades.

While powerful labor federation COSATU, a crucial ally of the ruling ANC, insists workers have nothing to lose by striking during a tournament it says offers little economic benefit to the poor, it might be reluctant to disrupt an event that has ignited national pride.

COSATU helped President Jacob Zuma to power, but relations with the ANC have soured of late and the federation has backed its members' demands for wage rises up to three times the inflation rate which the government says are not viable.

"(COSATU) are able to play hardball at this stage, stare down management because they are prepared to risk more and at this stage, they are prepared to risk the World Cup," said independent political analyst Nic Borain.

"It locks the Zuma administration into a productivity framework that is hugely negative for employment because labor at this cost, and labor which is so difficult, is unattractive to investors."

COSATU affiliate the National Union of Metalworkers of South Africa (NUMSA), whose members want a double-digit pay rise from state power utility Eskom, said this week it would not be deterred by what it called "political blackmail" to hold back from industrial action during the World Cup.

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"To the millions of our workers and the poor, their problems are much bigger than the World Cup and they will never surrender their genuine struggles for a living wage in the interests of appeasing ... visitors to our country," NUMSA said.

A strike at logistics group Transnet last month illustrated how the World Cup offers workers leverage. The firm caved in and agreed to a higher pay increase to end a 3-week stand-off which disrupted railways and ports.

But a sense of patriotism could see workers baulk at any action that would blight South Africa's global image as it hosts the soccer tournament for the first time on African soil, said Standard Chartered analyst Razia Khan.

"Threatening to strike at any other point is one thing, threatening to strike when the country is in the international spotlight ... is something else," said Khan, head of research for Africa at the bank.

"South Africa can't afford a repeat of May, with the Transnet strike. Workers don't want to be ... seen as the reason why South Africa disappointed the world with a poor showing. It does somewhat limit their ability to push for wage demands over the course of the World Cup."

The wage war is already taking its toll on business sentiment, with the South African Chamber of Commerce and Industry (SACCI) last week citing threats of labor unrest among the reasons for a dip in its confidence index in May.

SACCI said it was concerned that under difficult economic circumstances the country was dogged by "a spate of labor demands for wage rates well in excess of inflation" and that the demands would negatively impact growth and job creation.