Cost of strikes to South African econ­omy grossly ex­ag­ger­ated

Weekend Argus (Saturday Edition) - - ISSUES - HA­ROON BHORAT and DAVID TSENG

THE RE­CENT spate of strikes in South Africa has gen­er­ated some stock re­sponses from both the me­dia and for­eign in­vestors: that the coun­try, through its po­lit­i­cally strong trade union move­ment, is held to ran­som by high wage de­mands, or the be­lief that the strikes are al­most al­ways vi­o­lent and eco­nom­i­cally de­struc­tive.

But, by analysing strike data, a more ob­jec­tive and in­for­ma­tive un­der­stand­ing is made pos­si­ble.

On the num­ber of for­mal sec­tor work­ers in­volved in strikes, the raw data from the Depart­ment of Labour’s An­nual Re­port on In­dus­trial Ac­tion shows in 2003, 83 533 work­ers were on strike, while in 2007 the es­ti­mate was 608 000 and in 2011 it stood at 203 000. These num­bers how­ever, must be ap­pro­pri­ately nor­malised. For the same years, these strik­ers rep­re­sented only 1.1 per­cent of the work­force in 2003, 7 per­cent in 2007 and only 2 per­cent of all work­ers in 2011.

In other words, over the three years re­viewed, less than 7 per­cent of South Africa’s work­force was ac­tu­ally on strike.

To es­ti­mate the eco­nomic costs of strikes, the stan­dard ap­proach is to sim­ply cal­cu­late the num­ber of strik­ers mul­ti­plied by the num­ber of days of the strike. Hence, if 10 work­ers strike for four days, the days lost through strik­ing would be 40 days.

In 2003 then the to­tal num­ber of strike days lost stood at about 920 000, in 2007 the to­tal was 952 000, in­creas­ing rapidly to 2.8 mil­lion work­ing days lost in 2011. Again, though, it is cru­cial to es­ti­mate lost work­ing days as a share of the to­tal num­ber of work­ing days in a given year. When the pro­por­tion­ate num­ber of work­ing days lost was cal­cu­lated, it was ac­tu­ally ex­tremely low in 2003, 2007 and in 2011. The num­ber ex­ceeds 1 per­cent only once – re­flect­ing the pub­lic sec­tor strike in 2011. The share of work­ing days lost as a share of to­tal work­ing days in 2003 was 0.05 per­cent, in 2007 it was 0.45 per­cent and by 2011 it was 0.13 per­cent.

It may be ar­gued though that de­spite this, we seem to be a par­tic­u­larly strike-prone econ­omy when in­ter­na­tional com­par­isons are made.

Yet data sug­gest this is not true at all. Among a sample of BRICS economies (ex­clud­ing China due to the lack of data), South Africa ranks just third in terms of work­days lost due to strike ac­tiv­ity (with an av­er­age of only 3.77 per­cent of work­days lost per year).

Brazil ranks first with a sig­nif­i­cantly higher 46.4 per­cent, In­dia is sec­ond with about 8 per­cent and Rus­sia fourth with 2.5 per­cent. In fact, the av­er­age per­cent­age of work­days lost per year in these coun­tries from 1999-2008, is 12.26 per­cent. Ul­ti­mately, ev­i­dence for South Africa’s rep­u­ta­tion as an econ­omy with a high strike rate is very thin.

Be­yond the BRICS and in rel­a­tive terms – com­pared to seven coun­tries with sim­i­lar economies, such as Nige­ria, the US and Turkey – South Africa ranks only sixth.

With Turkey (19.77 per­cent of work­days were lost per year be­tween 1999 and 2008), Nige­ria (10.94 per­cent) and the US (9.51 per­cent), all ex­ceed­ing South Africa’s 3.77 per­cent.

The re­sults of these com­par­isons show strike ac­tion, and the im­plied costs in terms of work­days lost, are com­mon in any econ­omy with a func­tional in­dus­trial en­vi­ron­ment where work­ers and em­ploy­ers are free to en­gage and ne­go­ti­ate the terms of labour costs.

In the me­dia, South Africa of­ten ap­pears as a strike-prone coun­try. Re­porters fre­quently fo­cus on the ap­par­ently large num­ber of work­ers in­volved in in­dus­trial ac­tion. In fact, in terms of strike in­ten­sity (or the num­ber of strik­ers per 1 000 work­ers) South Africa’s av­er­age for the pe­riod be­tween 1998 and 2009 is mod- est at best. On av­er­age, only 28 out of 1 000 work­ers were in­volved in strike ac­tion for the pe­riod re­viewed.

In this, South Africa has a sim­i­lar strike in­ten­sity to economies such as Den­mark (25 strik­ers per 1 000 work­ers), Aus­tralia (24/1 000) and Ice­land (31/1 000). And, in turn, South Africa’s econ­omy is less strike-in­tense than Italy’s (66/1 000), Spain’s (73/1 000) and par­tic­u­larly Ar­gentina’s econ­omy with its av­er­age of 307 out of 1 000 work­ers in­volved in strike ac­tion.

This sug­gests there are three key lessons to be learned from the strikes that have taken place in South Africa in re­cent years.

First, such strikes are part and par­cel of any nor­mal func­tion­ing in­dus­trial re­la­tions en­vi­ron­ment, and are no dif­fer­ent from the strikes in both de­vel­oped and de­vel­op­ing coun­tries.

Sec­ond, for the three years we re­viewed, less than 7 per­cent of the coun­try’s work­force was in­volved in strike ac­tion. In some years, this fig­ure was less than 2 per­cent, while the cost to the econ­omy in terms of days lost is ex­tremely small.

And, lastly, real strike data sug­gest that com­pared with other coun­tries – rel­a­tive to other mid­dle- and high-in­come economies – the in­ci­dence, in­ten­sity and cost of strikes in South Africa is dras­ti­cally over­stated.

Bhorat and Tseng are re­searchers in the Devel­op­ment Pol­icy Re­search Unit at the Univer­sity of Cape Town

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