ZA Confidential is not going to become repetitive, but for the first time, we are going to feature the same topic for a second day. It is the BMW decision to pull a big investment from ZA because of the impact of the trigger-happy strikers in the local automotive sector. There are two reasons for returning to the topic. The first is the feedback we received that this was a BIG investment, which is now lost to ZA. And secondly, we received some useful comment from two of our esteemed economists that came too late for yesterday’s newsletter. So here goes – more comment on the BMW decision……..
Peter Attard Montalto from Nomura:
We hear of these things all the time from companies, but they normally are not in the public eye and in the media because they are decisions made in quiet back rooms by management and not trumpeted. However BWM has clearly had enough of the labour situation and the risk/reward of further investment simply doesn’t make sense for them. There are many other companies thinking the same thing because of labour issues. Plus remember that in the car sector electricity supply quality and the stalling by government of allowing major co-generation by manufactures is a big issue. The car manufacturing strike has gone on for four weeks and the media has, till the BMW headline, given up noticing – the market too gets bored on the story dragging on – until it appears in current account and trade figures. Remember the key issue of the last trade print was that it was too EARLY for this car strike and other strikes to fully appear. It’s the next trade number that is going to be the bumper, scary one. We must not forget that strikes are ongoing in a whole host of different sectors around the economy. It appears in nominal level data but not growth data because this is a yearly phenomenon to some extent on a macro level, though the car sector is certainly much worse than last year. The key areas to watch are this car sector strike given even the upside of investment being effected now, Eskom related construction given delays in power stations coming on stream, the Platinum wage round which hasn’t even started yet (we are seeing restructuring strikes ‘only’ at this stage), and gold to see if AMCU tries and obtains a larger increase than the NUM.
Mike Schussler from economists.co.za:
The fact is companies need to make profits to stay in SA and they need to deliver on the contracts. No one in the world has six to seven weeks of disruptions to an industry. That was last the case in the Britain of the late seventies and early eighties. We lose more man days per 1000 workers than the UK did in the winter of discontent in 78/79! We will not create the jobs or the wealth we need – that is fast becoming a future fact. We are now in danger of losing the jobs we already have! The madness of strike after strike in a particular industry must stop. If the leaders of our country do nothing then we will be talking extreme poverty in 2050. The ultra left wing NUMSA who get Ultra Left wing monies via the Rosa Luxembourg foundation do not even know that they are being used to get jobs going in Germany again!