Who is blackmailing whom?

When Grant Thornton Strategic Solutions assessed the economic legacy of the Fifa Soccer World Cup early in 2010, it predicted that there would be a R93-billion gross domestic impact, while 695 000 annual jobs would be sustained and a once-in-a-lifetime profiling of the country would be secured. Much has changed since then.

Following a crippling 18-day strike, Transnet last week agreed to raise wages by 11%. Now, one million state employees are threatening action during the month-long Soccer World Cup tournament that begins on 11 June, unless they receive similar increases.

Mediation efforts will resume this week, reported Bloomberg.

“The unions are leveraging off the soccer,” said Richard Downing, an independent economist, in a telephonic interview from Pretoria. “The increases are absolute silliness. It’s going to cost the economy for sure. There will be a loss of jobs.”

Exposure may backfire

Organisers predict that the World Cup will draw about 300 000 foreign visitors and a television audience of 500 million, presenting the government with an unprecedented opportunity to showcase the country.

The international attention may backfire if unions follow through on threats to rally tens of thousands of workers to join strikes and protests in the nine host cities, and disrupt power and water supplies, reported Bloomberg.

Public sector unions are being “absolutely brazen” about using the World Cup to press home their wage demands, said Andrew Levy via telephone from Johannesburg. He heads his own labour research company.

“Nobody’s standing up to them. Business would be bankrupt” if they were awarded similar increases.

The pay increase at Transnet will cost the company about R1 billion ($132 million) a year. Now, workers at Eskom Holdings Ltd, the state power utility, are demanding 18% increases, while employees of the water boards want 15%.

Unions are also threatening strike action if a decision by regulators to allow Eskom to raise its tariffs by an average 25.5% over three years is not reviewed.

These demands will be discussed at a meeting with the government on 14 June, three days after the start of the World Cup. The federation has threatened a “massive strike” if it does not get its way.

Unions representing nurses and teachers and other state employees declared a dispute on 21 May after the government offered them 5.3% pay increases, half of what they had demanded. An independent mediator has been given 30 days to end the impasse, failing which unions will ballot their members on going on strike.

Blackmail?

President Jacob Zuma, while defending workers’ right to strike, has called for restraint during the competition.

“The World Cup has never come to Africa,” he said in a 20 May interview with state-owned SABC. “I don’t think we should disappoint the continent. If you have visitors in your house, you don’t start fighting.”

The Congress of South African Trade Unions, the country’s largest labour federation, said wage demands have nothing to do with the World Cup and described the pressure on its members not to strike for its duration as blackmail.

“Nobody must say: ‘Oh hold on, there are visitors around, don’t do anything about this matter because of the national interest’,” Zwelinzima Vavi, the federation’s general secretary, told Bloomberg.

"The World Cup will be a one-month event. It will come and go,” he said.

Finance Minister Pravin Gordhan said the government cannot afford to pay much higher wages and simultaneously increase access to services and tackle poverty.

About a quarter of South Africa’s 49.3 million people lack proper shelter, and one in four workers does not have a job.

Calculating the cost

Dawie Roodt, chief economist of the Efficient Group, told Leadership Intelligence Bulletin that it would be incredibly difficult to quantify the exact economic impact of the strikes, if they do proceed.

“It depends on how long the strikes will drag on, what percentage of increases will be agreed upon, and what impact it will have on the image of South Africa,” he says.

Currently, the pay increases have not significantly influenced the inflation figure, simply because there is not such a vibrant demand in the economy.

“As soon as the demand intensifies, it will trigger an increase in costs, which will impact inflation,” says Roodt.

“The rough estimate is that for every R5 to R10bn costs incurred because of the pay increases, there would be downward pressure on the economic growth of between 0.1 and 0.3%.

“But it is tough to say. The one safe statement about these strikes is that they have come at a most inordinate time and could taint our South African image internationally,” he added.

On the pitch

The South African government and taxpayers face uphill battles off the pitch, while Bafana Bafana will have equally massive challenges to address on it, in the first round of the Soccer World Cup

Bafana Bafana’s opponent in the opening game of the tournament, on 11 June at Soccer City, is Mexico.

Statistically, South Africa could be feeling overwhelmed by the sheer class of its first-round opponent in Group A. It is ranked 86th in the world, while France is ninth, Uruguay 18th and Mexico 17th.

Never say never, though. France, the defending world champion in 2002, lost to Senegal in the opening match of the 2002 World Cup.

The Sunday Times reported that Mexico won the world under-17 title in 2005 and boasts many of those young stars in its senior line-up right now.

Against England last Monday, the team played with pace and intensity, yet lost 1-3. It matched England in all departments apart from the finishing touches.

Mexican coach Javier Aguirre said, “South Africa, beware. This is the best Mexico team to leave the country’s shores.”

He further admitted that his team was overawed at the prospect of playing at Wembley against England, a factor that could have contributed to the emphatic defeat.

One wonders if Aguirre realises that 70 000 vuvuzela-blowing Bafana Bafana fans will be waiting for the Mexicans at Soccer City.

The Mexicans may be classy, but will they be unnerved by the sounds at Soccer City? If the answer is yes, Bafana could still emulate Senegal’s feat against France.