Following months of strikes, go slows and stop work action that have hit many sectors of the economy, from the health and education sector to mining and industry, unrest in the country's already troubled automotive sector appears likely to boil over.
On August 14, the National Union of Metalworkers of South Africa (NUMSA) warned it would file a 48-hour strike notice on August 17 unless employers in the automotive sector agreed to increase the wages of its members. If the strike goes ahead, as many as 15,000 automotive workers could be involved in the walk out, affecting eight major manufacturers.
At the heart of the stand off between workers and management is the gap between union demands for a 9.5% wage increase for this year, and rises of 8.5% and 8% for 2008 and 2009 respectively. NUMSA also wants employers to increase their contribution to staff pension funds by 4%, and an extra 20% hike in rotational night shift payments and 15% for afternoon shifts with provision of transport.
The mediator appointed to try and settle the dispute recommended both sides accept a 9% wage increase for the remainder of this year, and a rise of 8% and 7.5% for the subsequent years, a proposal neither side appears content with.
A statement released by NUMSA on August 14 said that negotiations with the Auto Manufacturers Employers Association were at the point of "make or break", with little chance of a quick resolution to the dispute in sight.
"If you thought a rather early wage settlement in the auto manufacturing industry is settling in, think again," the statement read.
Hi-Tech Automotive, a manufacturer of sports cars mainly for the export market, has already been hit by strike action, with up to 600 staff downing tools on August 13 at the company's Eastern Cape plant. According to NUMSA, Hi-Tech has been paying its workers well below the industry average.
Wandile Bolo, a shop steward at the plant, said no bonuses have been paid to workers in the past three years, despite staff being required to put in excessive overtime.
Bolo told the local press on August 14, "Some workers are paid higher than others, yet are in the same grade. This must come to an end."
Prolonged industrial action could affect the economy. According to a report by the Department of Trade and Industry, the automotive sector is one of the driving forces of the South African economy, accounting for an average 7% of gross domestic product and almost the same percentage of exports. Overall, South Africa is ranked 19th in the world in terms of vehicle output. Production represents around 0.7% of the world's total vehicle production.
However, despite increasing output and booming domestic sales, all is not well in the industry and the unions feel their members should have a greater share of the industry's successes.
On July 24, Ford Motor Company of South Africa announced it was shifting production of its Focus line to Australia as of 2011. Citing stagnant domestic sales and lower than expected exports, spokesman Ben Pillay said the company had made the decision based on issues of productivity, efficiency, and costs.
Then on August 10, Volkswagen of South Africa issued a statement denying media reports that it was planning to halt production of its popular Golf range at its Uitenhage plant in Eastern Cape.
It has also been reported that BMW is looking at ending production of its 3-series at its plant at Rosslyn outside of Pretoria, another potential blow to the country's automotive sector.
One reason given by a number of manufacturers for considering moving away from South Africa has been uncertainty over the government's Motor Industry Development Programme (MIDP), which offers a broad range of incentives to the auto industry. These include a productive asset allowance (PAA) that grants manufacturers a 20% rebate on their capital expenditure in the form of import duty credits for a five years term.
However, the legislative provisions for the PAA are set to expire at the end of the year, with other provisions of the MIDP due to run out in 2012.
While the government considers the automotive sector as crucial to boost South Africa's industrial base and increase employment, further delays in releasing the review of the MIDP result in South Africa losing part of the sector and harming the chances of hitting its economic goals.