South Africa braces for possible power sector strike

JOHANNESBURG, Aug 6

South Africa's biggest union said on Thursday it would march to press state utility Eskom for better wages as the company braced for a possible strike that could disrupt power in Africa's biggest economy.

The possibility of a power shutdown helped drive up prices of platinum and palladium due to fears output could be hit, and deepened concerns about damage to the South African economy, also a major gold supplier.

Renewed strike threats helped push down the local rand currency as investors fretted about the impact on the economy, which is struggling in its first recession in 17 years.

A drawn-out strike could hit shares and send metal prices rocketing as happened in January last year when South Africa suffered a near-collapse of its power grid, analysts said.

"We are planning a big march for Thursday next week, we will march on Eskom's headquarters," Lesiba Seshoka, spokesman for South Africa' biggest union, the National Union of Mineworkers (NUM) said. NUM has threatened to strike at Eskom.

The National Union of Metal Workers of South Africa (NUMSA), which has some 5,000 workers at Eskom also said it would strike.

"We are going to pull the plug on Eskom," its spokesman Castro Ngobese said.

Eskom generates 95 percent of South Africa's electricity and 45 percent of Africa's. Blackouts early last year temporarily crippled mine output and dented economic growth.

Negotiations on Friday will determine if unions carry out threats of industrial action.

Another strike could hurt investor sentiment after a recent wave of industrial action in South Africa that led to above-inflation settlements.

A power strike would be a challenge to President Jacob Zuma's authority as he tries to lead South Africa through its first recession in 17 years and defuse anger in poor townships.

"If its a drawn-out strike of weeks then it is a huge problem, but if it is a couple of days then we can somehow live with it," said Johan de Kock, a Cape Town-based head of equity research at Metropolitan Asset Managers.

"Eskom must have some contingency or emergency plans to cope with such situations for a few days, but if its a long strike it would have a huge impact, metal prices could spike as it happened when we had a huge power crisis last year."

Seshoka said the NUM, which represents about 16,000 workers at Eskom, had learnt the power company was seeking a court order to ban the strike. But that would not stop NUM members taking action, he said.

Under South African labour law, Eskom is classified as an essential service, prohibiting a large majority of its staff from striking. But the union has said it could defy the law because of the urgency of its members' demands.

The Solidarity union, which represents about 8,000 workers at Eskom, said a prolonged strike could affect power supply.

"There is a risk that power generation units could go down, and this could trigger a problem that can affect the whole national grid and the system could have a blackout," said Bennie Blignaut, the head negotiator for the Solidarity union at Eskom.

"As we speak union members are meeting in various stations across the country planning how to go on strike and, and even though it is illegal to strike, people are organising for a strike."

(Reuters)