The strike in South Africa’s steel and engineering sector that started on July 1 costs the industry more than ZAR 300mn (USD 28mn) daily, equivalent to 0.014% of the country’s daily gross domestic product, Kaizer Nyatsumba, head of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), said in a statement.

“Ours is a very strategic sector with both upstream and downstream impacts on other important industries like mining, construction and auto manufacturing. Therefore, it is not just companies in the sector that are affected or stand to be affected, but it is also those companies in these other industries,” Nyatsumba said.

The National Union of Metalworkers of South Africa (Numsa), the country’s leading manufacturing union representing more than 220,000 workers in the metal and engineering industries, launched the indefinite strike after reaching a deadlock with employer bodies – SEIFSA and National Employers Association of South Africa (NEASA) - regarding the collective bargaining demands of workers. Numsa demands a 15% wage increase in a one-year bargaining agreement, among others, above the annual inflation rate, which hit a five-year high of 6.6% in May. Nyatsumba called Numsa’s demands “lofty” and expressed hopes that employers and labour would “find one another over the next few days”. A meeting between the leadership of SEIFSA and NUMSA and labour minister Mildred Oliphant has been tentatively scheduled for Friday (July 4).

Nyatsumba said also that the CEO of an unnamed major car manufacturing company had informed him that he was under “considerable pressure” from his head office in America to close operations in South Africa and to move them to a country with a more stable labour dispensation. According to the National Association of Automobile Manufacturers of South Africa (NAAMSA), the impact on vehicle production and exports would start to be felt if the strike continued beyond two weeks.

The steel and engineering strike will aggravate further the fragile South African economy, which was severely hurt by a 5-month industrial auction in the platinum mining sector. The platinum strike, which ended last week, caused a 25% contraction in the mining sector and a 0.6% q/q decline in GDP in Q1 2014.

Last year, South Africa’s vehicle manufacturing sector, which accounts for about 6% of economic output, was crippled for about two months due to Numsa-led strikes. A three-week strike at the country’s seven major vehicle manufacturing plants caused a production revenue loss of about ZAR 20bn (USD 1.9bn) and was followed by a month-long strike at auto components factories.