Services crippled as South Africa council workers strike

JOHANNESBURG (Reuters) - Thousands of South African council workers went on strike Monday to press for wage hikes, crippling public services in Africa's biggest economy and piling political pressure on new President Jacob Zuma.

The industrial action is being seen as more muscle flexing from the ruling ANC government's labour union allies, who have called for increased social spending to cushion workers from the country's first recession in 17 years.

The strike by public transport workers, refuse collectors and licensing officers among others, follows days of violent protests by residents of impoverished townships who have complained about lack of healthcare, water and electricity.

Hundreds of passengers were stranded in Johannesburg's central business district as bus services ground to a halt.

About 5,000 council workers, many wielding sticks, clubs and wearing T-shirts that pronounced "fighting for survival," marched in the city, singing ANC revolutionary songs and blowing plastic trumpets.

Police officers, some on horseback, kept watch over the strikers from a distance. Some workers overturned refuse containers, leaving litter strewn on the streets. Shops and businesses locked their doors as the marchers approached.

Union officials said 50 protesters were arrested but later released.

Similar marches took place in Pretoria and Cape Town and national broadcaster SABC said police fired teargas to disperse rowdy crowds in the northern city of Polokwane, arresting several people.

Investors fear that Zuma will give in to pressure from the unions -- who helped bring him to power -- and boost government spending with the economy in recession.

"Zuma had been very quiet on all these issues until recently when he spoke out at (new central bank governor Gill) Marcus' appointment and over mine nationalisation. Investors need to be reassured that he is in control," said Peter Attard Montalto, analyst at Nomura International.

NO MARKET IMPACT

The latest industrial action has had no impact on financial markets yet but analysts said this could change if the strikes drag on and affect more services and economic sectors. Production in the world's top source of platinum and major producer of gold were also unaffected.

The South African Municipal Workers Union (SAMWU) and Independent Municipal and Allied Trade Union (IMATU), which say they represent 150,000 council workers, want a 15 percent wage hike. They have rejected an 11.5 percent wage increase. Annual inflation was 8 percent in May.

"Indications are that the majority of workers, if not 90 percent of them, are out on strike," said SAMWU General Secretary Mthandeki Nhlapo.

"Refuse collection is badly affected; bus transport is badly affected. Other services like electricity are also affected. Across all services ... the effect is visible," he told Reuters, adding the strike could be indefinite.

Albert Schuitmaker, executive director of business group Cape Regional Chamber, said workers' demands were excessive.

"Salary increases are normally around about the inflation rate plus maybe one or two percent, so to come in with demands of 15 percent is excessive. The economy cannot carry that," Schuitmaker said on private station eTV.

A rail workers' union said it had suspended a strike set for Tuesday which would have left thousands of urban commuters stranded, to allow for further wage talks.

Workers in the chemical sector have also been on strike for higher pay and unions in the gold and coal sectors will announce Tuesday whether to accept an improved wage offer, averting stoppages which would hit some of the world's biggest mines.

South Africa's Chamber of Mines said it saw a good possibility of reaching a wage deal with workers in the gold and coal mining sectors Tuesday, putting an end to week-long talks and strike threats.

The strikes are the latest sign of discord between the ruling ANC and its labourallies who helped Zuma win an April election in which he promised to improve the lives of millions of South Africa's poor.

"No form of disorder or violence can resolve any wage dispute other than through negotiating forums like bargaining chambers," the ANC said Monday.

Financial markets have taken the actions in their stride to date, but analysts say this could change if they become more widespread.

"I think the impact on investors and the economy is limited in the short term," Nomura's Attard Montalto said.

"Investors' concerns are when they (strikes) shift from being just about wages ... to more general policy concerns, interest rates, inflation targeting etc."

Labour unions have been critical of business-friendly policies like inflation-targeting, which they claim have worsened the plight of the poor.