UPDATE 3-S.Africa council workers to consider pay offer

* Council workers' union to decide on revised offer

* High settlements may affect economy

* Zuma warns against unlawful action during strikes

(Adds report of police firing at nurses and patients)

By Marius Bosch

JOHANNESBURG, July 29 (Reuters) - Leaders of thousands of striking South African council workers were due to meet on Wednesday to consider a new pay offer in a dispute that has disrupted local government services and put pressure on President Jacob Zuma.

The three-day-old strike is the latest stand-off between Zuma and the unions who helped sweep him to power in an April election and now want the president to fulfil his promises to help lift the living standards of the poor.

SAPA news agency quoted a police official as saying police fired rubber bullets at nurses and patients at a clinic in eastern South Africa in a fresh outbreak of protests. Superintendent Sibongile Nkosi said law enforcement authorities were investigating the matter.

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

South Africa is suffering its first recession since 1992 which unions say has hit the country's poor hardest. Unemployment is rising, with more than four million South Africans without jobs, according to official data.

Economists believe higher-than-inflation wage settlements reached in a number of sectors this month could strain Africa's biggest economy further down the road.

Already facing a shortfall in tax revenue due to the economic crisis, South Africa may be forced to increase taxes and the wage settlements could fuel inflation, which currently stands at 6.9 percent annually.

The country may also lag other global economies in recovering from the worldwide financial crisis.

"Often when economies recover after a crisis there is a boost to productivity given increased output but lower levels of labour and wages, the U.S. after 2001 is the prime example," said Peter Attard Montalto, emerging markets economist at Nomura International.

"With such heavy unionisation South Africa risks not benefiting from this productivity boost and hence will fall down the league tables of competitiveness of investors. Higher wage growth also feeds through to inflation through consumer demand."

Shortly after appointing a new police chief, assigned to tackle one of the world's highest crime rates ahead of the 2010 soccer World Cup, Zuma warned against any unlawful action during strikes, saying he would crack down on workers who overturn trash cans, littering streets.

"I feel it is important that they should be arrested because they are interfering with the rights of innocent citizens, who are walking around. I have been told there is a law and the law should apply," he told a news conference.

MILLIONS LOST IN WAGES

Mike Schussler, economist at economists.co.za, estimated that council workers were losing about 15 million rand ($1.90 million) in wages a day, but said it was not possible to quantify the cost of the strike to the economy.

SAMWU, the union representing 150,000 council workers, said its executive would meet later on Wednesday to consider an improved offer from employers.

The union is demanding a 15 percent increase and said 70 percent of council workers earn less than the 5,000 rand monthly minimum wage it is demanding. Employers have tabled a revised offer of an effective 13 percent increase.

SAMWU said on Wednesday many of its members worked in appalling conditions.

"We collect dead animals and worse on the roadside, we unblock sewers, we fix water pipes in the freezing cold, respond to emergencies and much more besides. And yet the gap between these vital workers and those who are supposed to manage ... is as wide as it was under apartheid," the union said in a statement.

Pressure on the government eased on Tuesday after South Africa's biggest union agreed a wage deal with gold and coal producers -- averting a potentially damaging strike in the key mining sector.

Strikes in the paper, industrial chemicals, pharmaceutical and petroleum sectors were called off this week after wage settlements. Unionised workers at public broadcaster SABC and fixed-line phone company Telkom (TKGJ.J) embarked on a two-day strike on Wednesday.

Residents who live in the central district of Africa's biggest city said the strike has hit normal services hard.

"It is actually terrible. There is litter everywhere, bricks on the road and rubbish all over. It is the worst I have seen the city look ," said Bongani Ndhlovu, who has been living there for three years. (Additional reporting by Alison Raymond and Gordon Bell; Editing by Michael Roddy)