* Main mining union NUM seeks wage hikes of up to 60 pct
* Gold companies' shares drop, rand also under pressure
* Threat of mines unrest is headache for ruling ANC
* Wildcat strikes spread to auto industry
(Recasts with auto strike)
By Ed Stoddard
JOHANNESBURG, May 20 South Africa's rand hit new
four-year lows on Monday after Mercedes Benz said
workers at an assembly plant had staged an illegal strike and
the government-allied union demanded big wage hikes for coal and
The car maker said workers agreed to resume operations on
Tuesday after several days of wildcat action in South Africa's
auto industry, centered on the port city of East London.
But news of the halt spurred a currency fall already
underway after it emerged that wage hikes of up to 60 percent
had been demanded by the National Union of Mineworkers (NUM).
The rand, a highly liquid emerging market currency
vulnerable to sudden shifts in sentiment, hit its lowest levels
since 2009 in morning trade and then lost another 3 cents in the
late afternoon session to a new four-year low of 9.4875/dlr.
The NUM pay demands in a submission to the Chamber of Mines
seen by Reuters on Sunday rattled mining investors after wildcat
strikes at platinum and gold mines killed 50 people and cost
billions in lost output last year.
Employers and workers are squaring off for next month's
salary bargaining period against a backdrop of high inflation
and shrinking company margins in Africa's largest economy due to
soaring costs and sinking commodity prices.
This is making South Africa vulnerable, said George Glynos,
managing director at financial consultancy ETM Analytics.
"Commodity prices are retreating, you have wage negotiations
which look like they are turning pear-shaped even before they
have begun, and all that on top of a fragile economy," he said.
Shares in Africa's top bullion producer AngloGold Ashanti
fell more than 4 percent and rival Gold Fields
shed 4 percent to 4-1/2 year lows after gold fell for an eight
straight session on global markets.
A fierce union turf war is damaging labour relations at
South African mine shafts, with the NUM fighting an aggressive
challenge to its once near monopoly of members from the growing
Association of Mineworkers and Construction Union (AMCU).
AMCU has poached tens of thousands of platinum miners from
NUM in an increasingly violent struggle at mine sites.
The union battle poses a headache for President Jacob Zuma's
ruling African National Congress (ANC), which faces criticism
that it mishandled last year's mines violence. Opponents say it
and the mainstream NUM have neglected the rights of workers and
sided with mine bosses, a charge they both deny.
The ANC's Secretary General Gwede Mantashe, a former top NUM
official, defended the union on Monday, saying that "recent
attacks" on it were akin to an attack on the ruling party's
alliance with its labour allies.
Last year's mine violence dented South Africa's image with
investors and led to ratings downgrades for the economy.
NUM, a key political ally of the ANC, is seeking an
entry-level minimum monthly wage of 7,000 rand ($750) for gold
and coal surface workers and 8,000 rand for those underground,
according to the submission to the chamber of mines obtained by
Reuters. The latter would represent a 60 percent rise from the
current minimum wage of 5,000 rand a month.
NUM also said it wanted 15 percent increases for "all other
wage categories," meaning more experienced and skilled workers.
Wage talks are due to begin next month.
South Africa's Solidarity trade union, which represents
mostly skilled workers, said on Monday it was seeking 10 percent
pay increases for its members from the country's gold and coal
producers in the upcoming negotiations.
With spot gold fetching around $1,350 an ounce, down
close to 20 percent so far this year, South Africa's mines, the
deepest in the world, are hard pressed to turn a profit.
"If you look at the all-in-costs for South African gold
miners, including capex (capital expenditure), the break-even
costs right now are anywhere between $1,100 and ounce and $1,400
an ounce," said David Davis, mining investment analyst with SBG
NUM still represents the bulk of the rank and file in the
gold and coal sectors and needs to be seen taking a tough line
with management to head off the assault from AMCU, which now
dominates the platinum sector specifically.
African Bank Investments, a lender to lower-income
South Africans such as miners, said on Monday many of its
debt-laden customers were struggling to pay back their loans.
"The knock-on effect from the recent strike activity led to
increased debt servicing burdens," the bank said in announcing
its first-half earnings.
AMCU's rise has been built in part on perceptions that NUM's
leaders have grown too close to management and the ANC.
The view from the boardroom is somewhat different as NUM has
been wringing above inflation wage hikes for its members over
the past decade, a huge squeeze on company margins.
But even increases above inflation do not go far for workers
at the bottom end of the pay scale who on average have eight
dependants and are mostly drawn from poor rural areas.
Inflation, which is currently running near 6 percent, looks
set to accelerate further given the recent weakness in the rand.
(Additional reporting by Agnieszka Flak, David Dolan and Jon
Herskovitz in Johannesburg and Wendell Roelf in Cape Town;
editing by Pascal Fletcher and Philippa Fletcher)