JOHANNESBURG South African trade union NUMSA said it had reached a deal to end a four-week strike in the auto components sector that has crippled production
It said workers will return to factory floors on Monday.
Union officials told a news conference on Sunday that workers would receive a 10 percent pay increase in the first year of the accord and wage hikes of eight percent in the second and third years covered by the agreement.
The strike in an industry that accounts for 6 percent of GDP is one several this year threatening to hamper growth and further dent investor confidence in Africa's largest economy.
"The strike was very hard for us," Irvin Jim, the general secretary of the National Union of Metalworkers of South Africa (NUMSA), told the news conference.
A four-week strike by more than 30,000 workers at major auto makers including BMW, Ford (F.N), Nissan (7201.T) and General Motors (GM.N) ended last month and cost the industry $2 billion in lost output.
But as workers on the assembly lines came back to work, tens of thousands of those at suppliers walked out.
The auto sector has been a bright spot for the ruling African National Congress (ANC), facing national elections next year.
It has used protectionism to grow the sector and provide relatively well-paying manufacturing jobs in a country where unemployment has been stuck at around 25 percent for years.
But some car makers have been considering how much to invest in South Africa, where wage hikes have not been met by higher productivity and labor relations are ranked as among the world's worst in the World Economic Forum's Global Competitiveness Report
Germany's BMW (BMWG.DE) said last week it was no longer considering expanding production in South Africa because of the labor unrest.
NUMSA leadership dismissed the move as brinkmanship and said the German car maker must seek the union's approval before trying to increase the size of its operations.
"The blackmail by BMW is rejected with the contempt it deserves," Jim said.
Simmering labor unrest in mining and manufacturing has been cited as a factor by major credit global ratings in the past year when they downgraded South Africa's rating.
Economists have said a long-standing governing alliance between the ANC and unions has led to labor-friendly legislation which has made the jobs market overly rigid and is eroding the country's competitive edge.
Since 2000, real, after-inflation wages have risen 53 percent, while productivity has fallen by 41 percent, according to South African government data.
The central bank has been worried about the damage caused by labor strife that has slowed production in mines and factories, especially after South Africa's trade shortfall unexpectedly widened to 19.05 billion rand ($1.90 billion) in August, the biggest gap in seven months.
The rand has also suffered, losing nearly 19 percent this year.
Workers at Anglo American Platinum (AMSJ.J), the world's top platinum producer, have been on strike for more than a week in protest to planned job cuts the company says it needs to return its operations to profit.
Amplats has said it is losing an average of 3,100 ounces of production a day from the strike. Gold producers and unions agreed to wage hikes of up to 8 percent last month, ending a three-day strike.
A wave a violent strikes in the platinum belt that started last year slowed production of the major export commodity and led to the deadliest security incident in the post-apartheid era when police shot dead 34 strikers last year at Lonmin's Marikana platinum mine.
($1 = 10.0118 South African rand)
(Additional reporting by David Dolan; Editing by William Hardy)