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UPDATE 7-S.Africa increases wage offer to strikers-source

* President wants strike to end in next few days

* Government offers 8 percent wage hike, source says

* Deal would strain budget, may cause tax rise, analyst

(Recasts with new offer)

By Peroshni Govender and Jon Herkovitz

JOHANNESBURG, Aug 30 (Reuters) - South Africa’s government increased its wage raise offer to unions representing 1.3 million striking state workers, a source said on Monday, trying to end a strike that threatens Africa’s largest economy.

The offer came in talks arranged after President Jacob Zuma’s ordered ministers to negotiate immediately to end the nearly three-week-long walkout that has closed schools, prevented treatment at hospitals and harmed investor sentiment.

The government increased its offer for a wage increase to 8 percent from 7 percent and raised its offer for a monthly housing allowance to 800 rand ($108.6) from 700 rand, a union source close to the talk told Reuters.

The source said unions would likely look favourably on the offer, saying “the strike will be over.”

Government spokesman Themba Maseko said he could not comment on whether the offer had been made.

Unions have been demanding 8.6 percent and 1,000 rand. Even if the government raised its offer to something more palatable, the unions are unlikely to respond quickly as they would need to consult their rank and file members.

The government and unions were still in negotiations that could end early on Tuesday, officials said.

Public Service Minister Richard Baloyi said in a statement prior to negotiations that the government was bringing a new offer to the table, without offering details. So far, the government has said it cannot afford the demand for increases of more than double inflation to end the strike, which threatens to spread across the economy.


For a full menu of strike stories [ID:nLDE67Q0G1]

For scenarios on what may happen next [ID:nLDE67B0Q7]

For graphic on COSATU members:

Reuters Insider TV on economy


Zuma’s spokesman said the president was particularly concerned about the strike’s impact on health and education.

“The president’s view is that the strike must end as soon as possible, in the next couple of days,” Zizi Kodwa said, adding that Zuma had spoken to government ministers at the weekend to tell them to resume talks.

South Africa’s biggest strike since 2007 in terms of lost man days has left bonds, stocks and the rand largely unaffected, but market players said the strike would cap gains by the rand and could have a bigger impact if it drags on.


Analysts expect Zuma and the African National Congress government, which has typically given in to labour’s demands, to reach a deal soon, tilted in favour of the unions, and worry later about the damage to state spending.

“Politically, this is beneficial for Zuma because he is in a tight spot with the unions at the moment,” said Susan Booysen, a political analyst at Wits University.

“The country already has a high deficit. The rise may result in higher taxes as the government tries to balance its books.”

The strike has deepened a rift in the ruling alliance between Zuma’s ruling ANC and the country’s largest labour federation COSATU, which helped bring him to power but is disappointed with him not advancing left-leaning policies.

The continent’s biggest economy has been hit by a series of strikes in the private and public sectors in the past few months, which have led to above-inflation settlements.

In other disputes, workers at miner Exxaro EXXJ.J have rejected an 8 percent raise and another strike at a Rio Tinto-BHP Billiton RIO.LBLT.L titanium joint venture saw operations shut down on Monday. [ID:nLDE67T15Y]

COSATU has threatened to widen the strike this week to all its member unions who it says represent about 2 million workers.

Workers in industries including mining will stage a one-day walk out on Thursday with COSATU threatening a prolonged labour action that could bring the economy to a halt unless a settlement is reached in the state workers’ strike.

South Africa is the world’s fourth largest gold producer and largest platinum producer, with mines turning out about 488 kg (1,076 lb) of gold and 385 kg of platinum a day.

The country's biggest firms, such as Anglo Platinum AMSJ.J, Impala Platinum IMPJ.J and Harmony Gold Mining HARJ.J, have stockpiles of the precious metal and would not be hard-hit if it was a one-day work stoppage.

Any agreement to end the dispute is likely to swell state spending by about 1 to 2 percent, forcing the government to find new funds just as it tries to bring down a deficit totalling 6.7 percent of gross domestic product. (Additional reporting by Wendell Roelf in Cape Town and Matthew Tostevin in Johannesburg) (Editing by Ralph Boulton)