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South Africa Hit By Perfect Storm

South Africa’s economy has been in a tailspin since widespread strikes began in early August. Over the past few months, the spread of labor unrest to other industries has resulted in credit downgrades from Moody’s and S&P and forced investors to move their money elsewhere in Sub-Saharan Africa for the first time in years. Last week thousands of striking South African truck drivers agreed to end their two-week strike, but this won’t build positive momentum in what is otherwise a dismal economic and political situation.

Now, the Financial Times reports that labor negotiations in the mining sector have broken down again:

The crisis in South Africa’s beleaguered mining sector took another turn for the worse on Monday after talks between the Chamber of Mines and trade unions intended to bring an end to a wave of wildcat strikes in the gold sector ended in failure. . . . The industrial strife has already cost companies and the state billions of rand, and both Moody’s and Standard & Poor’s have downgraded South Africa as the unrest has escalated.

Mining executives have warned that a continuation of the strikes will accelerate job losses and risk the closure of mines already operating on tight margins. More than 100,000 miners have been caught up in the industrial strife which has triggered the biggest crisis in one of the world’s top 10 mining sectors since the end of apartheid.

South Africa’s dismal handling of the rampant political and economic unrest is raising serious concerns about the ruling ANC party, which has been unable to do anything to halt the strikes. Many are beginning to seriously question the ANC’s ability to transform itself from a revolutionary body into a full-fledged political party capable of governing South Africa into the future.

Labor unrest is important to keep an eye on in a society with such widespread poverty. If the most marginalized populations of South Africa join the mine workers in protest, credit downgrades and reduced foreign investment may be the least of the ANC’s problems.

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