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South Africa’s private sector will next year intensify engagements with the government and labour for more "social pacts" to "restore industrial peace", help avoid strikes and grow the economy faster to create jobs, Business Unity South Africa (Busa) CEO Nomaxabiso Majokweni said in an interview on Wednesday.

The past two years have been particularly challenging for South Africa’s labour relations, with wage negotiations deadlocking and resulting in strikes that were more violent in nature compared with those of previous years.

Business to Increase Social Pacts

Workers struggling with a high cost of living and widening inequalities are demanding more in wages from employers who are under pressure from higher electricity and transport costs.

"Energy and logistics costs are challenging. Then we have operating expenses such as wages that are high. It is a recipe for disaster," Ms Majokweni said.

The string of high operating costs meant that firms which granted steep wage increases would later be forced to fire workers, Ms Majokweni said.

"These businesses have to be profitable and … once they start agreeing to high wage demands, they retrench," she said.

The private sector has often raised concern that wage hikes in South Africa are not accompanied by higher levels of productivity. Strikes also have a negative effect on productivity.

Strikes in various sectors, particularly manufacturing, have restrained economic growth in the third quarter and have been identified by rating agencies as being among factors that led to South Africa’s sovereign credit ratings downgrades over the past year.

Ms Majokweni said most of the issues raised by rating agencies, including those around "incoherent" economic policies, were the same ones business has put before the government.

"You are taken forward by one policy and they (the government) introduce another one that takes you three steps backwards," Ms Majokweni said. Ratings are important as they are among the indicators helping investors looking for investment markets to assess which countries are safe for investment.

Standard Chartered’s head of Africa research, Razia Khan, said preservation of South Africa’s investment-grade rating by at least two rating agencies was required for continued inclusion in the World Global Bond index.

Rating agency Fitch late on Wednesday affirmed South Africa’s BBB rating. Standard & Poor’s is also expected to maintain its BBB ratings while Moody’s is seen as most likely to downgrade its Baa1 rating. The rating is a notch above those of Fitch and Standard & Poor’s.

Ms Majokweni reaffirmed the private sector’s commitment to creating jobs, but said the economy needed to grow at higher rates. South Africa’s economy is expected to grow by closer to 3% from forecasts of about 2% this year.

A reduction in the costs of doing business and policy certainty would boost business confidence and private-sector investments, she said.

Source: http://business.iafrica.com/news/891657.html

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