South African construction and engineering group Aveng has warned that ongoing labour unrest – which lopped R123-million, or 23%, off its profits during the interim period to December 31, 2012 – not only represented an earnings risk for the coming six months, but was also undermining South Africa’s investment competitiveness.
The group reported a 30% rise in interim revenue to R25-billion and a 43% increase in headline earnings to R397-million, with operating profit being underpinned by the Australian businesses and opencast mining activities in the rest of Africa.
“The situation is unsustainable,” CEO Roger Jardine warned on Friday, while also urging government, business and labour to approach the problem from an ‘SA Inc.’ perspective.
Aveng could not yet quantify the possible full-year direct and indirect impact of the industrial unrest, which has continued into the second half, notably at the Medupi power-station project site, in Limpopo.
But Jardine described it as a “top-of-mind” issue for Aveng, whose businesses traverse labour-intensive sectors, from mining and manufacturing to construction and concession management.
Prior to the results, Standard & Poor’s (S&P’s) indicated that it has sustained a negative outlook on South Africa in its March update partly because there was the potential for a recurrence, during 2013, of some of the recent labour tensions that had boiled over in the mining, transport and farming sectors in the recent past.
S&P’s downgraded the country in October last year, but on March 12 affirmed South Africa’s long- and short-term foreign currency sovereign credit ratings at BBB/A-2 and also held its local currency ratings and the country’s national scale ratings.
Jardine said broad-based multisector consensus was required, owing to the fact that macroeconomic and social issues, rather than company-level human resources systems and industrial relations, were creating a strike-action “tipping point”.
He said Business Leadership South Africa, of which Aveng was a member, was engaged in discussions aimed at facilitating such a compact, which would not be confined to the construction industry.
“We need to find common ground to move forward,” he said, adding that strikes outside of prevailing agreements “lead to anarchy”.
“The right of workers to strike is a right enshrined in our Constitution – it is a right that must be protected.
“[But] we need to think out of the box here . . . and business leadership and government and labour need to put our heads together to deal with this,” he concluded.