Manufacturing Circle executive director Coenraad Bezuidenhout on Monday warned of devastating consequences for the South African economy should calm not be maintained during the nation’s seasonal wage negotiations.

The tone on which wage negotiations in the gold mining sector kicked off, as well as threats of strikes in the agriculture sector in the Western Cape, was of concern to the organisation.

As centralised wage negotiations started in the gold sector on Thursday, the Congress of South African Trade Unions Western Cape provincial secretary Tony Ehrenreich warned that the “deepening levels of poverty and inequality” that last year resulted in an explosion of protest and violence within two industries – mining and agriculture – would likely resurface, spreading throughout other industries this year.

Centralised wage negotiations between gold producers and unions started after the conclusion of a prenegotiation workshop outlining the current state of the gold sector and the development of a protocol guiding this year’s negotiations.

“The attitudes of business leaders and advisers are, however, taking us to the brink of renewed conflict with their unsubstantiated claims in relation to the economy,” said Ehrenreich.

The Chamber of Mines said the gold mining sector, which was subjected to a “high level of strikes”, had lost about 12 t of production in total, valued at R5.5-billion, with 40% of the industry either marginal or incurring losses during the fourth quarter of 2012.

“Cool heads must prevail in upstream sectors during the current wage bargaining season. If not, manufacturing contraction and job losses in the manufacturing sector are a real prospect,” Bezuidenhout warned.

Should mining and agricultural output be hit by strikes, it would lead to a decline in domestic demand, as well as production interruptions in domestic manufacturing.

Manufacturers had been able to sustain domestic demand while international demand weakened and managed to leverage the weaker rand.

Further, despite production interruptions in the coal and steel sectors during the first quarter of the year and petroleum plant shutdowns in May weighing down the industry, the manufacturing industry’s employment outlook had remained stable.

However, Bezuidenhout pointed out that the sector remained “fragile” and any positive gains would be “wholly undermined” during the wage-bargaining season should union leaders and business fail to set aside narrow-minded short-term goals and political ambitions or consider the downstream impact of their actions.

Any strikes may ignite labour unrest in downstream sectors, negatively impacting the most vulnerable sectors, namely transport, logistics and metals.

“If this was to happen, it would make for the perfect storm,” he said, adding that high and rising domestic costs and capital constraints could make mechanisation and associated job cuts “a necessary step” for many manufacturers to ensure their survival.