UPDATE 3-Unions turn up heat in S.Africa state worker strike

* COSATU threatens to cut ties with ANC

* Worries mount about damage from larger strike

* Analyst sceptical of ANC-COSATU split

(Adds police firing rubber bullets, separate strike)

By Peroshni Govender and Jon Herskovitz

JOHANNESBURG, Aug 26 (BestGrowthStock) – South Africa’s top labour
federation COSATU threatened on Thursday to sever its
long-standing alliance with the ruling African National Congress
and widen a state workers’ strike next week to key industries.

Thousands of striking state workers held marches in major
cities nationwide calling on the government to meet their wage
demands. About 1.3 million unionised employees have walked out
in the standoff, shutting schools and cutting off medical
treatment at hospitals.

“The alliance is again dysfunctional,” COSATU
Secretary-General Zwelinzima Vavi said in a statement. “The
centre cannot hold.”

The comments were some of the strongest signals to date that
organised labour, which helped President Jacob Zuma ascend to
the presidency, may be ready to cut, or change, a relationship
with the ANC that was forged in their struggle to end apartheid.

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For a snap analysis on COSATU threat, click [ID:nLDE67O1L8]

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

How have other strikes been settled? [ID:nLDE67M0NF]

For a Q+A on what is at stake [ID:nLDE67I14T]

Reuters Insider TV on economy http://link.reuters.com/ven66n

For graphics on days lost in South Africa strikes, click

http://graphics.thomsonreuters.com/F/08/ZA_STRK0810.gif

For an interactive factbox, http://r.reuters.com/zag95n

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The state workers’ strike has had no major impact on rand
and bond trading but market players said worries would mount if
it extended into September and other labour groups joined in.

Jasson Urbach, an economist with the Free Market Foundation,
estimated the work stoppage was costing the economy 1.084
billion rand ($147.8 million) a day.

Police fired rubber bullets when protests turned violent in
Kimberley, about 435 km (270 miles) southwest of Johannesburg,
while rallies slowed traffic to a crawl in major cities.

COSATU said it filed 7-day strike notices on Thursday so
that all its 2 million members could join the state workers in a
strike they said would also target the mining and manufacturing
sectors, a step which could grind the country to a halt.
[ID:nLDE67N1QK]

Some analysts believe South Africa could ultimately benefit
from a split between the ANC and COSATU because it would allow
the government to ditch union-friendly policies and reform a
rigid labour market, criticised for restricting investment and
driving up production costs.

But not all are convinced that the long-time partners will
abandon each other, despite growing acrimony.

“The reality of each of these factions is that it is very
difficult for them to break with their ally, however tenuous
that relationship is,” said Mark Schroeder, a specialist on
Africa for global intelligence company Stratfor.

NOT AFFORDABLE

On top of the wage dispute, the leader of the ANC’s Youth
League Julius Malema fired what amounted to a warning shot at
Zuma on Wednesday, questioning his leadership and implying the
ruling party’s youth wing would not support Zuma for a
re-election bid.

COSATU also wants the government to reverse a 9-billion-rand
deal involving mining giant ArcelorMittal (ACLJ.J: ) that
transfers 26 percent of its local shares to employees and black
investors including a consortium led by Zuma’s son, Duduzane.
[ID:nLDE67H1KQ]

“We are heading rapidly in the direction of a full blown
predator state, in which a powerful, corrupt and demagogic elite
of political hyenas increasingly controls the state,” Vavi said,
as he took a swipe at Zuma over the heavily criticised deal.

The government has said it cannot afford the state workers’
demand of an 8.6 percent wage rise, more than double the
inflation rate, and 1,000 rand ($136) a month as a housing
allowance. It has offered 7 percent and 700 rand.

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.

An expanded strike would add to worries about prospects for
growth after the economy slowed more than expected in the second
quarter of 2010 as mining contracted and manufacturing expanded
at a slower pace. [ID:nLDE67N0VV]

Separately, the National Union of Mineworkers said it would
consider widening strikes at an Exxaro (EXXJ.J: ) unit and at a
Rio Tinto-BHP Billiton (RIO.L: )(BLT.L: ) joint venture unless its
demands for higher wages were met. [ID:nLDE67P1GI]
(Editing by Marius Bosch and Noah Barkin)

UPDATE 3-Unions turn up heat in S.Africa state worker strike