Efforts to organize fast food workers into labor unions have been receiving abundant media attention, but unions have generally been losing sway in the US for the better part of four decades.

Although public sector unions such as those for teachers and government workers remain strong with about 30 percent of workers belonging to unions, less than 7 percent of private sector workers are unionized. Since membership peaked at almost a third of all workers in the 1950s, it has since dropped to just 11.3 percent.

Internationally, though, unions still hold a great deal of power. South Africa is a stark example.

South Africa, where about a quarter of all workers are unionized, recently began its strike season. After wage negotiations between unions and management have already gotten underway, labor unrest typically begins in May, as unions initiate the process of gaining authorization from the government to strike. The process is so entrenched, it creates a cyclical effect in the South African equity markets. The strikes are timed for maximum impact, for when the country emerges from its winter season.

May marks the time unions begin applying for certificates of non-resolution (CNR). CNRs are issued by the country’s Commission for Conciliation, Mediation and Arbitration and certify that every effort has been made to resolve the dispute but an impasse has been reached.

Wildcat strikes aren’t unusual, particularly among smaller organizations, but larger unions typically follow set rules and obtain CNRs that entitle unions to declare a work stoppage while protecting their workers from dismissal.

Last year’s strike season was relatively tame by South African standards, as companies made significant wage concessions largely at the behest of the government, which was eager to put its best face forward for the FIFA World Cup being played in South Africa that year. After last year’s successes, labor unions have become emboldened this year.

So far, 140,000 South African construction workers stopped work to demand higher wages, as have more than 30,000 autoworkers.

The National Union of Mineworkers (NUM) has also started nationwide strikes in the energy and mining sectors, affecting production of both coal and gold in the country. NUM is demanding a 15 percent across-the-board wage increase for its membership, while employers have offered a 6 percent increase for gold workers and a 5.6 percent increase for energy workers.

Those strikes are extremely ill-timed for the South African economy, which grew by just 0.9 percent in the first quarter of the year and a number of mining companies are actually cutting jobs in the country. High inflation at 5.9 percent, which has caused a spike in both labor and material costs, has been weighing on earnings and forcing significant cost cuts.

While broader macro factors are dragging down the country’s economy, it’s predicted that the growing wave of strikes will dent growth by another 0.2 percent to 0.3 percent for the rest of the year. The construction industry alone is losing an estimated ZAR820 million of revenue per day, while the auto industry is losing ZAR600 million.

As a result of this year’s strikes, I view South Africa as a country that should be avoided for the time being, even though I’m generally positive on commodity prices for the rest of the year.

The country’s economy is already struggling and the strikes have the potential to become much more widespread, since violence isn’t an uncommon occurrence. Last year 44 miners were killed in strike-related violence at a prominent platinum mine in the country, sparking weeks of protests.

So while a commodity recovery should be a significant boost for the country, the potential for broader work stoppages currently outweighs that potential benefit, particularly in the energy and materials industries.

Portfolio Updates

While I’m generally leery of commodity-related investments in South Africa, retail and fast food company Shoprite Holdings (South Africa: SHP, OTC: SRHGY) reported a strong first-half performance, despite tough business conditions, and remains one of my favorite plays on Africa.

In the first six months of the year, earnings were up 26.6 percent year-over-year to ZAR4.15 billion, while operating profit grew by 17.4 percent to ZAR5.36 billion. A total of 114 new stores were opened in the period, bringing its total store count up to 1,456 across the continent.

Shoprite’s growth was slowed by growing labor unrest and the weak rand, but the company benefited from the relative strength of other African currencies, which helped boost earnings in rand terms. Management looks for the impact of the weaker rand to continue working through the regional economy, likely forcing additional discounting, but it expects strong full-year performance.

Shoprite Holdings remains a buy up to USD50.