September 4, 2013 1:07 pm

South African gold production down as strike begins

A strike by thousands of miners has affected about two-thirds of production in South Africa’s gold sector as unions push ahead with their demands for significant wage increases.

The strike, which was called by the National Union of Mineworkers after weeks of salary negotiations, began with the night shift on Tuesday. By Wednesday morning, the sector was operating at about 30 per cent capacity, said Charmane Russell, a spokesperson for producers.

The Chamber of Mines met the NUM later on Wednesday as part of ongoing talks to find a solution to the deadlock.

The unrest is hitting companies that include AngloGold Ashanti, Gold Fields, Harmony Gold and Sibanye Gold. Executives have warned that a prolonged strike would be disastrous for an industry that is already affected by maturing shafts, rising costs and a subdued price environment.

The industry is also still recovering from the wave of violent wildcat strikes last year, which cost billions of rand in lost revenue and claimed about 50 lives.

Employers and unions have been poles apart, with the NUM demanding increases of R2,300 ($224) a month for surface and open cast miners and R3,000 for underground miners – rises equivalent of as much as 60 per cent.

Its rival, the Association of Mineworkers and Construction Union, has not joined the strike action. But it is pushing for all entry-level underground workers to receive a minimum of R12,500 a month and for all surface workers to earn R11,500 a month.

A basic entry-level salary in the gold sector is on average about R5,000 a month, which can rise to about R10,000 with benefits.

Two of the smaller producers – Pan African Resources and Village Main Reef – have reached a settlement with the NUM, agreeing to increases of up to 8 per cent. But those deals were specific to the two companies.

However, Ms Russell said talks were ongoing, adding that employers and the NUM had moved “much closer together”.

There are about 140,000 people employed in the gold sector, and the NUM represents between 70,000 and 80,000 of the miners.

Gold companies estimate that the industrial unrest, could lead to daily revenue losses of about R349m ($33.8m) and a total economic cost of about R597m a day.

A protracted strike would also further damage South Africa’s image as an investment destination and risk having a contagion effect on other sectors, such as platinum and coal.

South Africa is the world’s main producer of platinum and its sixth-largest gold producer.

President Jacob Zuma on Tuesday appealed to employers and unions to reach a speedy solution to the impasse.

“A protracted strike going on as it is looking now is not helpful to the country, nor to the industry itself,” Mr Zuma told journalists.

“The strike hurts both sides; we can just appeal that they must find a solution.”

But union officials have said the companies’ offer equates to a monthly rise of about R300, a figure they describe as derisory and akin to a “slave wage”.

“This R300 cannot even subsidise bread for 30 days, so how would you call that an increase?” Joseph Mathunjwa, Amcu’s president, told the Financial Times. “When was gold discovered in this country? How many years ago? And still workers are earning R4,000, R5,000, it’s time for these guys [companies] to change their heart.”

A bitter rivalry between the unions is blamed for exacerbating the volatile situation as Amcu has made significant inroads in the past year to challenge the 30-year dominance of the NUM.

Asked why Amcu had not joined the strike, Mr Mathunjwa said: “Amcu is not NUM so if we call a strike, we will call a strike on our own terms.”

Amcu is the majority union in the platinum sector where it is pursuing similar wage demands, and it has already begun talks with Impala Platinum. Unlike the gold sector, where collective bargaining is used, platinum producers negotiate on a company by company basis.

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