February 3, 2013 4:44 pm

SA must dig deep to beat mine unrest

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As South African gold and platinum miners slowly returned deep underground to ply their trade following weeks of wildcat strikes last year, executives were quick to caution that while the industrial action had abated, the sector’s problems were far from resolved.

Now, as miners, bankers, lawyers and government officials descend on Cape Town for the annual Mining Indaba, one of the global industry’s biggest conferences, which starts on Monday, there are expectations of another volatile year ahead. The conference will open amid warnings of the potential for shafts to be mothballed and thousands of jobs shed.

With the chaos of last year’s strikes – which cost about 50 lives in strike-related violence and more than R15bn in lost production – still fresh in people’s minds, gold, platinum and coal miners face the challenging prospect of fresh wage negotiations in a tense and uncertain environment.

The industrial unrest – which first erupted at Lonmin’s operations in August and spread throughout the platinum and gold sectors – exposed the fragility of traditional labour resolution processes that had served the industry relatively well since the end of apartheid, while heaping additional financial pressure on shafts that were already operating at a loss or on tight margins.

It also helped fast-track the emergence of a fledgling, more militant union, the Association of Mineworkers and Construction Union (Amcu), and saw angry workers seeking to represent themselves. The dramatic loss of influence of the National Union of Mineworkers (NUM), which has been dominant since its formation in the 1980s, was exposed.

The government and companies floundered in the face of a level of worker unrest not seen since the days of apartheid. Some mining houses sought to play hardball with the threat of large-scale dismissals, but all ended up increasing workers’ wage packages to end the strife.

Those factors mean companies will enter the two-yearly wage negotiations, which will begin around May or June, nursing the losses and additional cost burdens from the strikes, while facing the likelihood of a more militant and fragmented workforce.

Already this year some 20,000 miners’ jobs have been put under threat.

Harmony Gold said it was suspending operations at Kusasalethu, its largest mine, following violent industrial unrest.

It invoked a section of South Africa’s labour relations legislation that triggered a 60-day period for consultations with stakeholders in an effort to resolve the problems. If that process fails, the mine, which employs about 6,000 people and accounts for about 14 per cent of the group’s total production, could face indefinite closure.

That move was followed by Anglo American Platinum, the world’s biggest producer of the precious metal, announcing the results of a year-long review that included plans to close two mines at its troubled Rustenburg operations, which could lead to up to 14,000 job losses.

“Certain sectors are very challenged – platinum is one of them,” says Roger Baxter, a senior executive at the Chamber of Mines. “If you take it on a cash production cost and sustaining capital expenditure [basis], about 50 per cent of the [platinum] industry has been at a marginal or lossmaking position.”

South Africa is home to about 80 per cent of the world’s proven platinum reserves, and the metal is a critical component of the country’s mining industry. The industry is South Africa’s biggest export earner; its largest employer – generating about 190,000 jobs – and contributes about 2.7 per cent of the country’s gross domestic product, Mr Baxter says.

But it is not the only sector facing tough times. Back in the 1970s, South Africa provided more than two-thirds of the world’s gold, but the sector has been in decline for years as mines have got deeper, the ore poorer quality and shafts more challenging and expensive to mine.

The sector stills employs about 140,000 people, and South Africa remains the globe’s fifth-largest gold producer, but just as in platinum, executives have said the industrial unrest and rising costs risks accelerating shaft closures.

AngloGold Ashanti, the world’s third-largest gold producer, is in the process of conducting a review of its South African operations, as is Lonmin, the platinum miner.

Mark Cutifani, AngloGold’s outgoing chief executive, said in November that there “is no doubt that we are going to have to do some restructuring work”.

Amcu, the emerging union, has been making inroads into gold. At Harmony’s Kusasalethu mine, its representation has shot up from zero to about 62 per cent since October, while it is believed to be recruiting at Gold Fields’ KDC West mine and at AngloGold operations, industry officials say.

Unlike platinum, gold companies conduct their wage negotiations through collective bargaining under the umbrella of the Chamber of Mines, and it is likely that Amcu will have a seat at the table in the gold talks for the first time this year, officials say. Amcu representations at the large platinum producers is estimated to have grown to more than 40 or 50 per cent.

The concern in the industry is that the bitter rivalry between Amcu and the NUM could lead to greater militancy from both unions as they battle for members.

“It’s going to be very volatile, incredibly volatile,” said an industry official.

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