Last updated: November 7, 2012 4:44 pm

Amplats push to end SA strike backfires

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With about 40 per cent of its operations lying idle as disgruntled miners push for sharp salary increases, Anglo American Platinum last week launched a new tactic in an attempt to end the wildcat strikes that have cost it R2.4bn ($277m)

After playing hardball since the unrest erupted at its Rustenburg mines, Amplats offered to reinstate 12,000 dismissed miners, while promising a one-off R2,000 “hardship allowance” for those who returned to work last week.

But instead of the world’s biggest platinum producer being able to resume operations, strikers responded with more defiance. Roads were barricaded and police used tear gas, water cannons and rubber bullets to disperse protesters.

It was the latest violent episode in a wave of industrial strife that erupted in August, and a reminder that the sector’s problems are far from over.

In the past two weeks, progress has been made towards ending the strikes, with the majority of miners at AngloGold Ashanti, Gold Fields and Harmony returning to work after companies threatened dismissals, while also agreeing to wage increases. But AngloGold suspended operations at one of its mines for a second day on Wednesday after a sit-in by workers at the beginning of the week, in a sign the climate remains volatile.

Nobody believes that the sector’s worst crisis since the end of apartheid has reached its final chapter. Rather, the consensus is that the unrest will precipitate a shake-up of a decades-old industry that has struggled to shrug off the dark legacy of its poor treatment of black workers, while it also grapples with policy uncertainty and spiralling costs.

“It’s put our business in a very difficult position. I think we have to look forward and say what are we going to do to sustain these businesses in the future and it just becomes harder – the bar gets raised and we don’t even know if it’s the beginning of something or whether it’s over,” says Nick Holland, chief executive of Gold Fields.

“I suspect we could find we have an impasse and we go on to Christmas and then next year we might find there are new challenges to face.”

Stoppages and strikes in the gold and platinum sectors this year have cost R10.1bn in lost production, according to the South African Treasury. It estimates stoppages in the mining sector have shaved 50 basis points off South Africa’s GDP growth this year, knocking it from 3 per cent to 2.5 per cent.

It will take weeks for companies to return to normal production levels as shafts that have been idle are safely reopened. There is the risk that areas of more marginal mines will not be workable, leading to more job losses and production declines, industry officials warn. Salary increases could also lead to more staff-shedding as companies look to offset rising costs.

Lonmin, the platinum company that sparked the unrest, last week said it had notified unions that it was reviewing its operating model and management structure, raising the spectre of job cuts.

The crisis has also exposed the fragility of labour relations and the weaknesses of traditional unions in an industry that employs about 500,000 people.

The gold companies initially hoped that they would be immune to the unrest that began in the platinum belt because they negotiate through collective bargaining. But they watched helplessly as strikes swept through their sector, forcing AngloGold to suspend its entire South African operations for a month.

At the same time, the spotlight has been put on the much-criticised migrant labour system, as well as the squalid living conditions of tens of thousands of miners who take a “living out allowance” to supplement their incomes and end up in tin shanties lacking basic services.

“Now is the time to make changes for the long-term good of South Africa, for the mining industry and its people,” says Mark Cutifani, chief executive of AngloGold. “If we don’t work together now, none of us will like the future that comes as a result of these recent events.”

Like others, he says the strikes were not simply about wages. “It’s far more complex, it’s about a sense of unfairness.”

Proof of that seemed to come when 300 strikers forced the suspension of operations at Sishen, Africa’s largest iron ore mine operated by a subsidiary of Anglo American, despite the fact that staff received dividends of R33,675 this year through an employee share-ownership scheme.

Mr Cutifani says the industry needs to improve communication with workers, build trust and do more to help the government address the social conditions miners and mining communities find themselves in.

To stem the flow of future job losses, a “new model” of working arrangements will have to be developed that includes ramping up productivity, he adds.

“As an industry we have not understood our workforce as well as we should, and relying on communications through the unions has not worked,” Mr Cutifani says. “It’s pretty clear employers did not understand the challenges we face as an industry.”

The outlook for gold and platinum sectors is bleak. South Africa’s gold mines are among the world’s deepest and mature shafts have become more challenging and expensive to operate. Platinum companies have been suffering for months from a weak pricing environment and many were cutting expenditure and mothballing shafts before the unrest erupted.

“We have done terrible damage to South Africa as an investment destination,” Mr Cutifani says. Even after industrial unrest dies down, it will take time to repair South Africa’s image.

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