Spared more strikes, but threats still loom

Finweek English Edition - - INSIDE - tan­di­s­izwem@fin­

There must have been loud cheers and cham­pagne pop­ping in the board­rooms of An­gloGold Ashanti, Har­mony Gold, and Sibanye Gold as Labour Court Judge An­dré van Niek­erk pre­vented the As­so­ci­a­tion of Minework­ers and Con­struc­tion Union (Amcu) from rolling out wage strikes at their mines.

The judg­ment makes per­ma­nent an in­terim or­der granted by the court in Jan­uary this year af­ter the Cham­ber of Mines ap­plied to have any wage-re­lated strikes in the gold sec­tor by Amcu de­clared un­pro­tected. This is be­cause in Septem­ber last year a two-year wage agree­ment was reached be­tween the pro­duc­ers and the unions, com­pris­ing of the Na­tional Union of Minework­ers, United As­so­ci­a­tion of South Africa (UASA) and Sol­i­dar­ity, which rep­re­sented a com­bined 72% of em­ploy­ees at the time while Amcu – though a par­tic­i­pant in the col­lec­tive bar­gain­ing process – re­fused to sign the agree­ment. Its em­ployee rep­re­sen­ta­tive share was 17%.

While the rul­ing is cer­tainly a vic­tory for the gold min­ing com­pa­nies, it is also a vic­tory for South Africa’s dis­tressed econ­omy. With the lost em­ployee and com­pany earn­ings in the plat­inum belt as a re­sult of the five-month-long strike, it can be said that the econ­omy has lost at least R25bn. If it had that amount in its pocket, Govern­ment could have set­tled out­stand­ing land-resti­tu­tion claims, sup­ported sub­sist- ence and small­holder farm­ers and in­vested in com­mu­nity work pro­grammes.

In 1970, SA’s gold pro­duc­tion was glob­ally dom­i­nant, con­tribut­ing a mas­sive 68% to world pro­duc­tion. Fast for­ward to 2012, and SA fell to the sixth-big­gest pro­ducer in the world, con­tribut­ing only 6% to­wards world pro­duc­tion. China is now the world’s largest gold pro­ducer, fol­lowed by Aus­tralia, the USA, Rus­sia and Peru.

This drop can partly be at­trib­uted to the fact that our mines are get­ting de­pleted and there’s pretty much zilch we can do about that. But there are other con­tribut­ing fac­tors which in­clude pro­duc­tion stop­pages, in­creas­ing dis­tances from shafts as well as in­creas­ing min­ing costs. In 2012, when the gold in­dus­try was hit by wage strikes, it lost al­most R5bn in earn­ings.

Ac­cord­ing to es­ti­mates by the Cham­ber of Mines, if cur­rent trends con­tinue, SA’s gold pro­duc­tion would shrink even fur­ther. The cham­ber es­ti­mates that by 2020 the coun­try could pro­duce only 90 tons of gold and em­ploy less than 60 000 people.

These are the is­sues that SA should be smart about if we are to pre­serve the in­dus­try.

In­vest­ment So­lu­tions strate­gist Chris Hart says that while the Labour Court’s de­ci­sion is good news for the coun­try’s econ­omy, the domino ef­fect of these strikes can­not be ig­nored. There’s a great pos­si­bil­ity that when the gold minework­ers have their chance at de­mand­ing higher wages two years down the line, they may start at a level higher than the R12 500 de­manded by Amcu be­cause a prece­dent has been set, he says. “The re­sult­ing fac­tor now is that a strate­gic in­vest­ment im­per­a­tive over the next few years is to re­duce ex­po­sure to SA labour as much as pos­si­ble.”

In­vestors may well take their money else­where, but one must also re­mem­ber that the min­ers them­selves are ma­jor in­vestors in the do­mes­tic econ­omy. They them­selves would look at more sta­ble sec­tors in which to in­vest their hard-earned money so that they can earn a con­sis­tent re­turn.

An­other fac­tor is that SA’s gold pro­duc­tion has plum­meted some 83% over the past decade or so and, as Hart points out, is not as crit­i­cal a com­po­nent of the econ­omy as it used to be. There­fore, a har­mo­nious bal­ance be­tween cre­at­ing a sound and sta­ble min­ing in­dus­try and the need to em­ploy people (and pay them an ap­pro­pri­ate wage) must be achieved for the ben­e­fit of all.

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