Any sur­vivors?

Finweek English Edition - - INVESTMENT -

It’s a strug­gle to pick out any­one who would have ben­e­fit­ted from the five­month plat­inum strike that ended ear­lier this week ( Wed­nes­day, 23 June). In truth, it was like an air dis­as­ter over a me­trop­o­lis: lots of col­lat­eral dam­age.

“No win­ners,” said In­vestec Se­cu­ri­ties in a note, al­though look­ing on the bright side, it ob­served that there would at least be no in­dus­trial ac­tion in the plat­inum sec­tor for two years fol­low­ing the agree­ment. “With strikes over now, the com­pa­nies can fo­cus on re­cov­ery plans and nec­es­sary re­struc­tur­ing where pos­si­ble that should bet­ter po­si­tion the min­ers longer term,” it said.

Per­haps South Africa’s new Min­is­ter of Min­eral Re­sources Ngoako Ra­matl­hodi, comes out of it fairly well. Said John Meyer, an an­a­lyst at SP An­gel, a UK bro­ker­age: “The new Min­is­ter comes out of this rather well and will be seen as hav­ing inf lu­enced the end of the strike.”

It was Ra­matl­hodi who, days af­ter tak­ing of­fice, sought to get the plat­inum com­pa­nies and the As­so­ci­a­tion of Minework­ers and Con­struc­tion Union (Amcu) talk­ing. He stepped aside two weeks later say­ing he’d achieved his orig­i­nal aim al­though it was clear he had heeded the op­pro­brium of ANC gen­eral-sec­re­tary Gwede Man­tashe who said labour law should be al­lowed to di­rect the ne­go­ti­a­tions, not the min­is­ter.

For the rest, how­ever, the strike shapes like a tragedy.

It will cer­tainly have a hefty im­pact on the fu­ture earn­ings of plat­inum com­pa­nies at a time when the plat­inum price was stub­bornly un­re­spon­sive to the in­ter­rup­tion of some 1m ounces of plat­inum pro­duc­tion. Work­ers, mean­while, may have to toil two to three years to earn back in­come lost dur­ing the in­dus­trial ac­tion. The to­tal im­pact on some 70 000 worker salaries is about R10.6bn.

In terms of the wage of­fer, plat­inum firms will have to ab­sorb R1 000 per month cost in­creases for all A- and B-band em­ploy­ees. Ac­cord­ing to Kieran Daly, an an­a­lyst for Mac­quarie Re­search, this in­crease when com­bined with mid­dle-man­age­ment in­creases will leave the plat­inum firms scrap­ing a cash breakeven in the 2015 fi­nan­cial year un­less there is a sig­nif­i­cant in­crease in the rand per ounce price of plat­inum.

While de­tails of the agree­ment were not con­firmed at the time of writ­ing, Lon­min may gen­er­ate a loss in the 2014 fi­nan­cial year al­though its ex­ec­u­tive team was savvy in draw­ing down on its debt fa­cil­i­ties be­fore the strike took hold and be­fore bankers could ob­ject. Im­pala Plat­inum (Im­plats) is likely to seek means of shor­ing up its bal­ance sheet with a rights of­fer.

For Amcu, the fu­ture is un­cer­tain. At the mo­ment, the union’s pres­i­dent, Joseph Mathun­jwa, is tri­umphant, de­scrib­ing the strike as an act of stead­fast bold­ness. “Plat­inum will never be the same again,” he told a rally in Rusten­burg. “What other unions could not do in more than 20 years, you could do in five months,” he added.

The union cer­tainly sur­prised the pro­duc­ers. Am­plats CEO Chris Grif­fith thought the pres­sure of two months of no salary would force the union to the ta­ble. “I think they un­der­es­ti­mated the abil­ity of the com­mu­ni­ties to sup­port one an­other,” one as­set man­ager said. Even when an in-prin­ci­ple deal had been ne­go­ti­ated, Amcu paused to ask for more con­ces­sions, some of which it got.

This brings us to the third plat­inum pro­ducer, An­glo Amer­i­can Plat­inum (Am­plats). Ow­ing to its as­set di­ver­sity and the rel­a­tively deep pock­ets of its ma­jor­ity share­holder, An­glo Amer­i­can,

Joseph Mathun­jwa

Gwede Man­tashe

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