Mine wage talks promise to be very tough
A repeat of labour violence cannot be ruled out, write Ed Stoddard and Sherilee Lakmidas
WAGE talks across SA’s mining sector starting next month will be among the toughest ever with strikes a certainty given inflation, worker militancy and shrinking company margins.
There is also real risk of a repeat of the labour violence and wildcat action that led to more than 50 deaths last year, costing companies and the state billions of dollars in lost revenue.
Emboldened by the high settlements some received after the illegal 2012 strikes, labour militancy has spread from platinum to gold and coal. Miners’ income is being devoured by rising prices, but wages account for more than 50% of company costs and they have paid above-inflation wage rises in recent years.
“The gold companies cannot afford anything above inflation,” said David Davis, a mining investment analyst at SBG Securities.
“Just escalate $1,150 by 12% per year and by 2015 the gold price will have to be about $2,000 an ounce for the producers to make a 20% margin,” he said.
Spot gold is at two-year lows around $1,425 an ounce.
He said broadly, the all-in cash costs in SA for AngloGold Ashanti, Africa’s top bullion producer, and smaller rivals Gold Fields and Harmony Gold were about $1,150 an ounce last year and have been rising by 12% to 14% per annum over the last three years.
In the platinum sector, the situation is more dire, with about half of the shafts unprofitable at current prices. There is limited upside for the price of metal used to make catalytic converters that cap emissions from vehicles.
Supply concerns from SA, home to 80% of platinum reserves, could provide a boost but producers can hardly cash in on that if their mines are shut. Last year’s unrest was rooted in a turf war between the radical Association of Mineworkers and Construction Union (Amcu) and the long-established National Union of Mineworkers (NUM).
Amcu won in platinum and now claims 105,000 members or a fifth of SA’s mineworkers.
Wage talks in SA’s gold, coal and platinum sectors take place every two years, but this will be the first negotiations with Amcu in such a strong position.
Wage talks are always tough and the last official round two years ago triggered limited strikes including a shut down of most of the country’s gold mines for four days.
But last year’s wave of illegal strikes, that closed mines for weeks at a time, have been a game changer. Workers are relying on the unions to deliver deals such as the 11% to 22% pay hike platinum producer Lonmin gave to illegal strikers after 34 of them were shot dead by police at its Marikana mine. “We are extremely concerned about the abnormal environment where people can raise unrealistic expectations,” said NUM general secretary Frans Baleni.
Militancy is spreading. Diversified miner Exxaro had an illegal strike in March at five of its coal operations.
Exxaro CE Sipho Nkosi told the Reuters Africa Investment Summit last week the strikers had demanded a bonus even though they had not met their agreed targets.
“They said you made enough money, you declared a profit in your results. You made over R2bn so you can afford it. So every employee must get R15,000.”
But talk of shrinking profit margins can seem irrelevant if you work in dangerous conditions 2km or more underground for R4,000 a month with a family to feed. Inflation reached almost 6% in February with food prices rising 6.1%.
This helps explain why the more radical Amcu, a relatively new union, has poached tens of thousands of former NUM members.
“Many of our workers are getting R5,000 a month and on this amount you must pay for food, accommodation, transport and your family,” said Siphamandla Malchanya, an Amcu activist at Anglo American Platinum’s (Amplats’) operations in the platinum-belt city of Rustenburg.
Adding fuel to the fire, Amplats, the world’s top platinum producer, is in talks with the government and unions over its plans to mothball two Rustenburg mines and cut up to 14,000 jobs in a bid to restore profits. Much of SA’s mining labour force is semi-literate and from rural areas, and so laid-off workers would have few other options and their plight will stoke already volatile social tensions at a time when wage talks need to take place.
Just getting them off the ground may not be easy. Impala Platinum says Amcu is now the majority union at its operations, representing more than 50% of its workers, while Amplats says it claims 40% of its employees.
But neither company has been able to sign a “recognition agreement” with Amcu yet, needed to get talks rolling.
Another problem is structural. In platinum, negotiations are done company by company, while in gold and coal they take place collectively under the Chamber of Mines.
This is a key reason for Amcu’s penetration into platinum, as it is easier to convince workers you can hammer out a new deal for them if they are not part of an industrywide process.
The chamber was yesterday meeting with Amcu to see if it was willing to embrace industry-wide wage agreements in the platinum sector.