Kumba tells 1,620 workers of potential job cuts

After record annual operating profit, Kumba Iron Ore issued notices of potential retrenchment to 1,620 employees, trade union Solidarity said on Friday.

Kumba, Africa’s biggest ironore miner, recently announced two large investments in its Sishen and Kolomela mines totalling R10.6bn. It said it delivered nearly R21bn of free cash flow in 2020 and paid a total dividend of R60.90 a share or 86% of headline earnings.

Earnings before interest, tax, depreciation and amortisation (ebitda), which is essentially an operating profit metric, was 37% higher at R45.8bn. After-tax profit was R30bn compared with R21.3bn a year earlier.

The 70%-held Anglo American subsidiary confirmed the statement but not the numbers, saying it “has been on a business transformation journey over recent years” designed to “enhance our margins, extend the life of our mines, manage costs, reduce the break-even price and ensure we are sustainable for the future”.

“It also includes a targeted organisational restructure to ensure the right work is done at the right time, in the right way by capable people in roles that are designed with clear accountabilities and authorities,” it said.

Kumba’s staff costs in 2020 were R5bn, barely changed from a year earlier. Solidarity said Kumba intends retrenching up to 653 people out of the 1,620 staff notified they could be affected by the restructuring.

It is estimated that about 1,620 employees across the business will be affected one way or other, but it is envisaged that 653 employees may be retrenched, said Kumba’s notification on March 4 to its unions.

The group employs 6,141 people after reducing staff from nearly 11,800 in 2015. In 2016, Kumba cut a third of jobs at its flagship Sishen mine.

“It is unfair and simply insensitive of Kumba to punish workers amid a pandemic and an excellent financial performance with increased turnover, profits and dividends declared. The rationale put forward by Kumba simply has no grounds,” said Riaan Visser, Solidarity deputy general mining, agriculture and chemical industry secretary.

Kumba’s notice said: “A combination of fluctuating iron ore prices, [a] long-term depressed iron-ore market, higher capital requirements, and increased operating expenses due to higher waste stripping requirements, have led to Kumba’s margins and cash flows coming under pressure going forward.

“This has brought us with no choice [but] to look at storm proofing our business while we are in a position to do so, as opposed to be left with fewer opportunities to survive when the envisaged changes in the market occur.”

Visser said the retrenchments timing could not be worse. “With unemployment at the highest level in SA’s history, a business cannot justify such actions in any way. We will not tolerate it,” he said.

SA’s official unemployment rate rose to 32.5% in 2020’s fourth quarter due to Covid-19 economic disruption. More than 7.2-million people seek jobs.