Sibanye-Stillwater flags hiked socio-political risks facing SA

Continued tepid growth in SA estimated at 2.2 percent for 2022

SIBANYE-STILLWATER, battling to contain a fallout with employees after making a revised offer to striking gold miners, is anticipating a difficult “socio-political” environment in South Africa as it focuses on “managing relationships with labour and labour unions” this year.

Sibanye has been rocked by a nearly two-month strike by mineworkers at its South African gold operations. On Friday, Sibanye offered its gold miners a revised and final settlement offer reflecting an R850 a month annual increase for the period 2022 to 2024.

In its annual report for 2021, which was released Friday, Sibanye said its “philosophy on wage increases is therefore to retain salary cost escalation at levels close to inflation” through “collective wage agreement” with the unions.

Two labour unions, Association of Mineworkers and Construction Union (Amcu) and National Union Mineworkers (NUM), notified Sibanye of a strike, which began on March 9 after negotiations failed to reach an agreement.

On Friday, NUM said it had held “joint mass meetings” with Amcu “to allow gold mineworkers to come up with a new mandate and to pave a way forward” after abandoning a march to the JSE.

Explosive labour relations are just but one worry for Sibanye in a lucrative but volatile South Africa market. The company’s chief excecutive, Neal Froneman, said in the company’s annual report that there was likely to be volatility in South Africa. “Without decisive measures to root out corruption, instil ethical leadership and implement meaningful structural reform, it is likely that the South African socio-political context will become more challenging,” he wrote in the 2021 annual report.

Moreover, “continued tepid growth estimated at 2.2 percent for 2022 and reducing to a projected 1.3 percent by 2026 is insufficient to achieve developmental goals and alleviate social discontent”.

A continuing need for social relief is thus foreseeable and this “will put strain on the fiscus” with the result likely to be an unsustainable debt for South Africa.

Despite a commodity price boom in 2020 and 2021 heightening tax revenues, “this cannot be depended on” for future national budgets.

“With the future direction of political ideology uncertain, we have limited expectations for a regulatory framework that is more favourable to business competitiveness and conducive to investment. Our reputational risk is not only around environmental concerns, but also socio-political ones,” Sibanye said.

The company, which also has operations in North America and Australia, anticipates platinum group metals “remain well supported well into the 2030s” on the back of increasing overall automotive demand and higher catalyst loadings to meet increasingly stringent emissions requirements.

In 2021, Sibanye-Stillwater generated revenues of R172.2 billion and an adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda), of R68.6bn. This performance was 35 percent and 39 percent higher, respectively, on the prior year. The South African platinum group metals production (PGM) for the year was 20 percent higher at 1 896 670 ounces “despite significant operational headwinds, including safety stoppages, employee unavailability due to Covid-19 and ongoing power disruptions” from Eskom.

In North America, elevated skills shortages and high employee attrition rates resulted in an increased reliance on contract employment at significantly higher costs. Resultantly, the company posted an adjusted Ebitda from the US PGM underground operations of R10.8bn, which was 2 percent lower comparative to the previous year.

Gold production excluding DRDGold was 892 087 ounces, a significant 10 percent stronger on the previous year in spite of safety stoppages and significant inflationary cost pressures from Eskom, steel and chemicals.