High noon for mining wage talks

As unions ask for big rises, analysts say even 10% is beyond mines’ capabilities

IN LESS than two weeks, gold miners will enter one of the most difficult wage-negotiation periods in South Africa’s 120 years of gold-mining history.

The wage talks, due to start on July 11, are likely to be overshadowed by a battle for dominance between the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (Amcu).

The pressure could cause the struggling gold-mining sector to crumble.

On Tuesday, Amcu asked for salary increases of more than 100% and an increase of bottomline salaries for underground workers to R12 500.

NUM is asking mines to raise minimum salaries to R8 000.

The lowest-paid underground worker takes home a salary of about R5 000 compared with the average South African worker, who earns about R3 000.

Elize Strydom of the Chamber of Mines said mineworker salaries were bolstered by other cash and non-cash benefits, potentially lifting the lowest-paid underground worker’s salary and benefits package to R11 000.

Labour analyst Loane Sharp said promises had been made to workers that were dangerous and not feasible. “Even a 10% increase would be beyond the financial capabilities of companies and they’re asking for 100%. From the feedback we’re getting from clients, workers are very energised to strike. I think we’re going to see significant industrial action across the mining sector that will roll over the next four to five months, with spillover effects to other sectors of the economy,” said Sharp.

Top-level stakeholders, under the guidance of Deputy President Kgalema Motlanthe, are trying to manage the situation and avoid what happened last year, when wildcat strikes cost the country billions in lost revenue and production and led to the death of 50 people.

A fact sheet put out by the Chamber of Mines showed that a strike in the gold industry would result in a loss of revenue of R349-million every day workers were on strike. This includes a loss of salaries of R100-million a day for workers and a loss of taxes of R9-million that would be paid to government.

With negotiations starting in less than two weeks’ time, representatives from the government, unions and employers met for the second time on Fri- day to discuss security measures that should be taken.

In a further attempt to educate the different stakeholders about the problems faced by gold-mining companies, economists and other speakers will address them at a workshop on July 8 on the current state of the gold sector, including what processes and procedures need to be followed.

However, Sharp believes that the latest government initiatives to stabilise the sector will be “totally ineffective”.

“One of the problems with government is that they think dialogue can solve any problem. [This approach] ignores all the issues that lead to the strikes and work stoppages,” he said.

Workers have been granted well-above inflation increases for the past two decades even though production has been decreasing.

Increases over the past five years showed average increases of 12.3% compared with an average inflation rate of 5.9%.

During that same five-year period, production has dropped by 21%. In 2007 each worker on average produced 1.49kg of gold for the year, compared with last year, when the average worker produced 1.18kg of gold.

In the December quarter of 2012, about 40% of South African gold mines were classified as unprofitable or marginal, and this was without the consideration of capital expenditure, said Chamber of Mines economist Roger Baxter.

“If you take into account that 80% of South African mines’ capex is used to sustain production, the entire industry might be classified as marginal,” he said.

He added that the industry’s ability to maintain jobs depended on its ability to control costs and to match increases with productivity gains.

According to Adcorp research, the industry is expected to shed 140 000 jobs over the next three years.