Platinum industry on the mend
Labour relations improved, metal supply tightened and prices stable
I SET out this week to write a piece for Business Times to provide a perspective on where South Africa’s platinum industry finds itself. But as I was putting the finishing touches to the article, we woke up to the news that Nelson Mandela, the father our democratic country, has passed on.
Symbolically, it is a blow to the business community. Madiba’s immeasurable contribution to South Africa cannot be overstated: he was integral to the ushering of democracy in South Africa, and he led with distinction, stature and humility during his presidency.
Without his legacy, South Africa would not have become the thriving country that it is today, and the economy would not have achieved the gains it has in the last 19 years.
History will recognise him as a giant among men; as an iconic leader who fought throughout his life not only for equality but for the basic human rights of all.
I am sure I can speak for all 30 000 employees at Anglo Platinum, when I say we feel a deep sadness and would like to express our sincere condolences to his family.
This news casts a pall over our industry, which had appeared to be recovering from the trauma of last year — events like Marikana and the other unprocedural strikes, combined with the declining platinum price, which itself was a result of the structural changes in the platinum group metals market
So, let me provide the perspective on the platinum industry that I sought to do, before Thursday’s news overshadowed everything.
The fact is that while our sector might be on the mend, we’ve battled numerous challenges this year.
The platinum price has recovered from its mid-year low, but it has not shown a real positive trend. Significantly, unlike other commodities, platinum has not recovered since the 2008 global financial crises.
Labour relations remain complex. And at Anglo American Platinum, where our focus has been on implementing changes required from the business review announced in January, stakeholder engagement has been intense.
So if all these issues remain, why do we believe this year has been positive? Let me explain.
In the first instance, it does no good to complain about the weak platinum price. It is a consequence of international market conditions that affect far more than the price of our product.
Weak conditions, particularly in Europe over which we as a company have no control, are a reality.
As a large producer, we do have some ability to remove loss-making ounces from the market to ensure a balance between supply and demand for the metals we produce.
But our main responsibility, as the custodian of shareholders’ funds, employers of people and contributors to the national fiscus and community welfare, is to take what steps are needed to continue to be sustainable, competitive and profitable.
Our announcement at the start of the year showed our intention to put in place a plan to ensure those outcomes.
The focus of that review was on how to restructure our loss-making mines and integrate them into surrounding mines to make them more profitable. It was also about instilling greater capital discipline so as to focus our spending on our higher margin mines, while at the same time cutting overhead costs and improving operating efficiencies.
Put simply, we changed our focus from volume to value.
We were, however, conscious of the effect this plan would have on our employees, communities, suppliers, customers and government. So we tried to implement these plans only after intensive stakeholder engagement, and with maximum sensitivity.
Our main responsibility is to be sustainable, competitive and profitable
We took steps to minimise forced retrenchment, including offering early retirement, voluntary packages, and holding back production at newer operations so that affected people, rather than being retrenched, could be redeployed once closure processes had been completed.
It goes without saying that this engagement, both with government and organised labour, was not easy for any of us.
The investors in Anglo Platinum were rightly concerned that any limitations on our restructuring plans would have prevented us from conducting our affairs in a way that would allow us to remain profitable. But, as we later showed, this wasn’t the case.
We did make small changes to the plan during consultation — as is appropriate — but our revised plan still allows us to reach our strategic restructuring goals.
A sober analysis of the final outcome, based on the facts rather than the ambient noise, will show that we have been able to do what is needed to reposition Anglo Platinum for future prosperity.
We did have two weeks of industrial action on our mines, but, and this is crucial in the light of what happened last year, these strikes were carried out procedurally and largely peacefully.
Much of the credit for that should go to Deputy President Kgalema Motlanthe and the ministers of mineral resources, finance, labour and justice, who oversaw the negotiation of the Framework Agreement for a Sustainable Mining Industry.
This framework has cemented in everyone’s mind the importance of the mining sector to South Africa. Even though Amcu, the new majority union at Anglo Platinum and in the wider platinum sector, has refused to sign the agreement, the spirit of the deal has been widely observed nonetheless.
Unfortunately, labour relations, particularly in mining, are still some way from being normalised.
Procedures have not always been followed. The inter-union rivalry between Amcu and the National Union of Mineworkers is not a simple matter to resolve and in some ways we are experiencing learning processes last seen in the ’80s. But I believe the situation is improving.
Equally, despite the initial bumps, Anglo Platinum and the other mining companies have managed to implement major restructuring plans that ensure a healthy future for industry.
It is also gratifying that in the midst of this turmoil, the safety record has continued to improve. This is to the credit of all concerned — government, employees and management.
Working together has also allowed us to find a middle ground over the differences we had over changes to the Minerals and Petroleum Development Act.
What all this tells investors is that contrary to the views of the doomsayers, the platinum-mining industry is working.
Griffiths is the CEO of Anglo Platinum