Future of gold mining at stake in wage wrangling
● The future of South Africa’s gold mining industry hangs in the balance as it prepares for a new round of wage negotiations, with demands for steep pay hikes likely to fasttrack its inevitable demise, analysts say.
Labour accounts for 53% of total industry costs and with the current gold price mines could close down one by one, they say.
“The higher those labour costs, the more it moves [forward] that date of those mine closures,” said Ian Cruickshanks, chief economist at the Institute of Race Relations.
The gold industry has cut about 54 269 jobs in the past decade.
Although the gold price has increased by 20% in the past two years, the rand has strengthened by 20% in the same period, which means mining companies are not getting the advantage of the price rise.
“Many of the gold mines are marginally above break-even level from a cost basis, therefore any increase in wages can put them in a loss-making situation,” Cruickshanks said.
In the past year, AngloGold Ashanti sold its Moab Khotsong and Kopanang operations and shut down its TauTona mine due to unsustainable operational costs, while Sibanye-Stillwater has put its Cooke operations on care and maintenance.
Gold companies negotiating in this round of wage talks are AngloGold, Sibanye, Harmony and Village Main Reef, owned by Heaven-Sent, a Chinese investment company.
If South Africa’s biggest union in the sector, the National Union of Mineworkers — which represents 51% of workers — persists in pushing a high wage claim jobs could be lost faster than anticipated, analysts say.
According to Bloomberg, the NUM is demanding a 37% wage increase for the lowestpaid mineworkers.
NUM spokesman Livhuwani Mammburu declined to comment on the details of the demands tabled by the union.
The Chamber of Mines confirmed it had received demands from the NUM, UASA and Solidarity. The Association of Mineworkers and Construction Union, which represents 34% of workers in the industry, said it would table its demands this week. UASA is seeking a 10.5% increase, while Solidarity is asking for 10%.
The chamber did not say when the talks would start, but said the wage settlement would be backdated to July 1.
It said that on average over the past decade unit labour costs had increased 18% while productivity had dropped by 3%.
“The most advantageous position for the sector would be one where labour productivity increases at a pace faster than unit labour costs,” Chamber of Mines spokeswoman Charmane Russell said.
However, Peter Major, analyst at Cadiz Corporate Solutions, said there were several reasons why productivity had dropped, including the fact that because gold mines were being mined out there was less gold to extract in the accessible areas.
In the past decade, modernisation has extended the life span of some labour-intensive gold mines, but mechanisation of gold mines has proved to be difficult in South Africa. Even Gold Fields’s South Deep, which was considered the last hope for the country’s future gold production, had still not yielded any profits after more than 10 years of repositioning the mine to the fully mechanised structure it is today.
From a worker’s point of view, Cruicksh-Lanks said, unions were making sure that before the sun set on the industry they had helped workers get the best deals out of gold companies. Workers deserved at least an increase in line with inflation, Cruickshanks said. South Africa’s expected 2018 inflation rate, according to the Reserve Bank is 4.9%.
The higher the labour costs, the sooner mines will close