BAY SMELTER IN SURVIVAL BATTLE: 500 JOBS ON THE LINE

Reorganisation imperative to contain costs and ensure South32 can recover competitiveness, writes Dineo Faku

SOUTH32 president and chief operations officer for Africa Mike Fraser said the company planned to retrench workers at its lossmaking Hillside Aluminium

Smelter in Richards Bay to improve competitiveness.

Fraser said the proposed restructuring of the smelter would involve up to 500 jobs cuts to weather the volatility in the commodities markets.

He said the smelter faced a double whammy of low productivity and high costs per employee, rendering it uncompetitive on a labour cost per ton basis.

“Our international benchmarks talk about labour productivity of anywhere between 400 tons and

500 a tons full-time equivalent in First World smelters,” Fraser said.

“We are in the low 300 ton full-time equivalent basis.”

The smelter currently employs 2500 people, including contractors.

In the six months to December 2018, costs at Hillside ballooned to $2161 a ton from $1826 a ton in the 2018 financial year, driven by the jump in raw material prices.

Last week, the group gave notice to organised labour on the consultation process under Section 189 of the Labour Relations Act in a bid to identify measures that would help to control costs.

Under Section 189, an employer is required to consult relevant unions when contemplating dismissing employees for operational requirements.

Fraser said costs comprised 10percent of overall losses with the company able to control only a quarter of that.

The company is expected to announce a preferred bidder for the energy business by the end of June.

Trade union Solidarity deputy general secretary Marius Croucamp said the company should not just blame employees for a lack of competitiveness.

He said management also had to take responsibility for the decline.

The Section 189 consultation would probably be extensive, he added, as it was not just about retrenchments.

“The company has proposed the reorganisation of Hillside, wage negotiations and remuneration all in one. They are changing the way people work,” Croucamp said.

“We hope to assist to minimise job losses and want to look at alternatives,” he said.

South32 was formed in 2015 after BHP Billiton unbundled its South African coal, aluminium and manganese assets.

It is pushing Eskom to resolve the electricity contract at Hillside. “We would like an early resolution. We don’t want to wait until next year when we have a dispute,” Fraser said.

Hillside has a supply contract in which it receives a lower energy price when the price of aluminium falls on the London Metal Exchange dating from 1995.

Eskom would like to revisit the contract when it expires in 2020, but the company believes the contract does not expire until 2028.

South32 is divesting South Africa Energy Coal by setting it up as an independent business and placing in the hands of new owners, preferably black South Africans.

“We want to ensure we partner with someone with the resources, balance sheet and capabilities to sustain the business. This is not an Optimum Coal,” he said.

Fraser said the company had allowed its labour costs to get out of hand, which had affected its productivity.