Bleak prospects as prolonged strikes in the South African platinum mining sector continue.
CAPE TOWN, SOUTH AFRICA – The discovery of gold and the subsequent Witwatersrand Gold Rush in 1886 was the main catalyst in South Africa’s economic development. With abundant resources in diamonds, gold and platinum, to name but a few, South Africa soon became a major player in the global mining industry. Let us not forget, however, that exploitative labor policies both before and during the apartheid regime were the stepping-stones that enabled South Africa to become the global mining giant that it is today.
In 1946, over 1,000 miners gathered in Johannesburg’s Market Square under the African Mine Worker’s Union (AMWU), formed in 1941. These workers demanded a minimum wage of 10 shillings per day and better working conditions. These strikes led to the deaths of nine miners and the injury of over 1,000. The miners’ demands being met and they were forced to go back underground. Yet the strikes of 1946 served a greater purpose in South African history, as it led to a shift in the political paradigm and spurred a more militant movement in the struggle against oppression. In 2014, however the question has to be asked: Is the ongoing strikes since January 23rd in South Africa’s platinum sector an echo of the injustices of the past or a political game of chicken? One in which powerful unions are the only winners and the mineworkers as well as the South African economy becomes collateral damage.
The South African mining sector accounts for roughly 18% of South Africa’s GDP and 16% of total employment through direct and indirect jobs. According to Roger Baxter South African Chamber of Mines COO, ”The [mining] sector creates 1.4 million jobs in South Africa; 500,000 directly and about 900,000 jobs through the multiplier and induced effects.” As far as the importance of platinum is concerned, he notes that, “South Africa is home to 87% of the world’s known platinum reserves and is the world’s largest primary producer of platinum for supply to global markets.”
The South African mining industry remains dependent on cheap and flexible labor. Still haunted by the Marikana Tragedy in August 2012, which left 44 people dead and at least 78 injured, the platinum sector is suffering from prolonged strikes that started in January this year under the Association of Mineworkers and Construction Union (AMCU). AMCU is not budging from its demand to a wage increase up to ZAR12,500 per month over four years, which translates into a compound rate of 30%.
AMCU was formed in 1998 following a breakaway from the National Union of Mineworkers (NUM), which was an affiliate of COSATU, South Africa’s largest trade union. At Marikana, strikes culminated in the outbreak of violence between police and strikers, yet it is the spat between AMCU and NUM over bargaining rights that was the main cause of the violent strikes at the Lonmin and Amplats platinum mines in Rustenburg. After the incident, AMCU now represents 70% of Lonmin employees as well as the majority of employees at Amplats and Impala Platinum.
Producers are estimated to have incurred costs of around $763 million since the start of the strikes while the loss in wages is estimated at $290 million. The three big platinum mining companies remain adamant that given depressed metals prices and rising production costs, they can only afford wage increases up to 9%, well above the current inflation rate which is close to 6%. “There are expectations from the unions on what the mining companies can afford to pay, and at the same time there are companies who have been struggling especially in the platinum and gold sectors where prices have fallen off significantly while costs have risen. Companies are working with the unions and government to find solutions to restructure because of the viability of these businesses,” says Baxter. While mines have built up stock prior to the strikes, the prolonged strikes will certainly have an impact on South Africa’s platinum output, which constitutes around 70% of global supply.
With the formation of the Workers Association, committed to getting miners back to work and COSATU’s issued statement on March 11th urging employers and police to break the now seven-week strike, it is clear that there is more politics amongst the unions than meets the eye. With 14,000 jobs now under threat, the lack of action on the part of government illustrates the pre-election paralysis which is currently hitting South Africa in both the mining and electricity sectors, where pressing issues are not being addressed.
Last week’s dismal attempt at wage-talks between South Africa’s labor mediator and the Chamber of Mines, it is becoming clear that government-assisted negotiations will not be getting off the ground soon enough, while the sector is hemorrhaging lost profits as the spot price for platinum reached a six-month high last week at $1,480 per ounce. While built up stock will keep the market supplied for now, it cannot do so indefinitely.
The negative perception of South Africa’s labor landscape being perpetuated will carry its own cost. “Since 2011, the sector has faced a challenging labor market with large-scale unprotected strike action and the Marikana tragedy in 2012 which negatively affected investor perceptions of the country,” said Baxter.
The dictatorial stance that AMCU has taken despite the tragedy of 2012 is certainly worrying and begs the question of when is enough truly enough. If mining companies simply cannot afford the demanded wage increase and the deadlock continues, the economic affects for the country in terms of job loss and hampered GDP growth will be far more devastating than settling for a 9% wage increase. The reasons behind the demands for the strikes in 1946 were clear, the motivations of the union were sound and the outcome – although initially negative – had a large role to play in the evolution of human rights in South Africa. In stark contrast, the 2014 strikes are characterized by vagueness in the union’s demands and AMCU’s apparent disregard of the interests of its members. Miners’ welfare once again become collateral damage in the standoff, but this time, the blood will be on the hands of the union.
This article was written as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Second Official Mining in Africa Country Investment Guide, will be launched next February 2015, as the only official publication providing country-specific information at Africa’s top mining event, the 2015 Investing in Africa Mining Indaba™ held in Cape Town, South Africa. You can view the 2014 Official Mining in Africa Country Investment Guide here.