South Africa Mining Unions Declare Deadlock, Ask For Arbitration

July 25th, 2013 by

southafrica-gold

Two South African mineworkers unions have declared a deadlock in labor negotiations with gold mining companies, and have asked the national arbitration board to intervene.

Solidarity and the National Union of Mineworkers (NUM) have rejected mining companies’ offer of a 5% wage increase. NUM has asked for a 15% general wage increase, and a 60% wage increase for entry-level workers.

Illegal strikes have broken out in the mining sector, most recently a 10-day underground sit-in by 120 workers at the Limpopo mine of Village Main Reef. The demonstration was sparked by the announcement that 918 workers would be fired for participating in an illegal strike over a trust fund for workers that had been established by the mine’s former owners.

For the other side of the wage negotiations, the Chamber of Mines, an industry association, asserted last month that 60% of gold mines in South Africa were losing money, and that if sustaining capital expenses are taken into account, ALL gold mines in South Africa were losing money (the report was released when spot gold was trading at 1283/0z).

Amplats, the world’s leading producer of platinum, reported that its mine in Rustenburg lost 1 billion rand in the first six months of this year, and that it cannot afford “unrealistic”labor demands. Amplats, which saw its first-ever year of losses last year, had to scale back restructuring plans that included firing 14,000 workers, amid threats of violence and pressure from the South African government. The current plan to eliminate less than half the original number, 6,000 jobs, is still being protested by the unions.

Analysts say that the hard line taken by both sides is driven by lower precious metal prices on the part of the mining companies, and the strain of rising domestic inflation on the workers. While the collapse of the rand has given the mining companies some temporary breathing room, the inflation pressures will only serve to strengthen the resolve of the workers for a substantial wage increase.

If wage negotiations stall, or lead to labor unrest, there could be serious shortages of platinum, and a proportionate effect on gold. Mining strikes last year caused national GDP in South Africa to drop .5%, and the struggling economy can ill-afford another such shock.