South Africa looks to courts to end bitter mine strike

Efforts to end the longest industrial action in South African history entered the courts this week in a bid to break a deadlock between striking platinum miners and their employers over the former’s insistence on a basic monthly salary of €900.

The strike by 70,000 miners, led by the Association of Mineworkers and Construction Union (Amcu), has halted nearly 40 per cent of normal platinum production in South Africa, the world's top producer of the precious metal by some distance, since it began in late January.

Platinum producers Lonmin, Anglo American, Impala, and smaller operators have said they cannot afford to increase the miners' minimum wages immediately to 12,500 rand (€900) a month, but they recently offered workers a deal that would see them earn that amount by 2017.

The mining houses say that many mineworkers who have not been paid in months wish to return to their jobs underground, but are fearful of being subjected to violence and intimidation by their striking Amcu colleagues.

Three miners and one of their wives have been killed in separate incidents in Rustenburg in the North West province, where the platinum belt is located, in the past fortnight, prompting police to deploy reinforcements to an area that has seen an upsurge in violence since 2012.

In August of that year, 44 people were killed in a week of strike-related violence that culminated in police shooting dead 34 miners on a hill outside one of the Lonmin shafts near Marikana. Amcu is just one of a number of unions operating in the area, albeit the largest. The others do not support the industrial action.

As of Wednesday this week, a website set up by the platinum producers claimed that striking miners had lost close to R8.4 billion (€585 million) in wages, while the companies involved have lost revenues of nearly R19 billion (€1.32 billion) as a result of the industrial action.

The mining houses recently resolved to approach striking mineworkers directly about their latest pay offer in a bid to end the strike, but Amcu objected to the tactic, and the union has gone to court to try and stop companies from communicating directly with its members.

Global market
In a show of force last week, Amcu president Joseph Mathunjwa told about 5,000 striking miners in Rustenburg that they would remain on strike until they achieved their goal of securing a living wage.

“Only an agreement could end this strike, until such time an agreement is reached, the strike continues,” he said.

However, on Tuesday, the main parties – the three platinum companies and Amcu – agreed to return to court-sponsored mediation, which began on Wednesday and is expected to last for up to three days.

Platinum is used to make catalytic converters for cars as well as in jewellery, among numerous other industrial applications, but until recently its global market price has barely reacted to the fall-off in output.

According to Impala Platinum marketing executive Derek Engelbrecht, this is because there has been an abundance of above-ground stocks of platinum – some market experts have estimated it to be about five-million ounces – that is only now beginning to run out.

“When the economic downturn hit in 2008, the mining houses just kept on producing at the same rate. That coupled with the platinum held by investors and that which is recycled [about 25 per cent of the world’s platinum is recycled] kept the surplus high,” he said.

“So there was no panic when the strike started because the major producers had a pipeline that was able to deliver to customers. This lasted until April, but now the situation is changing, and we have had to reduce everyone’s allocation of the metal to about 50 per cent.”

Full capacity
Engelbrecht told The Irish Times that Impala could continue to supply platinum at this reduced rate for another couple of months because it was only their Rustenburg mines that were not operating, so they were still mining 35-45 per cent of their capacity.

Other large operators are more reliant on the Rustenburg mines for their total platinum output.

“But the problem is still ahead of us,” he explained. “The market is only beginning to see the impact now, but it will be felt into June, July and August, even if the strike comes to an end in the coming days or weeks.

“This is because it will take us two months to get the mines to a level of operability again that ensures the returning miners are safe when they go back underground. So the longer the strike goes on, the longer it will take us to get back up to full capacity,” he concluded.

With South Africa’s general election concluding two weeks ago, it is hoped the African National Congress-led government will play a greater role in resolving the strike if the court mediation is unsuccessful, as the industrial action is also adversely affected the general economy.

But until a resolution is secured, world platinum prices will likely stay high, said mining analyst Peter Major of the Cape Town-based Cadiz Holdings. Platinum prices have edged a little higher in recent days to $1,477 an ounce as of Thursday.

Major, who has been tracking the industry since 1989, said that once the strike comes to an end, the price of platinum is likely to fall by about $200 or $300 per ounce, and that the long-term price should be closer to $950 an ounce.

He maintained that while the strike may well lead to higher wages for miners, it will inevitably lead to mass redundancies in the industry too, as mining houses move towards mechanisation and close shafts struggling to be profitable.

“I think 20,000 to 30,000 miners are going to lose their jobs over the next 12 months as mines need to make a decent margin for their shareholders. There will be fewer ounces produced, marginal shafts will be closed down and very few new shafts will be opened. The industry will be smaller and more sustainable.

“There has been no productivity increases in 12 years, but we have had double-digit wage increases. So we’ll see an increase in mechanisation. This will cost the mining house more, but machines run 24/7 and they don’t go on strike,” he said.