[miningmx.com] – DISPUTES over wages have been called at 75% of South African platinum which is expected to total 4.12 million ounces in 2013, according to recent research by UK’s Johnson Matthey.
This is the production where the Association of Mineworkers & Construction Union (AMCU) has majority membership, and where it’s seeking a 150% increase to entry-level minimum wages. In response, Impala Platinum (Implats) and Anglo American Platinum (Amplats) have offered 8% and 6% increases to basic wages respectively. Lonmin’s offer isn’t known as yet.
Intriguingly, the trigger to industry-wide strike activity of this scale may lie at Northam Platinum’s Zondereinde mine where AMCU’s rival, the National Union of Mineworkers (NUM) is the majority union, and currently out on strike.
Were Northam to acquiesce to NUM’s demands – which mirror AMCU’s R12,500 per month minimum wage stance – pressure would be heaped on AMCU. Clearly, it’s hard to under-estimate the delicacy and importance of Northam Platinum’s position which has moved its wage increase offer three times to 8% from 4%.
This is real knife-edge stuff, especially as the tension incipient strikes create is not just a headache for mine management. AMCU is feeling the heat too.
According to Mark Rosenberg, an analyst for Eurasia Group, AMCU would much prefer to call a synchronised strike in the first quarter of the new year having followed protocol as befits the newly established union. A strike now, so close to seasonal holidays, runs the risk of failure. Although the majority union in the platinum sector, AMCU isn’t secure enough to withstand a vote of no confidence, says Rosenberg.
“AMCU leaders will be wary of launching strikes too close to the upcoming Christmas/New Year’s holiday, when many migrant workers return home to the Eastern Cape and mines are generally shut,’ he said in a note published on November 3.
“Workers will be far less willing to forego income before the holidays, making any strike difficult to sustain. A strike across three companies in a sector where management can cut company-level deals will be even harder,’ he said.
So all eyes on Northam Platinum CEO, Glyn Lewis. As if it weren’t difficult enough negotiating with industry-wide strikes at risk, he’s also fighting for a company on the horns of its own economic dilemma.
According to Northam, agreeing to R12,500 per month in basic minimum wages means it would take the company 50% longer each month to cover the cost of labour; that is, 12 days instead of six days currently.
That means less time to generate the returns on which shareholders bank, remembering of course that shareholders are the flywheel. Look no further than the R600m shareholders pumped into Northam in a recent rights offer.
Northam can’t support a strike for long either. One month of no production would delay positive cash flows by up to six months in terms of the company’s R1bn recapitalisation programme which the strike is now threatening to disturb; unseat, even.
Incidentally, a wage agreement that incorporated a productivity element involving, say, an extra blast per shift would yield positive cash flow six months sooner than planned. Productivity agreements are better than one-off benefits above the inflation because it gets everyone pulling in one direction.
It’s no accident that common purpose has been missing from South Africa’s precious metals industry for years. According to Peter Duncan, head of market research for Johnson Matthey, some 300,000 oz of platinum was lost last year from South Africa’s platinum mines owing to a reduction in productivity.
And why is productivity falling when wages have risen 280% at Northam since 2002 outstripping inflation which has risen 50% over the same period? Perhaps Zondereinde has become more difficult to mine, deeper, the face further away involving more transport time. More the reason for a compact with labour.
Northam’s view is that it has been caught in a politically charged rivalry between NUM and AMCU. That’s why NUM’s demands also now call for a separate agreement for core employees – defined as rock drill operators – in a clear attempt to win back the sympathies of AMCU’s core following.
The strike at Northam also comes only a month after profit-share payouts. Any miner who worked five years at Northam would have up to two months’ wages in the back pocket. Right now, Northam employees are not hurting. They will, though, should the strike stretch into two, three, four weeks.
Privately, Northam agrees with the estimates of one gold CEO who said that while mining companies take a quarter or two to recover from a strike, employees suffer for far longer; years, in fact. The industry view, though, is that the imminence of strike action in the country’s platinum sector has little to do with workers’ rights, and all to do with politics, money and power.
