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"So we've planned, we've engaged, we've talked and all I can say is now it's down to delivery. If the worst case scenario does eventuate then we do have to dismiss the people." CEO Nick Holland.
ALEC HOGG: It's Tuesday October 16 2012 and in this Boardroom Talk special podcast, Nick Holland, chief executive of Gold Fields Limited, joins us. Nick, you've done some pretty bold things today but just by way of background at the moment nearly 23 500 or just over 23 500 of your 35 000 staff are still out on an unprotected strike and they've rejected whatever proposals you've put on the table.
NICK HOLLAND: Absolutely, we've tried now to get people back to work at KDC West for about a month; it's a month that that illegal strike has been going on. Beatrix has been for less than that but for almost three weeks. We're at a situation now where the violence, the intimidation, damage to property, etc has been escalating, we have to act on that and I don't think we can stand still and do nothing. We've been in touch with the police to assist us where possible but I want to give the employees one last opportunity to also take up the offer from the Chamber of Mines that we put out last week. If they come back to work, report for duty at two o'clock on Thursday afternoon, they can get that offer that was worked out for the gold industry. But that's the last opportunity, after that they're not going to have jobs I'm afraid and we have to break this strike, it's just gone on far too long.
ALEC HOGG: You say the behaviour of the strikers has approached anarchy, that's in the official statement, what do you mean by that?
NICK HOLLAND: Well, we've had people attacked, we've had marches on police stations by various people, we've had people looking to attack other residents, there have been people fighting people who wanted to go to work and preventing them, there's been significant intimidation. I believe that the vast majority of workers, based on the intelligence we're getting, do want to go back to work but they're being prevented from forces that are trying to drive another outcome, which I don't really understand what that outcome is because the sort of wage demands that have been put on the table, R12 500 minimum wage, there's just no basis for even contemplating anything like it even if we wanted to. We certainly aren't going to move outside of the wage agreement that we concluded last year. The offer that we're putting on the table actually keeps us within the wage agreement, it's a pre-existing commitment. So with the increasing intimidation we just have no choice now but to act. I think it would be better to break this thing and then provide an opportunity at the right time for people who do want to work to give them an opportunity to work. I think by doing this we can afford them that opportunity and that's their right.
ALEC HOGG: Nick, you say in your statement that failure to act boldly will lead to unimaginable consequences not just for mining but for South Africa. What do you mean by that?
NICK HOLLAND: I just feel that if this thing carries on it has the potential to escalate, who knows where this goes next? It could spread outside of the mining industry. We have a significant support industry to the mining industry that could be impacted, it could impact general business. Now, we have a tremendous responsibility here because unfortunately we've been selected ahead of everybody else. So my view on this, and I think it's the view of the other executives in the industry, is one we have to recognise that law and order cannot be breached and that includes illegal strikes, they should not be allowed. Two, that we've got to stick to existing agreements, 12, 13 weeks after we've just given an 8% to 10% wage increase, nearly double inflation, we're faced with this situation. Three, we just have to show that this is not something that we can contemplate. I think it's going to be short-term pain for us - I hope it's short term - and eventually we'll get to normality. But we feel after a lot of deliberation with the board, etc that we have to go ahead and do this now.
ALEC HOGG: You say you've tried to communicate but that's been ignored?
NICK HOLLAND: Ja, we've sent briefing notes on a regular basis to the workers, we've had them distributed to the hostels, etc. I've not wanted my managers to stand on a podium and address hostile illegal workers; I don't think it's necessarily a good idea for us to do that. So we've stopped from doing that and we're not doing it but we've given them a lot of briefing notes, we've explained to people what they're doing is illegal, we've urged them to come back to work. We've as recent as last week indicated the Chamber offer, we've also reiterated again this morning that they can still access that offer by Thursday. So I don't know what more communication we can do but we've done it in all the official languages, etc so they've got that information.
ALEC HOGG: Is there any chance in your mind that things might be different this time? You've issued an ultimatum, as you've said, they've got to get back to work, the illegal strikers, by Thursday at two o'clock, you have communicated in the past and it's been ignored, what makes you think this might be different?
NICK HOLLAND: It may not be, Alec. It may not be any different and it may be that we have to actually do what we've indicated we will do if they don't arrive on Thursday...
ALEC HOGG: And that's fire everybody, is it?
NICK HOLLAND: That's it; dismiss the people who have not come to work. We have a court interdict that allows us to do that, it's illegal and we would process the dismissals over that period of time. It will take us a few days to process them and obviously then it deals with all the logistics of people moving off the site, etc. But we've got a whole plan worked out, we've had a lot of discussions with the police on the whole issue and they're giving us as much support as they can. Look, all we can do is hope and pray that we can find a reasonable outcome here but I'm not optimistic that between now and Thursday that's going to happen.
ALEC HOGG: So the process, if I understand it correctly, is on Thursday if the striking workers do not return to work they will be dismissed, that will take a few days to process and then they will be escorted off the premises or their belongings will be escorted off the premises and then what?
NICK HOLLAND: Well, that's it, the mine is shut down and then we will go through a process of working out how we would bring the operation back into production. It would possibly be an opportunity for people who want to come back to work and we could provide opportunity for them to do that, those who want to. That's why I say I think there are a lot of people who do want to work but they're being prevented by intimidators, which are not the majority, from being allowed to work.
ALEC HOGG: Nick, would this also be an opportunity to mechanise more?
NICK HOLLAND: I don't think that's going to be a big issue in these operations as yet. It's obviously a big focus of mine and the company's to look at improved mechanisation but frankly the most important issue is for us to get the man away from the face. Number one get the man away from the face, two is way back in 2008 when I became CEO we wrote off about 2m ounces of high grade pillars, which we didn't deem safe to mine. If we could find a way of remotely mining those I think that would be a good project and we're looking at various technologies, thing off the shelf, plus things we're developing internally to do so but none of this is going to be a quantum change at this point in time. First prize is for us to get everyone back to work and that way I think it's a win-win. That's what I'm hoping for but the signs are not great that that's going to happen just now.
ALEC HOGG: The losses to date you announced today is R1.2bn direct but there's more because this infrastructure if it's not maintained on a daily basis can also deteriorate.
NICK HOLLAND: It can and we've never been in this situation before in that we've got stopes that are standing for four weeks when, in fact, we didn't prepare. When we have the Christmas break, which is two weeks over December, we actually stop blasting three or four days before and we go and support faces, we check to make sure they're going to hold up and we put increased effort in over that period of time, and we can plan. Now here we've not been able to plan, so it might be that some of the stopes collapse, there might be some falls of ground, there might be some areas that are loose. That's a safety hazard and that's my first concern when this happened way back three, four weeks ago is, gee-whiz, the safety here could be an issue. Fortunately we've rolled out roof bolting across the operations as a standard and that means that we should be able to mitigate some of that. We've been doing regular inspections, a lot of the areas look good and we should be able to get back but some won't and we'll have to take a good week to just go and check everything and make sure that it's safe. I don't want people rushing in there and starting production until we know it's safe. Hopefully things will hold up but I can't guarantee it.
ALEC HOGG: So that R1.2bn is going to swell considerably. Where does the future lie because if you re-hire what's to protect you from this happening again?
NICK HOLLAND: Well, we can look at various processes of identifying who are the troublemakers, ringleaders, perpetrators of violence, we can certainly identify those people and deal with them at the time. I think the other thing is everyone's lost here and going through a process where people who have not got income for a month that's not something they want to continue to happen over and over again. It could be that various people who we can prove were perpetrators and who may be on existing warnings we can deal with them separately from all of the others anyhow and this would provide us with the opportunity to do that. So we'll see what happens but I think certainly it would be a strong message to workers to know that we're serious here.
ALEC HOGG: Is there anything from your side you could do differently?
NICK HOLLAND: Going backwards or forwards?
ALEC HOGG: Well, both.
NICK HOLLAND: Well, I don't think there's a lot we could do going backwards. People talk about issues in the hostels and the mines not being ideal, we've spent over the last four, five years R500m on improving the conditions in the high density facilities, building 700 new houses, converting certain of the hostels to married quarters, providing more training, recreation facilities, etc. We've done a lot, I don't know what more we could have done over that period of time and yet this has still happened. We've given above inflation wage increases in this industry for the last decade and we continue to do so. I'm not too sure what more we can do.
ALEC HOGG: Is that not the seed of the problem perhaps, the above inflation wage increases, given that productivity hasn't been rising at the same rate?
NICK HOLLAND: Exactly and this has been a concern for some years in that productivity, in fact, has been declining. You're giving above inflation wage increases, productivity is declining, thank goodness you've had gold price in rand terms that's been increasing because had it not done so we would have been in more significant problems long before this. We would have had to restructure long before this happened. So no, it's not sustainable and the annuity effect of these increases combined with all the other things we're looking at, energy increases keep going up, carbon taxes are coming, royalties were introduced two years ago, heaven knows what's going to happen now in terms of any further changes to BEE etc, social costs. There's only so much that these mines can absorb before there's an impact and the impact you can see over the last three or four years has been declines and you might speed up the declines in this production profile if we don't find a different model.
ALEC HOGG: What do your foreign shareholders think of all this?
NICK HOLLAND: Well, obviously they're very concerned, sadly we've lost a lot of shareholders who've been loyal to Gold Fields for many, many years, who've just said, look, it's too difficult for us to stay in the stock while this is going on. So we've lost some foreign investment, it's going to be hard to get a lot of them back, it's not to say it's impossible. But I think we need to work out, when the dust settles on this, an operating model with government, organised labour that says how do we actually restore some credibility back to investors because we need them and without them we don't have an industry. So I hope when the dust settles we can try and talk about that and see what can be done.
ALEC HOGG: Given your comment that the behaviour is approaching anarchy, people being...well, one of your employees being dragged out of a truck, beaten badly, the truck set alight, the trashing of the Westonaria police station, etc, have you been receiving the kind of support from government that you would have expected?
NICK HOLLAND: We've received some support and I must say that the National Police Commissioner and the team have certainly had a very good meeting with us and the rest of industry to see how they can assist us. I think government now is realising the critical need to install law and order once again and make that a priority because without proper law and order in place we can't even think about any growth plans in the country. We've got to get basic law and order and a proper judicial system working behind us because that's the foundation for the future. I'm grateful to see that we're starting to see some positive comments in that direction but we need to do more and all I can say is myself, as the rest of the leadership in the industry, are prepared to engage with government and organised labour at short notice to see what more we can do together as a team to improve the situation.
ALEC HOGG: But the acid test is coming, presumably on Thursday, when you might have to fire nearly 24 000 people.
NICK HOLLAND: Well, it will be around 15 000 to start with because we haven't issued final ultimatums to KDC East yet, we want to give them a little bit of time, that's just happened. But it's around 15 000, that is the acid test on Thursday, people need to come back to work.
ALEC HOGG: And if they don't, the acid test for the law and order authorities would be similar.
NICK HOLLAND: Well, exactly, we need to determine whether we'll get the requisite support that we believe that we will get and all the indications are that we will but obviously everything will depend on what happens at the time. So we've planned, we've engaged, we've talked and all I can say is now it's down to delivery. If the worst case scenario does eventuate then we do have to dismiss the people.
ALEC HOGG: Nick Holland, chief executive of Gold Fields Limited.