POLITICAL ECONOMY

Platinum, gold, coal, diamonds, iron ore. No end in sight for SA mine strikes

The South African mine strikes, and associated intimidation of any who wish to return to work, appear to be continuing to spread - from platinum, to gold and now to other mining sectors as well.

Author: Lawrence Williams
Posted: Thursday , 04 Oct 2012

LONDON (Mineweb) - 

Writing here on Mineweb in mid-August (Platinum mine violence impact - could it spread to gold mines too?) we commented thus on the prospect of the strikes and associated violence then being experienced on the platinum mines spreading to the country's gold mining sector:  "But, the issues which have led to the platinum mining violence are potentially mirrored in South Africa's gold mines - an even bigger sector (just) - and the government will be hugely worried about the potential spread of mine unrest given the potentially major impact on the South African economy of a mining meltdown. South Africa may no longer be the world's largest gold producer - a position it held for nigh on a century, but it still remains one of the world's biggest and disruption here could have a very negative impact on global mine supply - and again lead to the permanent closure of some of the more marginal operations, which are struggling to stay afloat even at current gold prices. The platinum and gold mines operate in a very similar manner and employ huge  workforces by western standards. If the AMCU starts to move into the gold mines in a similar manner the impact could be equally destabilising."

At the time South African labour ‘experts', and the gold mining sector itself dismissed such a prospect, pointing out that the gold mines had a collective bargaining system in place which would prevent such disruptions occurring .  However they seemingly completely ignored the fact that the platinum mine unrest, leading to the Marikana ‘massacre' was, initially, largely driven by dissatisfaction at the grassroots level with the dominant mining union, the NUM and a new union trying to muscle in. And, was probably aggravated by political agitators seeking to embarrass President Zuma ahead of the forthcoming ANC elections

Add Julius Malema, the firebrand populist former ANC youth wing leader to the fray with his anti-mining message calling for the mines to be made unmanageable, and his personal antagonism towards President Zuma and the strikes have indeed spread to the gold mining sector, and beyond.  The industry leader, AngloGold Ashanti has had to cease work for the past two weeks at all its South African operations, while Gold Fields, the No.2 gold miner has had to shut down half of its flagship KDC mining complex.  The latest gold miners to suffer are Gold One at its Ezulwini mine and Harmony at the Kusasalethu operation with the prospect of strikes spreading to the rest of the gold mines - and there are now reports of interruptions at Petra's Kimberley diamond mining operations, at Coal of Africa's Mooiplats coal mine and at Kumba's big Sishen iron ore mine (the latter said that initially production had not been affected, but has since shgut the mine down as the strikers blockaded access to the pit). Altogether some 22 mines have shut down because of the wave of strikes.

And there looks to be no end in sight yet.  Again readers of Mineweb will know we commented only a couple of weeks ago that the platinum mine labour problems were still far from over - see Platinum output disruption - It ain't over yet - and so it has proved to be so with the largest platinum miner, Anglo American Platinum (Amplats) remaining at a virtual standstill and a sense of unease still hanging over most of the Rustenburg-centred platinum mines.  The strikes have also migrated to Amplats' Bushveld North Western Limb operations with its big Union Platinum mine also at a standstill with yet another ‘illegal' strike in progress.

 The potential for further violence and intimidation of workers on the gold and platinum mining sectors remains rife.  What has to be particularly worrying for the country's mining industry, and for the government too given the importance of mineral production and exports to the economy, is that the strikes seem to be spreading, not only within the precious metals mines, but also to be spilling over into other sectors.

The wave of strikes, often accompanied by serious intimidation of any workers trying to return to work, will be having a drastic impact on the prospects for inward investment into South Africa - not only in mining, but also in other industrial sectors. 

In terms of impact on global supply and metals prices, it is obviously in platinum where the biggest effect will be felt given South Africa's dominance in the sector.  Interestingly the platinum price moved up strongly up until the Marikana ‘settlement', but has drifted back since then seemingly taking little account of the continuing Amplats shutdown and other disruptions at the mining operations.

Although South Africa's gold mines still contribute a significant amount to global output we don't see them impacting the gold price significantly.  If the disruption continues, as it is doing on the platinum mines, it may make a relatively minor dent in global output this year, but the gold price is not really being driven by supply/demand factors at the moment, but more by economic and monetary factors.

Much has been made by the South African mining companies of the illegality of the strikes under the country's labour legislation - but in effect this is virtually irrelevant.  It does mean the strikers can be dismissed, but to replace a 10,000 to 20,000 or more workforce, as is the case at many of the larger gold and platinum mines, cannot be done without considerable long term disruption as new workers would need to be trained before being released into a relatively dangerous working environment.  The degree of intimidation of those attempting to sign on for work also makes any worker replacement options unlikely to succeed as long as the strikes continue.

Another worrying factor, which hints at political agitation, is that some of the recent walkouts appear to have no union involvement at all - and some have not even been accompanied by overt wage demands at all at the initial stages.  And when wage demands are made they seem to be being pulled out of thin air with figures of two, three or four times normal wage levels being put forward.  With work forces the sizes of those on the South African mines, the mining companies, particularly those in the platinum sector, and at some of the gold mines, where profit margins are tight anyway, cannot afford large pay increases without taking significant steps to reduce the numbers employed, which takes time and considerable capital to implement.

As the mining companies start dismissing workers and thus removing them from their hostel accommodation as a result, there is huge scope for violence on the Marikana scale too.  For those who live in local townships rather than on the mines themselves, the scope for intimidation increases as well.  How the mines, or indeed the government and the police force, get around these problems remains to be seen.  A softly, softly approach doesn't seem to have worked and now a harder line appears to be being taken with the corresponding dangers of escalation increasing.  As we said before the problems could run and run for some time yet.  In the famous words of Yogi Berra, "It ain't over ‘til its over".

iPad Version: Miners gather for a march in Rustenburg in South Africa's North West Province: SIPHIWE SIBEKO / Reuters