Biggest Platinum Producer Dodges Strike Bullet With Pay Pact
Johannesburg-SA (Nov 1) From being the Achilles’ heel that often chokes South Africa’s economy, labor relations on the country’s mines are improving and may help the country in its bid to avoid its credit rating being cut to junk later this year.
The world’s three biggest platinum producers -- Anglo American Platinum Ltd., Impala Platinum Ltd. and Lonmin Plc -- all reached three-year wage agreements with the Association of Mineworkers and Construction Union in the past week without losing one day to a strike. That’s a far cry from 2014, when the AMCU shut down the industry for five months, the longest strike in the nation’s history.
The need to improve labor relations was highlighted by S&P Global Ratings in June as one of the three key “structural measures” needed to keep the country’s investment-grade rating, along with a reliable power supply and revising its mining regulations. Gold miners also concluded a wage agreement with workers last year without a stoppage.
“We have a history of frequent and long strikes in this country so the fact that one of the more militant unions has chosen not to strike is very significant,” said Mike Schussler, an economist at Johannesburg-based research company Economists.co.za. “It definitely does help towards credit ratings.”
Price Drop
S&P, Fitch Ratings Ltd. and Moody’s Investors Service are due to review the nation’s credit assessment in the next few months and have identified prolonged strikes among weaknesses in the continent’s biggest economy.
With platinum down 39 percent to about $984 an ounce in the past five years, miners could ill afford another long stoppage. Amplats, Impala and Lonmin have cut capital expenditure by more than 40 percent in the period.
The cuts in capital expenditure and closing down unprofitable mines have intensified since the 2014 strike, with employment in the platinum industry down 10 percent to 170,000 since then, according to Schussler.
The change in tone from the AMCU, which rose to prominence after 34 protesters were shot dead by police in a single day near Lonmin’s Marikana mine in 2012, is marked. Two years ago, union President Joseph Mathunjwa pledged to reform the “slave-wage system in the mining sector.” This year, he recognized the constraints of “a very deep economic crisis particularly in the platinum sector” while still vowing to gain a “living wage” for workers.
“We are delighted with this achievement, as others thought AMCU will embark on a protected industrial action this year,” Mathunjwa told reporters on Monday.
Less Hostile
The environment is less hostile than a few years ago, said Arnold van Graan, Johannesburg-based mining analyst at Nedbank Capital. “One of the reasons for that is the realization among unions that if you push too hard, you end up losing jobs further down the line.”
The Congress of South African Trade Unions, the country’s biggest labor-union federation, said in July it will encourage its member unions that represent 1.9 million workers ranging from teachers to miners to balance wage demands with the need to preserve jobs when salary negotiations in their industries begin. The National Union of Mineworkers, which the AMCU has displaced as the biggest representative of employees in the platinum industry, is a Cosatu member.
At the three companies, the AMCU agreed to an increase in basic pay ranging from 7 percent 12.5 percent for each of the three years. The nation’s inflation rate was 6.1 percent in September. By the final month of the agreement in July 2018, a rock-drill operator at Lonmin will earn a basic wage of 12,296 rand ($906) monthly and receive guaranteed earnings of 19,455 rand.
The pact raises total labor costs at Amplats, the biggest producer, by 6.5 percent to 6.9 percent over the period, it said. At Lonmin, the increase is about 8 percent.
“If you can get that coming in below 10 percent, like Amplats has done, you’ve done well,” Van Graan said.
The pacts apply to all unions at the companies. The NUM declined to sign the agreement with Amplats because it doesn’t benefit employees, it said in a statement Tuesday.
“The entire wage agreement is a big loss to poor mineworkers who are being made to believe they have achieved a lot,” said William Mabapa, the union’s chief negotiator at Amplats. “The benefits are calculated from a lower base below their basic salaries and that is where the problem is. Workers are highly ripped off in this agreement.”
Source: Boomberg
