/ 5 July 2013

Mining peace pact hits first hurdle

Mining Peace Pact Hits First Hurdle

The peace accord to bring stability to the mining sector got off to a shaky start this week, with the emerging Association of Mineworkers and Construction Union (Amcu) refusing to sign the pact between business, government and labour without certain conditions being met or without direction from its members.

Deputy President Kgalema Motlan­the, who led the negotiations, said the parties expected Amcu to "revert back to us sooner than yesterday".

The union has been at the epi­centre of conflict in the sector, at loggerheads with the incumbent ANC alliance partner, the National Union of Mineworkers (NUM), to win the hearts and membership fees of workers in the mining industry.

Although several calls to Amcu for comment went unanswered, it is understood that several events made it difficult for the union to sign the agreement. It was seeking to have certain conditions met, including the reinstatement of its members by AngloGold Ashanti and Glencore Xstrata over unprotected strike action.

But Amcu's decision not to sign would not jeopardise the agreement, the trade union Solidarity's general secretary, Gideon du Plessis, said.

"Labour, business and government have made a commitment to restore the rule of law to the sector," he said. "The race has begun and Amcu will simply be left behind."

Framework agreement
According to a joint statement on the framework agreement, the parties committed to, among other things, "eliminating negative social and economic legacies and empowering workers; taking necessary steps to create greater certainty and predictability in policy and regulations; repositioning the mining industry to become more attractive to investors and a more meaningful contributor to job creation; ensuring that there is proper housing for mine­workers; and attending to the problem of high levels of indebtedness of mineworkers."

The agreement required that all signatories "desist from provocation, violence, intimidation and murder and discourage members from taking the law into their own hands", and committed the government to decisively enforcing "the rule of law, to maintain peace during protests relating to labour disputes, the protection of life and property, and the advancement of the rights of all".

It also stated that parties must ensure "all matters pertaining to labour relations" are conducted within the framework of labour law.

The state committed to preventing the abuse of workers by unscrupulous microlenders, including reviewing regulations regarding salary deductions and garnishee orders.

"All stakeholders will engage actively with local and foreign investors in a structured and co-ordinated manner to ensure that South Africa remains an attractive investment destination," the statement said.

It remains to be seen how far the agreement will go towards stabilising an industry beset by domestic and global challenges, according to analysts.

Wage negotiations
The accord was finalised just as unions and gold mining companies embark on wage negotiations. The NUM has tabled an increase of between 40% and 60% for entry-level surface workers who earn R4 700, and underground and open-cast mineworkers earning R5 000.

Meanwhile, Amcu has tabled a demand of R11 500 for surface workers and R12 500 for those underground, more than double what the Chamber of Mines lists as the average basic monthly wage before benefits.

Referring to the peace talks, Nedbank Capital's Mohammed Nalla said earlier in the week before the announcement that it was not the first time negotiations of this kind had taken place only to fall through at a later stage.

"If we look at the kind of relationship and rhetoric between labour and business, it is still very antagonistic."

It was still "very much" a game of wait and see before the impact of the accord could be assessed, said Nalla.

"It is a difficult space for mining companies at the moment. They are being squeezed from all sides."

The gold sector
The gold sector is a case in point. The global bull market in gold in recent years sharply corrected itself in the first half of 2013, according to Roger Baxter, senior executive at the Chamber of Mines.

Since the last quarter of 2012, prices have fallen an estimated R100 000 a kilogram of gold or 20%, from an average of just less than R510 000/kg.

Aside from the fall in prices, since 2011, the industry had experienced other difficulties, including rapid cost increases, falling productivity and illegal strike action, said Baxter, and rising costs had eaten away at the benefit of higher prices.

Baxter noted that, between 2007 and 2012, electricity prices had increased 238% from 18c a kilowatt hour to 61c/kWh; diesel costs rose an average 15.7% a year due to higher oil prices; reinforcing steel prices rose 15.3% each year; and worker pay rose 12% on average each year.

At current prices, close to 60% of the gold industry was loss making and in a "crisis position from an economic perspective", said Baxter.

The platinum sector, which has been hit hardest by union unrest, faces similar problems of falling prices and rising costs.

Proposed changes
The headaches are not merely economic in nature. On the policy front, the state is proposing changes to a range of laws — from labour to mineral rights regulation — that will have a bearing on how mining companies operate in the country.

Proposed changes to the labour laws, currently making their way through Parliament, could have a significant impact on the sector, a major employer.

Changes contemplated in the Labour Relations Amendment Bill include tougher provisions on temporary employment, essentially limiting labour broking, as well as the exclusion of a provision requiring strike ballots at workplaces before industrial action is declared.

The failure to include a clause requiring unions to vote before declaring a strike "was a missed opportunity" to restore some stability to the mining sector, said Joe Mothibi, a director at Norton Rose Fulbright.

The provision had been agreed to in the National Economic and Development Labour Council before the Bill's introduction to Parliament in a bid to bring more democracy to the workplace.

It was cut, along with other last-minute changes made by the ANC in the National Assembly, before it was moved on to the National Council of Provinces for further deliberation.

Pending major change
A strike ballot provision would also have made it more difficult for rogue elements to impose their will on the majority, said Mothibi.

Similarly, a major change to mineral rights is pending, under a 2013 Amendment Bill to the Mineral and Petroleum Resources Development Amendment Act.

One of the more controversial provisions in the Bill relates to mineral beneficiation and limits on exports.

The new Bill allows the minister of mineral resources effectively to control the export of certain materials by determining that a percentage of a specified mineral commodity be kept for local beneficiation and sold under developmental pricing conditions. How this will be determined will be subject to regulation.

South Africa needed effective laws that benefited its citizens, but when a legislative regime became too onerous, investors could go to other mining jurisdictions, said Jonathan Veeren, a partner at the law firm, Webber Wentzel.

Baxter said it was important to note that these changes were still only in draft form. The industry was still engaging with legislators on the Bill and there were areas of "constructive progress".

Accommodation that put the interests of the country first would be reached, he said. — Additional reporting by Lisa Steyn