The South African economy is dependent on a stable mining industry that has lasting and sustained peace in its labour affairs, says Trevor Manuel.
South Africa had to find a way to secure a lasting and sustained peace in mining labour relations, given the sector's importance to the economy, Minister in the Presidency Trevor Manuel said on the fringes of the Mining Indaba 2014 on Monday.
"It's exceedingly difficult right now," he told attendees at a cocktail event hosted by law firm ENSafrica and the Australian Trade Commission.
"You are dealing with an environment where there's exchange rate volatility and you need, at least, to secure industrial peace in order to ensure that we can attract and retain the investment and look to the mining industry because it is so fundamentally important to the South African economy."
He argued that discussions with even the most "militant of unionists" would reveal that "they too desire industrial peace, because it is in their interests, as it is in the interests of employers, and very importantly as it is in the interests of everybody in the country."
Manuel's remarks come ahead of the opening address at the 2014 Mining Indaba on Monday by Mineral Resources Minister Susan Shabangu, where investors will be looking to her for solid reassurance over the health of the local industry. The mining sector faces sustained labour tension, with platinum strikes well into their second-week. In addition, long-standing uncertainty over proposed changes to mining legislation prevails and deadlines for compliance with the country's mining charter loom, notably the requirement that firms are 26% black owned. It remains to be seen what kind of concrete assurances the state can give the investor community as it faces an general elections later this year.
Further Amplats retrenchments
Meanwhile, Anglo Platinum South Africa's largest platinum producer said at its annual results on Monday, that it would be retrenching a further 1 400 workers through restructuring efforts according to a Bloomberg report.
The protracted and violent nature of strikes in South Africa has also given international investors pause. Other issues include the pervasive uncertainty created by proposed changes to the Mineral and Petroleum Resources Development amendment Bill currently before Parliament. The Bill proposes, among other things, that the minister can designate certain minerals "strategic" and require firms to set a portion aside for local beneficiation.
Given these challenges, the minister's speech "can't just be platitudes" said Mike Roy, mining and metals sector leader for Africa advisory services at Ernst & Young (EY). "This is a very volatile, sensitive situation."
On the labour front many long-standing legacy problems needed addressing to help diffuse industrial relations tensions, noted Louis van Breda, director for assurance at EY.
Mineworkers typically support extended families and many faced high debt levels, heightening the stakes during wage negotiations.
'Lack of ancillary services'
In addition, where many mining operations took place, there was a "complete lack of ancillary services", such as proper housing, sanitation, and electricity, to support the socio-economic wellbeing of mining communities.
There needed "to be a collaborative approach between government, the mining houses and labour … to look at developing some form of ancillary services," said van Breda.
When it came to broad-based black economic empowerment, too little had been done to extend enterprise development under mining legislation according to Sandile Hlophe Africa transaction advisory services leader at EY. Deals have mainly focused on the question of equity, and not enough had been done to build local, black owned companies in the mining supply chain. This limited the growth of employment opportunities around mining operations said Hlophe. Global trends towards greater mechanisation, meant it was imperative that labour unions began shifting demands from wage increases towards greater emphasis on creating job opportunities for their members through entrepreneurship and enterprise development.
"If there isn't proper thought and proper action … to have amore inclusive involvement of wider communities and stakeholders, we are running into potentially massive problems, particularly in an election year," warned Roy.
In the face of similar worry Manuel did attempt to soothe investors. He stressed that over the last 20 years, despite early trepidation over the appointment of a democratic government in South Africa, the country's development had been largely positive.
Government's debt costs had been lowered considerably in the last two decades, the cost of capital had reduced, and there had been an improvement in corporate valuations he noted.
There has also been a significant increase in disposable increase of South Africans, the rise of a black middle class, wage inflation and government grants had been supportive, and there had been improvements in labour productivity.
"So its not a bad story," said Manuel.