Retrenchments in the platinum mining sector are now all but inevitable, say labour experts.
Opinions are split over whether the wage settlement in the platinum industry this week is good or bad news for South Africa, but there is no denying it will change the country forever.
The five-month-long strike in the platinum industry was the country’s longest and has resulted in what the union boasts is the highest settlement yet for entry-level mineworkers (as high as 20%), although it is also the largest financial loss mines have seen as a result of industrial action.
The Association of Mineworkers and Construction Union (Amcu) has heralded this settlement as a victory, not just for its members on the platinum mines but also for all workers in South Africa, as it is expected to have ripple effects in the gold and coal sectors and even in other industries.
For example, minimum wages for the lowest-paid workers will increase to between R6 700 and R6 900 this year and will be no less than R8 000 by the end of the three-year wage deals, which are backdated to 2013 and expire in 2016.
Although still thousands shy of the original R12 500 demand, it compares favourably with the minimum of R5 000 in South Africa’s gold mining industry.
According to figures provided by platinum producers, it is also substantially higher than the basic wage of about R37nbsp;000 in the motor industry, R4 000 in the civil engineering and road and freight industries and just under R5 000 in the chemical, steel and engineering industries.
A glance at the market doesn’t help to measure sentiment over the wage deal. The rand is weaker than it was before the announcement, although the platinum price has held fairly steady at about the $1 465 an ounce mark – and the share prices of the affected companies decreased slightly.
The platinum companies estimate the strike caused a R24-billion loss in revenues and R10.7-billion in employee earnings. And there is a high risk that similarly high wage demands and long strikes could spill over into other sectors should Amcu see a flood of new recruits.
Although the labour court recently ruled against Amcu extending its strike to the gold mines, where the National Union of Mineworkers remains the majority union, should they recruit successfully by the time wage negotiations come around in 2015, they could be representing labour at the table and push for similar demands.
The NUM remains the majority union on the coal mines, where Amcu originated, and a two-year wage deal remains in place until 2015.
A mining and minerals analyst at Noah Capital, Michael Kavanagh, said Amcu was likely to embark on a recruitment drive and that the duration of the strike in the platinum sector was unlikely to count against them. “I don’t think the workers will see it that way,” he said. “I think they will see the pot of gold at the end of the rainbow.”
Gideon du Plessis, the general secretary of the minority trade union Solidarity, said: “The gold sector CEOs [chief executives] have Margaret Thatcher genes. They are not going to give in like the platinum industry did.”
It is also possible that the future impact of the recently ended platinum strike may be enough to dissuade future attempts to reach the current settlement.
Amcu sought a moratorium on retrenchments as a condition of the wage agreement but did not succeed. At a press briefing on the settlement, Amcu president Joseph Mathunjwa skirted questions about job losses.
As far as restructuring is concerned, he said: “The commitment is that they cannot embark on a restructure until they stabilise the industry and bring it into productivity.”
Asked about possible retrenchments he said: “Retrenchment has its own process. We have received no section 189.3 notices [required by the Labour Relations Act]. The focus should be on this wage agreement.”
But widespread job losses could be the biggest threat to Amcu’s future as a majority union.
“Finances were tight before and they will be even tighter hereafter. If we don’t get rand weakness and increased metal prices, there won’t be capital to put into the operations,” Kavanagh said.
Peter Major, a mining analyst at Cadiz Corporate Solutions, agreed and said: “If the platinum price drops even $100 that could probably mean 2 000 men. And if the rand improves 5% or 10%, it’s going to put a real squeeze on margins [and mines are] going to have to retrench. I would say there’s a 50-50 chance there will be retrenchments by January next year.”
In a statement, Solidarity said the future of several shafts of the mining companies that were affected by the strike hang in the balance and large-scale lay-offs are likely to take place.
“Moreover, the mining sector’s sustainability was harmed, local economies were destroyed, investors were deterred and South Africa’s image probably suffered irreparable damage … Through the strike, Amcu has succeeded in causing the impoverishment of its members, many of whom will become statistics of lay-offs.”
Du Plessis said the agreement was “like a forced marriage”, noting that Lonmin has made it publicly known in its interim reports already that restructuring is inevitable.
Both Impala and Anglo Platinum will next be reporting in July this year and junior gold miner, Sibanye, has already expressed interest in picking up platinum assets in the Rustenburg area should they be sold off following the strike.
“I doubt they will retrench this year,” Major said. “What the companies are really hoping for is a 10% attrition rate … The most critical job factor is the platinum group metals price and nothing else. The only way not to be dependent on the metal price is to increase productivity.”
New mining minister Ngoako Ramatlhodi brought the parties back to the negotiating table but withdrew from discussions before a settlement was reached. He came under fire from listeners of Talk Radio 702 for stating matter-of-factly on air that he had solved the matter, although he was thanked by both the companies and the union for his role in the talks.
Kavanagh said he was surprised that Amcu suddenly began to back down on the R12 500 minimum wage in recent weeks: “I guess that they had made their point and made it well, and they were given numbers that still helped them to come out looking quite strong.
“I’m hoping it was the influence of the new minister of mines who explained to them it’s [the R12 500 minimum] not going to happen.”
But Solidarity believed a contributing factor was a dossier of “damning information” the companies had compiled about Amcu that brought the parties closer to a settlement. However, some industry insiders believe it was simply a case of the union running out of funds fast.
An economist at labour broker Adcorp, Loane Sharp, estimates the union was bleeding R1.9-million each month that the strike continued.
Assuming membership steadily grew from 65 000 to its current 120 000, Sharp said, at maximum, Amcu received R17.9-million in union dues from June 2012 to December 2013. Between January and May, it lost out on R26.9-million in membership dues that would have been earned had the workers been paid.
Sharp estimated Amcu’s infrastructure costs, which include organising and canvassing costs, stadium rentals, transport and subsistence costs, union officials’ wages and the cost of litigation from June 2012 to December 2013, at R11.1-million. Carried expenses during the strike were about R8.7-million.
“So, by the end of May, there was an accumulated deficit of R4.5-million. They were bleeding R1.9-million per month,” Sharp said. “Someone has supported them, and the question is who?”
An irate Mathunjwa told the Mail & Guardian that whether the union was running at a loss was “beside the point. A union is not a profitable organisation. Next question.”
Asked how the union had funded itself while running at a loss, he responded: “Let them bring the facts on the table. You cannot go and write this in the media; it has no substance. It’s nonsense … You have to be objective. I don’t want this to be construed as I am running away from you,” he said, shortly before ending the call.
Erick Gcilitshana, the NUM’s national secretary for health and safety, said the union welcomed the fact that the strike had ended and that employees could return to work.
“We welcome that there has been a settlement achieved, but we can’t celebrate 100% because it has been achieved on top of the blood of those killed during the strike and the people whose property was damaged,” he said.
The duration of the strike had concerned the NUM, which, when it negotiated wage increases, settled on figures based on economic analyses to guard against job losses.
Asked if the union was concerned about losing membership in other sectors, Gcilitshana said: “As NUM, we allow freedom of choice and freedom of association. We don’t use violence and intimidation to recruit. Members continue to come back to us – 11 000 members have returned back to NUM since 2012. We are using natural ways of recruiting.”
An analysis of increases to wage packages between 2004 and 2012, using a B3 salary grade as a guide, showed the NUM achieved an average salary increase of 8.86% and a guaranteed pay increase of 9.04%.
“NUM has not been focusing only on wages but also social wage,” Gcilitshana said. “Workers did not have any medical aid [before the NUM lobbied for it] … As NUM we believe workers’ increases are a journey.”