Extraordinary times are said to call for extraordinary measures but the first offer placed on the table by employers in this year’s wage negotiations for the gold mining sector has potentially set the scene for tough negotiations — and intense rivalry between unions has upped the ante.
A 4% increase offered on July 15 was swiftly rejected by all unions. Their demands range from 10% to double pay. Parties are due to meet again on July 24.
The Association of Mineworkers and Construction Union (Amcu) said the offer was “simply unacceptable” and the National Union of Mineworkers (NUM) called it an “insult”.
Opening offers in the past two wage negotiations started at 5% in 2009 and 4% in 2011 — with the latter resulting in a four-day strike.
But Charmane Russell, spokesperson for the gold producers, said the gold industry was in a substantially different position at those times and that factors taken into consideration before tabling the offer included the declining gold price, spiralling costs, falling production and productivity.
Labour costs currently constitute between 50% and 55% of gold producers’ total costs.
Gold industry in a loss-making position
Russell said about 60% of the gold industry is in a loss-making position and “any increase is going to have a significant knock-on impact on profitability and indeed the viability of many mines and shafts”.
On July 15 AngloGold Ashanti said it planned to write down its assets by as much as $2.6-billion, spurred by gold’s 23% plunge this year. This prompted a rating cut to junk by Standard & Poor’s on July 17.
It followed a similar cut by Moody’s on July 12. AngloGold’s plan follows similar announcements by other gold miners in recent months.
NUM’s spokesperson, Lesiba Seshoka, said the Chamber of Mines sought to justify the status quo.
“Their reasons are not new; these are the same ones they have been giving us for 30 years,” he said.
Secretary general of Solidarity, Gideon du Plessis, said the union’s demand is 10%, which was justified by costs that affect the mineworkers. Solidarity estimated these costs to be 3% above the consumer price index.
“It is not a good start; obviously they are pleading poverty … but we must put it all into perspective. Our members cannot afford to accept a 4% increase.”
A realistic offer
Peter Major, mining analyst at Cadiz Corporate Solutions, said the 4% increase was a realistic offer.
“Mines have granted 10 years of double-digit wage increases with no productivity increases at all,” he said.
“Historically, every six or seven years, a recession forces people to ratchet back on excesses through wage and other cost cuts. This brings industry costs and processes back to reality. But the world decided in the new millennium that it would abolish the economic cycle, so we haven’t had a reset in over 15 years.”
But now “crunch time has come and the 4% is a good start”, Major explained. “This is a pragmatic offer by the chamber. And though they might come up to 7%, there is no way they can settle at 9% or 10%. Or even 8%.”
NUM and Amcu have asked for vastly different increases (60% and 100% respectively) and the process, Major said, was made more difficult with the two unions fighting for majority status.
“It’s like two elephants on your front lawn. They don’t care who they step on and destroy. NUM has Amcu breathing down its neck and so it thinks it can’t afford to be realistic or long term. It is fighting for its life.”
"Never been so confused"
Major said that after 32 years of working in South Africa’s mining industry he had “never been so confused” as to what the outcome of the negotiations might be.
Russell said that, while it is “theoretically possible” for the industry to negotiate different agreements with each union, “it is not in the interests of the industry, gold mining companies or — in our opinion — employees”.
Seshoka said NUM’s demand of 60% came directly from its members. “They have said that, after 20 years of democracy, they can’t be dancing on one spot.” He said the chamber’s offer had set the scene for “serious confrontation”.
Amcu’s general secretary, Jeff Mphahlele, said it was too early to predict whether wage negotiations would end in a strike settlement. He said the demand for a 100% increase came directly from Amcu members.
Du Plessis believed that the gold producers should have diffused the situation, but “in the end they entered into classic positional bargaining … It will take a miracle for us to have a negotiated settlement and not a strike settlement.”