Last week’s Eskom blackout and the’stability pact†that will reduce theutility’s power supply to South Africa’s mines by 10% have forced mining companies to take stringent cost-cutting measures, including retrenchments. The Mail & Guardian has established that the mining group with the most marginal operations, Harmony, plans to retrench 10% of its 43 000-strong workforce. AngloGold’s Alan Fine said on Thursday that the company had no immediate plans for lay-offs, but would have to see how the stabilisation plan worked. However, Anglo-Gold would be forced to cut back its surface processing operations. He pointed out that the power usage had been cut by 18% since 2004. It was unlikely that lost production could be worked in.
Gold Fields’s Willie Jacobsz warned that six of the company’s shafts were at risk of closure because of the 10% cut. The company was expecting a 20-25% production loss this quarter, which would have a ‘significant impact†on staffing levels. Industry-wide, production bonuses and shift work will also be affected. AngloGold began mining at some operations on Monday, but does not expect to be fully on stream until next week. No figures for the mining industry’s accumulated losses are available, but Chamber of Mines CEO Mzolisi Diliza estimates that the cost to the economy in lost business, exports, wages, taxes and capex is R1,7-billion a day. Eskom abruptly cut 4 000MW of capacity last Friday, targeting the mines as major power consumers.
Mining executives were furious that talks between the industry and the utility began only after the blackout. Said one: ‘The cuts seem to have been a panic decision by second-level management; it was obvious at the Friday press conference that [Eskom CEO] Jacob Maroga was out of the loop.†A labour leader who attended a meeting between Harmony and union representatives on Thursday said the company planned to shed thousands of workers. It had indicated it would close its Evander Seven shaft near
Sekunda and part of the Bambanani shaft in the Free State.
‘They were frank about the damage from the blackouts and said they must make drastic decisions to adjust to the 10% cut,†said the unionist, who asked not to be named. ‘Since the cuts, they said they’d lost about R60-million a day. They told us they can’t operate fully with a 90% power supply. ‘We argued retrenchments were not necessary at this stage because of the high gold price.†The union source said Harmony would offer voluntary redundancy packages until end-February, after which it would retrench. Harmony spokesperson Amelia Soares said it was almost impossible for the company to make up production losses. ‘That’s gone. Last year we produced 2,3-million ounces; this year we might produce 2,1-million,†Soares said.
Soures said Harmony was in talkswith the unions to review continuing operations on the mines. ‘They will have to understand that if we are notoperating at 100%, we are going to have to do something about that.†Harmony chief executive Graham Briggs said the company had opened voluntary retrenchments for some time. ‘Retrenchments are not something new in the company. It is not reintroduced because of Eskom. We had this since November last year. We have been in the process of restructuring. At the moment we are talking with the unions.†Briggs said the R10 000 addition on the voluntary package was a means to encourage people to take retrenchments. He also said the company did not have any intention to issue retrenchment notices.
National Union of Mineworkers spokesperson Lesiba Seshoka said the union was disappointed about Harmony’s planned retrenchments. ‘They said to us on Tuesday that there will be no retrenchments and that they will be able to operate at 90%. It’s a bigger crisis than we thought. We can only hope that the leadership will sit around the table and resolve this,†said Seshoka.
Tito holds rates
As expected, the Reserve Bank’s monetary policy committee (MPC) left interest rates untouched at 11% on Thursday. Reserve Bank Governor Tito Mboweni said there are still considerable risks to the inflation outlook. But the ‘heightened economic uncertainties domestically and globally†and ‘evidence of moderation in domestic consumption expenditure†underpinned the MPC’s decision. Mboweni said the CPIX inflation rate was expected to peak in the first quarter at an average rate of 8,5% and then return to within the target band by the fourth quarter.
The MPC report makes it clear that the rising inflation rate is being driven by global recession and fuel and food prices, which are resistant to rate hikes. ‘CPIX inflation has continued its upward trend, measuring 8,6% in December 2007,†said Mboweni. ‘Excluding food and petrol, CPIX inflation would have measured 5%.†— Lloyd Gedye