Rioting miners blocked access to platinum giant Amplats’s Rustenburg shafts.
Late last year the mining industry was confident about the progress it was making in fulfilling its social obligations associated with a licence to mine, but this week conditions in the country's platinum belt deteriorated to such an extent that Anglo Platinum, the world's largest platinum miner, announced on Wednesday that it would suspend Rustenburg operations.
Explaining the decision, Chris Griffith, chief executive of Anglo Platinum, said employees were being intimidated and that the suspension would continue until operations could be safely resumed.
"We are in touch with the authorities at the highest level to identify how we can work together with our tripartite partners – government and the recognised labour unions – to achieve a swift and peaceful resolution to these illegal actions," said Cynthia Carroll, chairperson of the company.
Operations were suspended after protests were held at an Anglo Platinum mine in the Rustenburg area earlier in the day. Anglo Platinum said that the protesters were not their employees, although some claimed they were and produced documentation to prove it.
The platinum producer, with a market capitalisation of R111-billion, experienced a 4.5% dip in its share price on Wednesday, sliding to R41.70 before markets closed. The rand has also declined in value by more than 2% in response to unrest in the mining sector.
Anglo Platinum employs more than 50 000 people at all of its operations but it is not clear how many workers will be affected by the suspension.
Welcome
The platinum price has surged since the death of 44 miners at Lonmin's Marikana mine on August 16 and rose from less than $1400 an ounce to $1650 an ounce on Thursday morning, its highest level in more than five months. It rose by $39 an ounce after the closure of Anglo Platinum's Rustenburg operations.
Lesiba Seshoka, spokesperson for the National Union of Mineworkers, which has about 23 000 members at Anglo Platinum, applauded the decision to suspend operations.
"This is welcome. Many of our members are in danger of attack and this will help in cooling the situation down."
He said it was expected that workers would be paid while operations were suspended.
Johan Theron, head of personnel at Impala Platinum, said the Rustenburg operations were the oldest and largest of Anglo Platinum's mines and represented between 15% and 20% of its output, but were the least profitable.
Carroll said in a statement: "Our Rustenburg operations are already under considerable economic pressure and the longer it is necessary to continue this suspension, the greater the risk to their long-term viability."
Lonmin's entire output comes from Rustenburg, and 70% of Impala's comes from the area.
Every mining company receives a licence on the promise to deliver certain social improvements. "Mines are delivering to the extent that they can, but they can only do so much," said Vusi Mabena, head of transformation and stakeholder relations at the Chamber of Mines.
Infrastructure
People migrated to mining areas to look for jobs, and Rustenburg was the fastest growing city in Africa. Those areas also did not have the best infrastructure because of the nature of the business and mines were the first target for accusations.
"The social ills are beyond that situation; it is not only a problem for the mining industry. More than half of those arrested at Marikana were not Lonmin employees – that tells you the problem is bigger than the mines." Mabena said. There is a need for a united front, but the chamber has not yet been invited in to assist, he said. "This requires that all of us participate."
Bishop Paul Verryn, head of the Central Methodist Church in Johannesburg, who has been trying to broker peace at Marikana, said the mines were not solely responsible for the growing unrest, but that inequality in South Africa had now reached "a point of irretrievable impasse" and it's time to rise to the occasion. We cannot keep pretending everything is fine in this country – there is very little care about the humanity here."
Unrest in the area began last year when violent protests broke out at Xstrata and Impala Platinum. It reared its head again at Lonmin's Marikana mine in August and since then wage, and other, demands have been raised at Royal Bafokeng's platinum mine, Gold One's Modder East mine and Gold Field's KDC West mine in Gauteng. And now Anglo Platinum has faced off with angry community members.
Wage demands
The situation at Impala, which had a six-week strike at the end of last year, is tense following wage demands from some workers. Theron said wage negotiations were not underway, following a pay raise in April, but the mine was consistently talking with staff on the issue and had offered to review wages and grading. However, "it's been received with mixed reactions," he said.
"We are in a very precarious situation and can't afford to draw hard lines in the sand. There needs to be dialogue and hopefully sanity will prevail."
Peter Major, platinum analyst at Cadiz solutions, said he was pleasantly surprised by Anglo's action. "Anglo has read South Africa better than anyone except Gilbertson and Billiton. They know this country well. They think ahead."
Chris Hart, an economist at Investments Solutions, said: "This isn't just a fight between miners and employers but with the unions. You have competing elements here. These developments are occurring outside the system. This means labour cannot be controlled and so violent strikes ensue and police haven't helped very much either."
Hart said the investment consequence was to sell the mines and buy the product. "And so investment will dry up and this affects employment and this will be exacerbated as shafts will need to be shut."
Major, however, was more positive. "Real investors are circling like vultures as we speak," he said.
"They know there are going to be great deals out here soon, they know this will all pass because South Africa needs the jobs, South Africa needs the income."