Lonmin wage deal ‘will have inevitable impact on jobs’

But how will the most financially stretched of the major platinum mines afford the pay increase and what will the long-term cost be for this quick fix?

Although short of the R12500 demanded by the striking Lonmin workers, an agreement was signed on Tuesday for an increase of between 11% and 22% on basic wages for all workers as well as a R2 000 once-off bonus for those who return to work on Thursday.

But "the current economic reality means that any wage increases will be a trade-off against jobs," Lonmin spokesperson James Dray told the Mail & Guardian two weeks ago.

And, on Monday, Lonmin announced the termination of a Murray & Roberts contract worth R65-million, which affects 1200 contracted workers. The move will free up some space on the balance sheet to accommodate the increases, said Peter Major, a platinum analyst at Cadiz corporate solutions.

Another analyst, who asked not to be named, said that it was important to consider that an increase of about 11% had already been agreed for October, so the real extra cost to the company was closer to 11%, not 22%.

But Major said it would be naive to think that double or triple inflation increases could be made without losing numbers somewhere else.

"There are going to be a lower number of workers walking around the mine 12 months from now, if not by layoffs and retrenchments, then by not replacing or reducing the replacement of workers who leave through natural attrition.  Obviously, the mine will have to be professional about how it ­handles this."

Debt commitments
The wage increase will come into effect in October and it is good timing, given that it will not be reflected on the balance sheet on September 30, the test date for Lonmin's debt commitments totalling close to $1-billion.

Peter Attard Montalto, a contributing strategist at Nomura International, said the wage settlement only exacerbated the "barely viable operations" at Marikana. "These debt covenants and the need to have cash and output before the end of the month was likely a key part in the company making such an offer to workers," Montalto said.

But it could take up to eight weeks before cash begins to flow back into Lonmin.

The company is talking to banks to waive the test, the anonymous analyst said, thereby buying Lonmin a further six months.

"The banks are as scared as anybody. They would much rather lose some interest on the capital than some percentage of the capital they have extended to Lonmin. If the banks decide to call in the loans, they will have to stand in line with a lot of other lenders and creditors," Major said. Analysts agree that higher productivity is key to absorbing the blow to the balance sheet, although it was not clear at the time of going to print whether productivity targets had been linked to the wage increases.

Although the industry is concerned that the abnormal agreement has set a precedent that could result in further aggressive wildcat strikes flaring up across South African mines, investors appear relieved.

News of the wage deal brought the JSE all-share index to a record high on Wednesday morning and Lonmin's share price climbed back to levels last seen at the beginning of August. The development also had a positive impact on the shares of Anglo Platinum and Impala Platinum, despite both still grappling with employee wage demands.


Study unpacks the ‘hidden racism’ at Stellenbosch

Students say they feel unseen and unheard at the university because of their skin colour

Workers’ R60m ‘lost’ in banks scam

An asset manager, VBS Mutual Bank and a Namibian bank have put the retirement funds of 26 000 municipal workers in South Africa at risk

‘Judge President Hlophe tried to influence allocation of judges to...

Deputy Judge President Patricia Goliath accuses Hlophe of attempting to influence her to allocate the case to judges he perceived as ‘favourably disposed’ to former president Jacob Zuma

SAA grounds flights due to low demand

SAA is working to accommodate customers on its sister airlines after it cancelled flights due to low demand

Press Releases

MTN unveils TikTok bundles

Customised MTN TikTok data bundles are available to all prepaid customers on *136*2#.

Marketers need to reinvent themselves

Marketing is an exciting discipline, offering the perfect fit for individuals who are equally interested in business, human dynamics and strategic thinking. But the...

Upskill yourself to land your dream job in 2020

If you received admission to an IIE Higher Certificate qualification, once you have graduated, you can articulate to an IIE Diploma and then IIE Bachelor's degree at IIE Rosebank College.

South Africans unsure of what to expect in 2020

Almost half (49%) of South Africans, 15 years and older, agree or strongly agree that they view 2020 with optimism.

KZN teacher educators jet off to Columbia University

A group of academics were selected as participants of the programme focused on PhD completion, mobility, supervision capacity development and the generation of high-impact research.

New-style star accretion bursts dazzle astronomers

Associate Professor James O Chibueze and Dr SP van den Heever are part of an international team of astronomers studying the G358-MM1 high-mass protostar.

2020 risk outlook: Use GRC to build resilience

GRC activities can be used profitably to develop an integrated risk picture and response, says ContinuitySA.

MTN voted best mobile network

An independent report found MTN to be the best mobile network in SA in the fourth quarter of 2019.