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Andre Janse van Vuuren & Mike Cohen
13 Aug 2015 13:24
Members of the Association of Mineworkers and Construction Union on strike in 2014. (Delwyn Verasamy, M&G)
Relations between South Africa’s government and the mining industry are
unravelling as a commodity-price rout derails plans by President Jacob Zuma’s
administration to create millions of jobs and pare a 25% jobless rate.
Mining companies in South
Africa, the world’s largest platinum and manganese producer, plan to fire as
many as 10 000 workers at a time when the economy is struggling to rebound from
the slowest expansion since a 2009 recession.
A public slanging match has
ensued between senior politicians opposed to the layoffs and executives who say
their stance, together with prolonged uncertainty over mining laws and an
unreliable power supply, threatens their companies’ survival. ANC secretary general Gwede Mantashe last month branded
companies as “lazy” for firing staff rather than considering alternatives.
“I don’t think the
government understands the gravity of the challenges in the industry,” Mzukisi
Qobo, a politics lecturer at the University of Pretoria, said by phone on
“What happens in this industry sends signals to foreign investors
across a range of other sectors on how government treats big business.”
The chief executive
officers of Anglo American and Sibanye Gold, the largest miner of gold
in South Africa, have pushed back against the government in a rare display of
public criticism by businesses.
Prices plungeSibanye chief executive Neal Froneman said on August 6 that mining companies are
“tired of political comment instead of concrete actions”, and that the
government did not understand the economic realities of running a business.
Zuma, who has pledged to
create six million jobs by 2019, said in a speech on August 9 that companies
must avoid retrenching “at the first possible opportunity”.
Commodity prices have
plunged an almost 13-year low because of global oversupply and a slowdown in
China, placing further pressure on an industry already grappling with rising
labor and power costs.
South Africa’s mining
industry employs about 440 000 people and accounts for more than half of the
nation’s exports. Built on the back of cheap black labour under apartheid, the
industry has faced repeated criticism from unions and some politicians for
seeking to entrench economic privileges whites enjoyed under minority rule.
ANC supportThe ANC is under pressure
to placate its labour-union allies and stem a loss of support to opposition
groups such as the Economic Freedom Fighters, which has campaigned on promises
to nationalise mines. Less than a year after it was created, the EFF won 6.4%
support in the 2014 election to become the country’s second-largest opposition
“The EFF has publicly
accused the government of abandoning the working class,” Dirk Kotze, a politics
professor at the University of South Africa, said by phone from Pretoria. “The
ANC is trying to win back lost ground.”
The government denies that
its relationship with the industry is overly antagonistic.
“At times people agree with
one another and at some other times they don’t really drink from the same
well,” Mahlodi Muofhe, adviser to mineral resources minister Ngoako Ramatlhodi,
said by phone on Wednesday. “We don’t think that translates into serious
‘Quiet diplomacy’Anglo American chief executive Mark
Cutifani urged the government to focus on turning around ineffective state
companies, such as power utility Eskom, which is disrupting operations as it
curbs electricity supplies to mines.
“A government that supports
uncompetitive state enterprises cannot criticize private enterprise for taking
the necessary action to survive in these tough times,” Cutifani said at a presentation
in Johannesburg on July 30.
Anglo American derives about
35% of its revenue from South Africa, where it controls the world’s largest
platinum producer and owns Africa’s biggest iron ore asset. Both Anglo’s
platinum and iron ore units are cutting jobs.
Speaking out against the
government may be necessary to ensure mining companies have a future in South
Africa, according to Ian Cruickshanks, chief economist of the South African
Institute of Race Relations, a policy research group.
“Quiet diplomacy is not
working,” he said by phone on Wednesday. “Government has simply taken it as a
sign of weakness.” - Bloomberg
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