02 Sep Mine jobs on the line as strikes spread
THE HEAT IS ON: Serious problems lie ahead for the South African economy unless there is a speedy return to work at the country’s mines, including the disaster-hit Lonmin mine at Marikana.
BOSSES may be forced to slash thousands of jobs in the mining industry as illegal strikes spread from platinum mines to gold, adding to investors’ concerns over nationalisation, power supply and rising costs.
The work stoppage at Lonmin, now in its fourth week, has cost the lives of 44 people and about 2500 ounces of production a day. This week, 12000 Gold Fields workers went on an illegal strike over unhappiness with the local leadership of the National Union of Mineworkers (NUM). Anglo American Platinum and Royal Bafokeng Platinum have also seen illegal work protests over the past two weeks.
Lonmin said it was premature to say when it expected sufficient employees to return in order to restart production at Marikana — which it needs to do urgently to avoid the possible recall of a $950-million debt facility. Fewer than 6% of Lonmin workers reported for duty at Marikana, which accounts for 96% of the company’s output, on Friday.
“It is hugely important for workers to return. The viability and future of the mine is at stake,” Gideon du Plessis, deputy general secretary of Solidarity, said.
“Given the financial damage the mine has suffered, the focus should now start shifting to job security. The longer this process takes, the more people’s jobs are placed in danger. We are really concerned.”
Lonmin, which has 28000 employees and 10000 contractors, is in talks with its banks around the possible renegotiation of the debt facility which may be recalled by the end of September if certain targets, which seem unachievable in the current environment, are not met. Analysts have said the company might have to do a rights issue to raise capital to strengthen its balance sheet.
Its share price has shed 20% since the strike started on August 10. It closed 1.8% lower at R77.45 on Friday, its lowest level since May 2008. Gold Fields shed as much as 7.7% in trading, the biggest intraday drop in three years, and closed 2.8% lower at R101.03.
Platinum prices have gained 12% in rand terms since the Lonmin strike started, a much-needed boost for SA’s struggling miners who are facing increased costs, safety stoppages and labour unrest. A similar strike halted Impala’s production for six weeks until early March, and six months later production is yet to reach pre-strike levels, raising concerns as to how long it may take for Lonmin’s operations to return to normality. Impala saw violence flare up again in May, leading to another illegal strike.
Ian Cruickshanks, head of treasury strategic research at Nedbank Capital, said South Africa would bleed in terms of public and fixed investments. “This year foreign direct investment (FDI) did not happen because investors are worried about whether electricity supply will be guaranteed. On top of that, you have talks about nationalisation, even if they have no basis. Now you have this kind of unrest on a pre-1994 scale. Actually, what the unions are doing is cutting the lifeline of capital which is FDI,” he said.
Cruickshanks said this situation has the potential to turn into a long-term problem that could see the rand taking a knock and inflation soaring.
“What we should understand is that it takes a long time to build the country’s reputation as an investment destination. Before 1994 we were starved of foreign capital and thereafter it took us quite a lot of time to get it coming in.
”Now the current events are destroying those gains. It will take a number of years to build them up again,” he said.
Azar Jammine, director at Econometrix, said while a drop in production from one or two mines will not have a significant effect on the economy, it will be “worrisome” if the strikes spread.
“Mining is a big earner of foreign exchange, which could ultimately affect our ability to import. It will also lead to the rand/dollar exchange weakening, a widening in our account deficit, interest rates will go up and ultimately that would impact negatively on the economy,” he said.
“Also in the longer term, more jobs would be lost,” Jammine said.
Peace negotiations at Lonmin, which are seen as the key first step to get employees back to work and operations restarted, have been postponed until tomorrow afternoon amid threats from the Association of Mineworkers and Construction Union (Amcu) that it will withdraw from the talks.
Chris Jacobs, director at OIM International and an experienced labour relations consultant, said it could take two to three months after the signing of a peace agreement to win over a critical mass of workers needed to stabilise operations. If the parties fail to create a climate of co-operation, it could “easily take more than a year” to get operations back to pre-conflict levels, he said.
“Under the circumstances of a normal labour strike the mine could get back to operation quickly, but unfortunately the whole issue has been politicised. It has become a national issue,” said Makwe Masilela, director and market analyst at BP Bernstein.
Expelled ANC Youth League leader Julius Malema, who addressed workers at Lonmin after police killed 34 people during a protest, has since visited other mines. This week he urged unemployed miners at the former Aurora mines near Springs and recently fired workers from nearby Gold One to continue fighting until their demands are met. “We are going to lead a mining revolution in this country… We will make these mines ungovernable until the Boers come to the table,” Sapa reported him as saying.
Du Plessis said: “There is a large measure of instability in the mining industry and Julius Malema’s comments are leading to increased instability. If it continues like this it will lead to large-scale job losses and damage investor sentiment.”
NUM spokesman Lesiba Seshoka said Malema may be responsible for causing chaos that benefits him and his associates “who are hell-bent on nationalisation for their own good”.