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Johannesburg - Big wage hikes demanded by the government-allied trade union in the coal and gold industries helped push the rand to a four year low on Monday, highlighting the ripple effect of the prospect of more turmoil in the industry.
The National Union of Mineworkers' (NUM) call for pay rises of up to 60% in a submission to the Chamber of Mines seen by Reuters on Sunday rattled mining investors after wildcat strikes at platinum and gold mines killed 50 people and cost billions in lost output last year.
As employers and workers square off in this year's salary bargaining period, company margins in Africa's largest economy are shrinking due to soaring costs and sinking commodity prices.
Shares in Africa's top bullion producer AngloGold Ashanti [JSE:ANG] fell almost four percent on Monday morning and rival Gold Fields [JSE:GFI] shed 3.5% to 4-1/2 year lows.
Gold fell for an eighth straight session to its weakest level in over a month, as fears that the US Federal Reserve may wind back its economic stimulus programme hurt the metal's appeal as a hedge against inflation.
Reflecting the jitters over the threat of fresh mines unrest, the South African rand fell to a new 4-year low.
A fierce union turf war is roiling labour relations at South African mine shafts, with the NUM fighting an aggressive challenge to its once near monopoly of members from the growing Association of Mineworkers and Construction Union (Amcu).
Amcu has poached tens of thousands of platinum miners from NUM in an increasingly violent struggle at mine sites.
The union battle poses a headache for President Jacob Zuma's ANC, which faces criticism that it mishandled last year's mines violence. Opponents say it and the mainstream NUM have neglected the rights of workers and sided with mine bosses, a charge they both deny.
Last year's mine violence dented South Africa's image with investors and led to ratings downgrades for the economy.
NUM, a key political ally of the ANC, said at the weekend it was seeking an entry-level minimum monthly wage of R7 000 for gold and coal surface workers and R8 000 for those underground. The latter would represent a 60% rise from the current minimum wage of R5 000 a month.
NUM also said it wanted 15% increases for "all other wage categories," meaning more experienced and skilled workers.
Spot gold is currently fetching around $1 350 an ounce, down close to 20% so far this year, and South Africa's mines, the deepest in the world, are hard pressed to turn a profit at these levels.
"If you look at the all-in-costs for South African gold miners, including capex (capital expenditure), the break-even costs right now are anywhere between $1 100 and ounce and $1 400 an ounce," said David Davis, mining investment analyst with SBG Securities.
Gold companies declined to comment on Monday.
Strike threats
NUM still represents the bulk of the rank and file in the gold and coal sectors and needs to be seen taking a tough line with management to head off the assault from Amcu, which now dominates the platinum sector specifically.
Amcu has not yet submitted its wage demands to platinum producers, which negotiate with unions on a company-by-company basis. But companies can ill afford to be generous given current prices for the precious metal.
Anglo Platinum [JSE:AMS], Amplats, the world's top producer, now plans to cut 6 000 jobs from an initial target of 14 000 as it seeks to restore profits after falling into a loss last year.
It scaled back its original plan under government pressure, but workers and unions have threatened strike action on the platinum belt if the announced Amplats lay-offs go ahead.
African Bank Investments [JSE:ABL], a lender whose target market is lower-income South Africans such as miners, said on Monday many of its debt-laden customers were struggling to pay back their loans.
"The knock-on effect from the recent strike activity led to increased debt servicing burdens," the bank said in announcing its first-half earnings.
Amcu's rise has been built in part on perceptions that NUM's leaders have grown too close to management and the ANC.
The view from the boardroom is somewhat different as NUM has been wringing above inflation wage hikes for its members over the past decade, a huge squeeze on company margins.
But even increases above inflation do not go far for workers at the bottom end of the pay scale who on average have eight dependants and are mostly drawn from poor rural areas.
Inflation, which is currently running near 6%, looks set to accelerate further given the recent weakness in the rand.
