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Gold Fields has come under fire from Mineral Resources Minister Gwede Mantashe, who has vowed to stop the company's planned 1 560 layoffs and called for new management.
The company, which is one of the world's largest gold mining companies, announced the impending retrenchment of 1 110 permanent employees and a further 460 contractors earlier this week.
Gold Fields [JSE:GFI] shares plunged 13.82% to R41.84 on Tuesday on the news of the pending job losses. On Wednesday, it slid a further5.83% to trade at R39.40 by 15:30 on the JSE.
The jobs bloodbath in the mining sector has cast a long shadow over the government ambitions of turning the struggling sector into a sunrise industry.
Gold Fields' announcement comes weeks after Impala Platinum [JSE:IMP] revealed that it would cut some 13 000 jobs, in what they described as a cost saving mechanism.
Amid an already rising unemployment rate, mining job cuts represent a challenge for Mantashe, who – since taking up office in February – has committed to reviving a troubled sector reeling from a slump in demand for commodities.
In a wide-ranging interview with News24, Mantashe laid the blame for the company's financial challenges at the feet of Gold Fields management, calling for CEO Nick Holland to step down and accusing the company of failing to confront its management's failures.
Gold Fields owns South Deep, the world's second-biggest known body of gold-bearing ore, said to still have the potential to produce for 70 years.
However, South Deep Mine has suffered extensive losses amid several failed turnaround plans.
Holland told Bloomberg that a new plan to save South Deep, which is losing about R100m a month, would be announced in February.
"This has not been an easy decision, and comes after many other initiatives have been attempted, where we haven't seen results," Holland said.
'They are failing'
Mantashe, however, claimed Gold Fields management was exploiting workers instead of gold ore, and "scapegoating" them for its troubles.
"They are failing, and scapegoating the workers because to them, workers are just statistics," he said.
"A mine that comes here and says 'we will retrench so many' is actually for me a reflection of a backward management team. That is my own view."
Mantashe added: "I have been in the mining industry for many years, and I know how they do things. Nick [Holland] is not going to do things the same way."
The company's management had met with him on Monday to inform him of plans to start retrenching workers, he said.
However, he added, they were not willing to discuss alternatives to retrenchments, despite Section 52 of the Mineral and Petroleum Resources Development ACT – MPRDA – stating that the holder of a mining right must inform the Minister of Mineral Resources if "any mining operation is to be scaled down or to cease with the possible effect that 10% or more of the workforce, or more than 500 employees, whichever is the lesser, are likely to be retrenched in any 12 month period".
According to Mantashe, he dismissed them because they informed him their legal team advised them to engage their legal team after the retrenchments were completed.
Mantashe said the department was now considering how to force Gold Fields management to engage with the department in terms of Section 52.
Due process
Gold Fields, however, told Fin24 in response that it had followed due legal processes in its consultations.
"We have had external legal advice that Section 189 [of the Labour Relations Act] process should take place prior to a Section 52 process. A notice in terms of S52 can only be lawfully given once a firm decision to retrench has been taken by the employer," Gold Fields spokesperson Sven Lunsche said.
"Our S189 interaction with the trade unions will deliberate on the retrenchment process."
The company's intention was that the Section 198 process should start, and Section 52 engagements would take place before the Section 189 consultation process was finalised, Lunsche said.
It was Gold Fields' intention "to adhere to both the spirit and the letter of the Labour Relations Act in seeking mitigating solutions to the challenges faced at South Deep", Lunsche said.
50 000 job losses
The African National Congress, for its part, has said it is "emphatically against any retrenchments" in both the private and public sectors.
"The mining sector is an industrial development backbone upon which our economy relies," it said in a statement issued by spokesperson Zizi Kodwa on Wednesday.
"Over the years, the mining sector has been shedding jobs, and the recent pronouncement of more than 50 000 purported job losses across the board is shocking, as every mine worker benefits seven or more family members," the ANC said.
"In terms of Section 52 of MPRDA, which enjoins all the parties, we call on the sector to urgently convene a dialogue aimed at finding alternative solutions to this impasse."
It was "unsustainable" for mineworkers to continue to bear the brunt of losses, as this was not a function of productivity but rather "historical and irrational management decision[s]", the ANC added.
Economist Martyn Davies, however, said job losses were not surprising, given that the mining sector has been in decline for two decades.
"The situation that we find ourselves in is a result of our own doing, and is not surprising at all.
"It is a result of a factitious relationship between public policy and business, including the current uncertainty in the mining sector," he said.
Statistics released on Tuesday showed that mining production increased by 2.8% year-on-year in June. It was the first time in four months that annual production had shown an uptick.
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