Miners, unions set for tough wage talks

Miners, unions set for tough wage talks

2013-07-12 10:54

Johannesburg - South African mining unions and gold companies started wage talks on Thursday billed as the toughest since the end of apartheid, with demands for a doubling of basic pay set against collapsing bullion prices and shrinking profit margins.

The two-yearly negotiations normally take two months but this year's talks are expected to drag out because of a vicious union turf war that sparked strikes last year in which producers lost billions of rands of output and some workers were killed.

"For us it's about finding the balance between what is affordable and what the employees want," said Elize Strydom, a senior executive at the Chamber of Mines, which represents firms employing 120 000 of the gold sector's 140 000 workers.

This year the Association of Mineworkers and Construction Union (Amcu), which represents 17% of the gold workforce according to the chamber, will join more established unions such as the National Union of Mineworkers (NUM) for the first time.

Amcu's clashes in the last 18 months with ANC ally NUM, historically South Africa's most powerful union, have destabilised labour relations in the mines and across the economy.

Amcu has emerged as the dominant union in the platinum sector and its demands for gold mining companies to more than double the wages of entry-level workers forced NUM - normally a more conservative negotiator - to up the wage ante as well.

Coal industry wage talks will be conducted in parallel with those of gold but are likely to be far smoothe, with the Amcu-NUM rivalry not as evident in the sector.

Although nobody expects a settlement anywhere near Amcu or NUM's demands, analysts doubt whether an industry in terminal decline can afford increases much above inflation, currently at a shade under 6%.

"They're likely to settle about 3% above inflation but even 10% will hurt," said David Davis, a gold analyst at SBG Securities in Johannesburg.

From its zenith in the 1970s, when South Africa was digging up 1 000 tonnes of gold a year, the country produced just 167 tonnes in 2012 - a consequence of the need to "chase the reef" ever deeper into the bowels of the earth.

South Africa's mines operate at 4 km or more underground, a depth that imposes huge costs on companies that have also had to swallow a 25% fall in the bullion price since January as well as a sharp increase in the price of electricity.

A weaker rand, which lowers local costs, has given them a temporary lifeline but the industry argues that an overly generous wage settlement is unaffordable and will only result in job losses - something the ANC is loath to see less than a year before an election.

"Affordability is key because if we do not take that into account in the long run it will jeopardise work security," Strydom said.

"It will jeopardise the life of the mines and it will be bad for the country because mining is still a key industry in South Africa."

Despite steadily declining output, gold remains an important element of South Africa's economy, accounting for 10% of all exports in 2012.