News / Economy

    Mining Strike Impacts South African Economy

    FILE - Miners gather at Wonderkop stadium outside the Lonmin mine in Rustenburg, northwest of Johannesburg, Jan. 30, 2014.
    FILE - Miners gather at Wonderkop stadium outside the Lonmin mine in Rustenburg, northwest of Johannesburg, Jan. 30, 2014.
    Reuters
    As South Africa's biggest post-apartheid mine strike marks its eighth week on Thursday, it is already denting growth and export earnings, and many of those affected are having to sell their most prized possessions to make ends meet.

    In an informal bar near the platinum belt city of Rustenburg, striking miner Oupa Majodina holds up his cell phone to show a photo of his pride and joy: his cattle.

    “I own 11, but I will have to sell some of them. What can I do? I need the cash,” he said glumly as he nursed a beer.

    No talks are scheduled between the two sides to the strike, the Association of Mineworkers and Construction Union (AMCU) and the world's top platinum producers, Anglo American Platinum , Impala Platinum and Lonmin, and they remain poles apart on the issue of wages.

    That means the misery will only spread, making an even bigger headache for President Jacob Zuma and the ruling African National Congress on the run-in to May 7 general elections.

    The strike has hit about 40 percent of global production of the precious metal, which is used for catalytic converters in vehicles and is a key source of hard currency for South Africa.

    The companies have lost revenues of 9.2 billion rand ($850 million) and counting, according to an industry website that updates the losses like a Doomsday clock.

    “You will need to take that 9 billion rand out of the current account because it is almost all from exports,” said Mike Schussler, who runs economics consultancy economists.co.za.

    This current account deficit is already a key weakness in South Africa's economy, putting its rand currency under pressure. It grew in 2013 to 5.8 percent of gross domestic product, its widest since 2008.

    A wave of violent, wildcat strikes that erupted periodically in 2012, rooted in a turf war between AMCU and the National Union of Mineworkers, cost platinum and gold producers over 16 billion rand that year, when the current account gap was 5.2 percent of GDP.

    With no resolution in sight, the cost of the present strike may exceed that, and the losses will continue to mount after it is over, as operations will take a long time to get back to full production. Job losses and shaft closures look highly likely.

    Terrible timing

    For the current account, the losses will be magnified as South Africa's government embarks on a spending binge for big ticket items such as over 1,000 trains that will be imported from foreign companies like General Electric.

    “There will be huge pressure on the current account from the government's infrastructure program. So this strike could hardly come at a worse time,” said Schussler.

    The impact on growth will also be significant. Africa's largest economy is seen expanding at a sluggish pace of only around 2.5 percent per year, according to the latest Reuters poll of economists.

    “Roughly speaking, if you look at our GDP, which is 3.6 trillion rand, then that 9 billion rand is about a quarter of a percent off economic growth already,” said Schussler.

    Perhaps half a percent had been lost already, he added, if the 4 billion rand in lost employee wages and the effect on companies that supply and service the mines are added.

    “This means growth of 2 percent or lower,” Schussler said.

    Even operations not on strike, such as Aquarius Platinum's , have not been able to capitalize on their rivals' misfortunes as the strike has not had much impact on price.

    Spot platinum prices are little changed since the strikes began on Jan. 23 as traders bet that the availability of above-ground stocks will cushion end-users from the impact.

    Cattle and caravans

    The lost wages have been felt immediately in the communities along the platinum belt northwest of Johannesburg.

    Patrick Tlou, 48, the owner of the Phomolong Tavern, where Majodina and a few other men were sitting in a circle on plastic chairs drinking beer, said his trade was suffering.

    “Business is very down. It's because of the strike. Many of my customers have gone home,” he said.

    Home for most miners is the villages they hail from in places such as Eastern Cape province, hundreds of miles away.

    This is where Majodina keeps his cattle. After sending money home for years to his family, he will now have to draw on his cows and kin to see him through the strike.

    “On April 1, I will go to the local Shoprite store and get 300 rand that my mother will send me out of her pension check. But normally I send money home,” he said.

    As for his cattle, it's a buyer's market as desperation sets in among miners, many of whom own livestock back in their rural homesteads.

    “If I say I want 6,000 rand for this animal, someone will say I only have 4,000 rand, and I will have to take it.”

    Elsewhere in Rustenburg, Ig Bronkhorst, owner of Campworld, which sells caravans and camping gear, said his business was also badly affected, though his typical client would be in a higher income bracket than the striking AMCU members, who are at the bottom of the mine wage scale.

    “My business is down at least 30 percent since the strike started. It goes wider than the guys working on the mine. It is also the contractors and the suppliers for the mines, and many of them are my customers,” he said.

    “People are bringing back caravans to sell because they need money,” he said.

    You May Like

    Russian-speaking Muslim Exiles Fear Possible Russia-Turkey Thaw

    Exiled from Russia as Islamic radicals and extremists, thousands found asylum in Turkey

    US Presidential Election Ends at Conventions for Territorial Citizens

    Citizens of US territories like Guam or Puerto Rico enjoy participation in US political process but are denied right to vote for president

    UN Syria Envoy: 'Devil Is in the Details' of Russian Aleppo Proposal

    UN uncertain about the possible humanitarian impact of Russian proposal to establish escape corridors in Aleppo

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Philadelphia Uses DNC Spotlight to Profile Historic Role in Founding of United Statesi
    X
    July 28, 2016 2:16 AM
    The slogan of the Democratic National Convention now underway in Philadelphia is “Let’s Make History Again” which recognizes the role the city played in the foundation of the United States in the 18th century. As VOA’s Kane Farabaugh reports, local institutions are opening their doors in an effort to capitalize on the convention spotlight to draw visitors, and to offer more than just a history lesson.
    Video

    Video Philadelphia Uses DNC Spotlight to Profile Historic Role in Founding of United States

    The slogan of the Democratic National Convention now underway in Philadelphia is “Let’s Make History Again” which recognizes the role the city played in the foundation of the United States in the 18th century. As VOA’s Kane Farabaugh reports, local institutions are opening their doors in an effort to capitalize on the convention spotlight to draw visitors, and to offer more than just a history lesson.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9098
    JPY
    USD
    105.75
    GBP
    USD
    0.7631
    CAD
    USD
    1.3189
    INR
    USD
    67.209

    Rates may not be current.