News / Economy

    Strike Risk Rises as South Africa Wage Talks Stall

    Miners gesture as they pray during the one-year anniversary commemorations to mark the killings of 34 striking platinum miners fatally shot by police outside the Lonmin's Marikana platinum mine in Rustenburg, 100 kilometers northwest of Johannesburg, Aug.
    Miners gesture as they pray during the one-year anniversary commemorations to mark the killings of 34 striking platinum miners fatally shot by police outside the Lonmin's Marikana platinum mine in Rustenburg, 100 kilometers northwest of Johannesburg, Aug.
    Reuters
    Six weeks of wage talks between South African gold producers and unions have failed to bridge the chasm between their positions, increasing the prospect of crippling strikes in a declining industry battling low prices and soaring costs.

    Gold mine stoppages would inflict more damage on Africa's largest economy, which is already losing $60 million a day to a strike by 30,000 workers in the car manufacturing sector that accounts for 6 percent of gross domestic product.

    The auto strike entered its third day on Wednesday and has affected global carmakers operating in South Africa, including Toyota, Ford and General Motors.

    The two opposing sides in the gold sector remain poles apart after the weeks of talks, with virtually no narrowing of the gap between employers, whose latest offer was a 5.5 percent hike for basic wages, and unions.

    The National Union of Mineworkers [NUM], which represents 64 percent of the country's roughly 140,000 gold miners, is seeking a basic wage for entry-level underground workers of 8,000 rand [$790] a month, a 60 percent increase.

    Tough demands

    Its more hardline rival, the Association of Mineworkers and Construction Union [AMCU], with about 17 percent of the gold labor force, has submitted demands as high as 150 percent.

    “The prospects for a strike remain big,” said NUM spokesman Lesiba Seshoka. More talks were due on Wednesday and Monday and workers could down tools after that if the impasse remained.

    In contrast, negotiators in the auto sector made some movement towards bringing their positions closer. The National Union of Metalworkers of South Africa has reduced its 20 percent raise demand to 14 percent, compared to the 8 percent being offered by the companies for the first year.

    President Jacob Zuma and his ruling African National Congress, criticized for their handling of violent mines unrest last year in which more than 50 people were killed, are keen to avert more labor strife ahead of elections next year.

    South Africa's gold and platinum producers are still recovering from a wave of wildcat strikes in 2012 rooted in a turf war between NUM and AMCU. This cost billions of dollars in lost output and triggered damaging sovereign credit downgrades.

    But in contrast with last year, when illegal strikes spun out of control into violence, the wage talks process this year has followed standard legal procedures and has been generally peaceful, although there have been sporadic murders at mines.

    No compromise

    The gold companies, which have slightly raised their starting offers, say the unions have shown no compromise.

    “If you look at past years there has been a narrowing of the gap by this stage in the negotiations and we have not seen that yet,” said Charmane Russell, a spokeswoman for the gold producers which include AngloGold Ashanti, Gold Fields, Harmony and Sibanye Gold.

    Aside from a 5.5 percent increase, producers also have offered a “gain share” which, depending on the company, could be linked to the gold price, production, profits or cost objectives, and could add another 1 percent to a basic wage.

    Inflation data released on Wednesday will do little to cool union demands as it showed headline inflation in South Africa accelerated to 6.3 percent in July from 5.5 percent in June.

    Increasing costs

    Of concern is the fact that food inflation rose by 6.8 percent, a trend that cuts into the income of working-class households.

    The split between the two sides underlines growing militancy among a black labor force that has seen few improvements in living conditions in the two decades since apartheid ended.

    Companies have little room, though, with labor accounting for more than 50 percent of costs. Also, gold's spot price is about 30 percent lower than the record peak of more than $1,920 an ounce it reached almost two years ago. About half of the country's shafts are losing money at these levels, according to industry numbers.

    This spells big trouble for a South African sector that accounted for 79 percent of world gold production in 1970.

    Thomson Reuters GFMS ranked South Africa sixth in global output in 2012, when it produced 177.8 tons of gold, just 6 percent of the world total. It was the country's worst year for bullion production since 1905.

    The outlook is gloomy too for talks in the platinum sector, which also faces massive union pay hike demands just as it grapples with rising costs and depressed prices.

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