News / Economy

South Africa Platinum Strike Cripples Mine Companies

FILE - A miner gestures as they gather at Wonderkop stadium outside the Lonmin mine in Rustenburg, northwest of Johannesburg, Jan. 30, 2014.
FILE - A miner gestures as they gather at Wonderkop stadium outside the Lonmin mine in Rustenburg, northwest of Johannesburg, Jan. 30, 2014.
Hope for a settlement this week of South Africa's prolonged platinum miners strike was dashed when the country's largest mining union boycotted a meeting chaired by South Africa's deputy president.
Thousands of platinum mine workers belonging to the country’s largest mining union, the Association of Mineworkers and Construction Union (AMCU), went on strike on January 23 demanding a monthly basic salary of $1,181. A series of talks to end the strike has so far failed.
On Thursday, South African Deputy President Kgalema Motlanthe convened a meeting of all stakeholders to discuss peace and stability in the entire mining sector. However, AMCU boycotted the meeting and instead marched to the Impala Platinum Mine headquarters in Johannesburg to demand better wages.
Union leader Joseph Mathunjwa vowed to keep the workers on strike until their demands were met. He had no kind words for the mine bosses.
"Some of them, they have never even, been to those underground harsh conditions that we are facing 365 days, but they are walloping immense salaries. Why?" asked Mathunjwa.
South Africa's Minerals Resources Minister, Suzan Shabangu, made a passionate call for all involved to bring the strike to an end.
"The situation is highly destitute (desperate), indeed we would like to see parties being able to resolve the matter. As we know that this strike is not only hurting the workers it’s hurting the country too. We really want a resolution… to the strike itself," said Shabangu.
Economists have warned that the strike is already having a negative impact on both the mining industry and the economy at large. So far, platinum mines have lost over $944 million in revenue while workers have lost $378 million in salaries.
Kevin Lings, an economist from the investment firm Stanlib, said continuation of the strike could collapse the mining sector.
"It’s very difficult for business to move forward, when you have got this much labor unrest, whether its mining or manufacturing, it’s usually disruptive to business to have this much labor unrest, and obviously we need to implement policy more effectively from a government perspective, in terms of infrastructure development," said Lings.
The strike is taking a toll on companies and workers alike. Lonmin, a giant platinum mine, recently asked its non-striking workers to go on leave, saying this will cut costs and help the company to survive.
With mining contributing about 20 percent of South Africa’s gross domestic product (GDP), Leon Louw, Executive Director at the Free Market Foundation, an economic think tank, said the economy is taking a beating.
"The South African economy, is now stagnating, or growing at very, very low rates. This is all very tragic, very sad and very serious and not being taken nearly seriously enough by most commentators and by the government in particular," said Louw.
Daryl Glaser, Head of Department of Political Studies at the University of Witwatersrand, said the government’s failure to properly resolve issues in the mining sector and the economy at large could haunt the ruling African National Congress in the coming elections.
"The dissatisfaction with the ANC is potentially providing recruits to new and breakaway political parties. They potentially find recruits in workers who are unhappy. It remains to be seen how much advantage they are going to be able to take of the dissatisfaction," said Glaser.
With only a few weeks left before South Africa's national elections on May 6, it is not clear how long the government can afford to wait as the platinum sector strike punishes workers, business and the economy.

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