Platinum’s devastating lose-lose strike

(Published in Mining magazine April / May 2014 )

By Stef Terblanche

It has been called a strike from hell, a strike stuck in the past, a strike stuck in a vacuum and the strike to nowhere.

After nearly three months that saw both sides in the dispute suffering immense losses, at the time of writing there still seemed to be no end in sight to the strike by some 70,000 workers belonging to the Association of Mineworkers and Construction Union (Amcu) at the world’s three largest platinum producers, Lonmin, Anglo American Platinum (Amplats) and Impala Platinum (Implats).

The protected strike in which the “no work – no pay” principle applies in terms of labour legislation, started on January 23 at operations of the three companies in the Western Platinum Belt in the Rustenburg area.

By March 5 the Commission for Conciliation, Mediation and Arbitration (CCMA) adjourned its efforts to mediate in the strike as it felt the parties remained too far apart and wanted to give them “an opportunity to reflect on their respective positions”.

However, at the end of March it was announced that the CCMA facilitated mediation process was to be resumed after CCMA mediators met separately with Amcu on March 26 and with the platinum producers on March 31.

Announcing the resumption of mediation talks, CCMA Director, Nerine Kahn, reiterated that the dispute “is of a complex nature and that the CCMA is working with the parties in finding a mutually beneficial and jointly agreed solution”.

“The mediation process is ongoing.  Various separate meetings have been held with all parties in the course of the last two weeks (of March) as part of the mediation process.”

Laura Mseme, Senior Manager Strategic Management, Policy and Governance at the CCMA told MINING that the CCMA  remains confident that “a mutually acceptable mediated solution can be found”.  

But at the time of writing it seemed resumption of the process could be slow and difficult.

Shortly after the CCMA made the announcement, a spokesperson representing the three mining companies told MINING that the parties had not yet resumed actual face-to-face negotiations.

The mining companies, he said, were waiting on Amcu to come back to them with a counter proposal in the “settlement zone” based on the companies’ most recent offer made on January 29 of a wage increase “spread over three years and starting off with a 9% increase”.

“The companies remain open to discussions with Amcu within a reasonable settlement zone, (but) no talks are currently underway,” the platinum producers said in a joint statement.

Lonmin spokesperson Sue Vey confirmed this, saying that nothing had changed in the situation since the beginning of March.

The situation at the beginning of March was summed up in a joint statement by the CEOs of the three platinum producers, Chris Griffith, Terence Goodlace and Ben Magara.

“We remain far apart. The revised demand by Amcu of an average basic wage increase of between 25% to 35% year-on-year over a four-year period remains unaffordable.

“Our proposed increase would take the current monthly basic wage of between R5,000 and R5,700 to between R6,300 and R7,200 by 2015 excluding benefits and bonuses. This proposed increase should also be seen against the reality of the mining industry already being the highest paying industry of similar labour-intensive industries.

“Importantly, the proposed increases will take the minimum guaranteed pay of entry-level underground employees to between R9,390 and R10,250 in the first year to between R10,900 and R11,900 in the third year.”

Both the union and the employers had therefore by early March revised their respective offers, yet remained far apart with both sides refusing to budge on their offers since then.

"We are open to negotiations but can only do that when Amcu moderates its wage demands," said  Implats group executive for corporate relations Johan Theron when the resumption of mediation was announced.

After the suspension of mediation Amcu staged marches to the head offices of the mining companies, handing over lists of grievances and demands.

“We’re not returning to work until they (the companies) commit to R12,500 in four years,” Amcu’s Mathunjwa told the workers that had marched to Implats’ offices.

Amcu warned that a protest march to Parliament would follow after the Easter holidays if the union's demands were not met by then.

Explaining the platinum producers’ position early on in the strike, the three CEOs jointly said the offer made by their negotiating team on 29 January “pushes the boundary of what is affordable and sustainable as far as we possibly can”. 

“The offer is significantly above the rate of inflation; it is fair and reasonable. We cannot and do not contemplate anything above this.”

Justifying their position, the three CEOs said the platinum industry is in a precarious position. Prior to the start of the strike and before granting increases currently under negotiation, around 45% of platinum operations in South Africa failed to break even, they said.

“As a result of mostly unprocedural strike action in 2012 and 2013, the platinum producers lost combined production of 879,400oz, with huge impact on company revenues and employee wages. These losses by both the companies and their employees will never be recovered.”

They pointed out that the various pressures had already reduced their combined workforce to less than 134,000 in December 2013 from more than 145,000 in December 2011. At the time of going to press the three companies said they had already lost revenues totalling R11.3-billion, while the striking workers had already lost over R5-billion in forfeited wages.

“Prolonged strike action would further exacerbate the current situation and may result in further job losses. Furthermore, there is the constant threat that the global platinum manufacturing market, which relies on consistency of supply, will start looking at replacing platinum group metals in a number of industrial applications. This could spell even more hardship for the platinum sector,” said the three CEOs.

The platinum mining companies have warned that in the face of prolonged strike action and big losses, job cuts and closures of mines and shafts were imminent.

The entire strike so far has been fraught with uncharted territory and with no-one able to navigate the large divide between the union and the mining companies to date, a settlement remains elusive. This makes the CCMA’s task a daunting one.

The government has also been very concerned about the strike throughout, constantly urging the parties to seek a settlement. The mining task team headed by Deputy President Kgalema Motlanthe and which includes Mining Minister Susan Shabangu and Labour Minister Mildred Oliphant, helped to broker the CCMA mediation.

And Finance Minister Pravin Gordhan recently said the strike had an effect on the 2013-14 tax collection, but it was not "overwhelming". He has reportedly also said the current strike will cause less economic damage than industrial action did in 2012, and that it has not yet hurt South Africa’s exports as the mining companies have stockpiles. He also questioned possible political factors that may be at play.

The mining task team led by Motlanthe has engaged in regular meetings in different forums involving both the industry and the government, and at these meetings the strike has been discussed and facilitation and assistance offered. The effect on local communities has also been a big concern.

For the rest however, government has remained outside of the fray, leaving it to the CCMA and the parties involved to to try and resolve the dispute.

The Chamber of Mines is not a party to the negotiations or the mediation as the platinum sector, unlike the gold and coal sectors, does not have a central bargaining structure in which the Chamber negotiates on behalf of its members. However, Dr Elize Strydom, senior executive for employment relations at the Chamber and an experienced industrial relations negotiator, advised the three platinum companies. did attend these processes in an advisory capacity.

Various commentators and analysts have called for government to get more involved, while others wanted it to stay out of the dispute. Peter Major, mining consultant at Cadiz Corporate Solutions, believes government should do much more to help end the strike.

“They have the ability to end this strike if they really wanted to. But I believe they are holding back because there is an election coming. So things will remain as they are until the elections where after I think government will play a more direct role in bringing an end to the strike,” he says.

Some analysts believe Amcu’s unfaltering position is being fuelled by a false belief that the South African platinum mines are able to influence and manipulate world platinum prices in the longer term and that any large wage increase to their workers can be recovered in this way.

But during both this strike and the 11-week strike late last year at Northam Platinum, the price of platinum went down.

Major also rejects any belief that wage increases can be recovered from a strong platinum price in the future. “Anyone who invested any money in the platinum index over the past eight years, would have suffered a massive loss of over 30%,” he says.

There have been dire warnings that apart from job losses due to operations shutting down, greater use of automation by the affected mines in future  could also reduce their dependence on labour.

Meanwhile the strike has entered a phase where analysts and other observers agree that something has to give. The question being asked is whether the mining companies will be first to run out of stockpiles and find themselves unable to honour commitments, or will striking workers first run out of patience with receiving no pay and seeing their families go hungry.

Amcu insists its members want to continue with the strike until their demands are met. The union says it has plans in place to intensify the strike.

There have also been reports of Amcu members who are migrant workers having returned to their rural homes where they can live off subsistence farming and sit out the strike.

But the three mining companies say they have been inundated with calls from workers who want to return to work but fear for their safety, and have been posting such messages from unnamed workers on their joint strike information website.

The independent publication, The Intelligence Bulletin, recently reported that the three mining companies, which between them produce over 60% of the world’s platinum, were sitting on platinum stockpiles estimated at 200,000 ounces.

While there are signs that stockpiles may be running out, the companies’ joint spokesperson says it is not having an effect at this stage. The strains are also evident in other ways.

Two of the three companies, Amplats and Implats, have sent force majeure notices to some of their contractor and suppliers whose contractual obligations cannot be met due to the strike. But so far no notices have been issued to customers of the mines. Bloomberg has quoted Implats’ Theron as saying that said his company may buy platinum on the open market to meet deliveries as the company “definitely can’t continue to supply all (its) clients as (it) normally would’ve done”.

Meanwhile contractors serving the affected mines and their employees are already suffering the knock-on negative effects of the strike, while small businesses in surrounding communities have also taken a knock.

Overseas interest in the strike has also been big and it has been widely reported by foreign media alongside the other two “big South African stories”, namely  Oscar Pistorius’ trial and the Nkandla Report. The impact can only be negative for the South African economy.

Among others, The Wall Street Journal focused on the loss of platinum output as well as that the strike is likely to slow down South Africa’s economic growth. The Sydney Morning Herald reported the shut-down of the mines, loss of production and possible job cuts. It also ran a story saying “Fresh unrest across the whole of South Africa's platinum belt is threatening the recovery of Anglo American Platinum, the world's top platinum producer”.

The Financial Times warned that the migrant labour system at the core of the mining industry in South Africa threatens the stability of important gold and platinum producers, and that the current platinum strike was “stuck in the past”. The Guardian focused on the all the losses incurred by the industry due to the strike.

It is clear, at this stage there are definitely no winners in a strike that is bound to have consequences far into the future.