Platinum Mines’ Union Bypass May Disrupt Industry, AMCU Says

May 05, 2014 12:01 pm ET

(Updates with companies’ comment on meeting with union in 10th paragraph.)

May 5 (Bloomberg) -- The main union at the South African operations of the world’s largest platinum companies said the producers’ decision to take a pay offer to workers directly to end a 14-week strike may destabilize the industry.

“We fear that it could result in a very unstable environment because you’re dividing into two parts” should shafts be opened for miners to return, Association of Mineworkers and Construction Union President Joseph Mathunjwa told reporters in Johannesburg.

Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc ended talks April 24 and decided to put their latest pay offer directly to workers, using text messages and radio commercials. The strike by more than 70,000 AMCU members since Jan. 23 has cost the companies 16.4 billion rand ($1.6 billion) in lost revenue and employees 7.3 billion rand in income, the platinum producers said on a joint website.

The AMCU has rejected the producers’ latest offer of 12,500 rand a month by 2017 including benefits, instead demanding that amount in base pay within four years. That’s double entry-level workers’ current salaries.

The union will “flex its muscles” to make sure that companies don’t close shafts because of the stoppage and will call a “mass solidarity strike” if that happens, he said.

Inflated Numbers

Amplats plans to switch to mechanized open-pit mining from labor-intensive underground excavation as most of its South African operations remain crippled by the strike. The company closed shafts and cut jobs last year and has said it’s considering whether to sell strike-hit mines.

Amplats said in negotiations that it had a budget of 1 billion rand a year for wage increases, according to Mathunjwa. The number of employees used by Amplats was almost 5,000 workers higher than the actual number, inflating wage-increase costs by as much as 500 million rand, he said.

“This engagement exposed that the employers, in particular Amplats, can actually afford the AMCU demands and the different positions were within negotiation range,” Mathunjwa said. Impala and Lonmin wouldn’t disclose any data on their costs, according to the union.

Talks Standstill

Negotiations are “a process of give and take and must be grounded in economic reality,” Charmane Russell, a spokeswoman for the producers at Russell & Associates, said in an e-mailed response to questions. “The companies have a responsibility to ensure that any settlement reached is affordable and sustainable.”

Amplats, Impala and Lonmin were informed of AMCU’s decision not to accept the settlement offer at a meeting today, the companies said in a joint e-mailed statement.

Impala probably won’t “have a clear picture” of how many employees would like to accept the pay offer until May 8, spokesman Johan Theron said by phone.

Lonmin has sent text messages to miners, giving them until the same date to decide on returning to work by May 14, according to spokeswoman Sue Vey.

Amplats has already “already seen a commencement in the uptake” of the offer, it said in the statement.

“Regrettably, the companies have received feedback from a large number of employees that while they would prefer to accept the offer and return to work, many are fearful of doing so due to the threats to their personal safety,” the companies said.

Amplats Chief Executive Officer Chris Griffith accepted 11 million rand of shares that will vest to him after three years in terms of the company’s long-term incentive plan, the producer said in a statement today. It bought another 4.05 million of stock that will be released to him over the same period under Amplats’s bonus-share plan, it said.

Potential Intervention

The government may have to intervene in the negotiations to help reach a resolution, President Jacob Zuma told reporters in Johannesburg today.

The protest “has gone on for too long and is not helping the workers,” he said.

South Africa’s ruling African National Congress has no relation with the AMCU, making it difficult for the party to intervene from a political perspective, Enoch Godongwana, the head of the ANC’s economic policy committee, said in Johannesburg today.

The mining companies need to “draw a line and to ask the government to protect their employees,” he said.

--With assistance from Rene Vollgraaff and Amogelang Mbatha in Johannesburg.