Platinum Jobs Seen at Risk as Latest Pay-Strike Talks Fail

Jun 10, 2014 12:04 pm ET

(Updates with metal prices in sixth paragraph.)

June 10 (Bloomberg) -- The South African minister who led the latest round of failed talks in a platinum strike threatening to push the country into recession said job cuts grow more likely as the 20-week pay dispute drags on.

“The longer the strike goes on, the more likelihood of such dismissals,” Minister of Mineral Resources Ngoako Ramatlhodi told reporters today in Pretoria, the capital. “At some point you’re not going to be able to sustain your operations. The situation is grim and quite serious.”

Ramatlhodi withdrew as leader of negotiations to end the labor action that’s halted most local operations owned by Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the biggest miners of the metal. The producers have lost 21.9 billion rand ($2 billion) in revenue, making it South Africa’s longest and costliest mining strike. The talks ended without a resolution yesterday.

The worsening labor environment has contributed to “enormous headwinds” facing the country’s economy, South African Reserve Bank Governor Gill Marcus said today. A recession, while unlikely, would be “a very grim outcome.”

Platinum gained 1.9 percent to $1,480.29 an ounce by 5:32 p.m. in Johannesburg. Palladium rose to its highest in more than three years, advancing 1.4 percent to $855 an ounce.

Amplats, as the largest producer is known, fell 1 percent to 467.74 rand by the close in Johannesburg. Impala, the second largest, was unchanged at 111 rand, while Lonmin declined 3.2 percent to 242.9 pence in London.

Crumbling Negotiations

Repeated attempts have failed to engineer a breakthrough in the dispute that has idled 60 percent of output in the largest platinum-producing country. Negotiations between the sides earlier crumbled under meditation by the Commission for Conciliation, Mediation and Arbitration.

Later bilateral meetings ended in the companies breaking off discussions and putting a pay offer directly to employees, a move that the union sought to block in unsuccessful legal action. A labor court judge also took the unusual step of mediating company-union talks.

“The parties failed -- I didn’t fail,” Ramatlhodi said. “But they left this meeting yesterday saying they will continue exploring” a resolution. “We hope the parties will go back to court.”

Housing Allowances

The Association of Mineworkers and Construction Union, the dominant labor group at the mines, wants basic pay for the lowest-paid underground employees to be more than doubled to 12,500 rand a month by 2017. The companies have said that’s unaffordable, offering increases of as much as 10 percent and including allowances for housing in the figure. The country’s inflation rate was 6.1 percent in April.

“The position was to get to 12,500 rand in first year then we moved to four years; in principle we moved to five years,” AMCU President Joseph Mathunjwa said today in an interview on Johannesburg-based television channel eNCA.

As of June 6, the main outstanding issues were how long it would take for the companies to reach the 12,500-rand wage and whether to include a housing allowance as part of the basic pay, Ramatlhodi said. The AMCU said it would only include an accommodation grant against delivery of homes by the government, which the state has pledged to fast-track.

“Our coordinators are busy convening meetings at various operations” to give members feedback on the latest talks, Jimmy Gama, the AMCU’s treasurer, said in a text message. The companies are also reviewing their options, they said in a joint statement yesterday.

Returning Workers

The priority for Amplats is to encourage employees to return to work, Mpumi Sithole, a spokeswoman for the company, said in an e-mail.

Amplats last year fired about 3,300 workers, with a further 1,500 employees applying for severance packages. The company had initially planned to cut 14,000 positions and scaled back the number after complaints from the government and unions.

“We’ve already seen closures and cutbacks at Amplats, Lonmin and most of the junior producers, and with up to 50 percent of South African production unprofitable, we’ll certainly see more,” Hanre Rossouw, commodities chief for emerging markets at Investec Asset Management, said in an e- mail. “Tragically, this continues to be a fight about a bigger slice of a much smaller pie. Some estimates put potential further job losses at 15,000 to 20,000, with nearly 20,000 jobs already lost.”

--With assistance from Tshepiso Mokhema in Johannesburg.