Amplats: smaller cuts, no-one pleased

South African mining firms are in a delicate position. Squeezed by falling commodity prices, production problems and labour unrest, they are trying to push on with plans to cut costs while treading carefully to keep workers onside.

On Friday, top global platinum producer Anglo American Platinum (Amplats) announced its decision to slash 6,000 jobs, a far cry from the 14,000 originally planned – but the main union AMCU rejected the announcement, and Amplats may find itself dragged back to the drawing board.

The union says Amplats should engage in talks – and if those fail, strike action will be next. In fact, cutting costs seems far from the minds of unions, with AMCU saying it expects a wage hike and houses to be given to miners as the way forward.

Tensions have been running high in South Africa in recent weeks between frustrated mining bosses, hit with high production costs, and militant unions pushing for wage hikes as the sector heads towards planned industry-wide pay talks. It is feared a breakdown in negotiations could prompt violent action, which has blighted the industry and seen some workers receive pay hikes of up to 22 per cent through wildcat strikes and unofficial negotiations.

Amplats’ 6,000 figure is a huge drop from the 14,000 job cuts initially proposed, after coming under intense government pressure. It also revealed that platinum output will be initially cut by 250,000oz in 2013 and then an additional 100,000oz in subsequent years. In addition, it proposed to keep open one of four shafts slated for closure near Rustenburg. The miner said the action necessary to get back to profitability.

Yet more upheaval lies ahead. On Friday, AMCU national treasurer Jimmy Gama told beyondbrics: “The NEC still has to meet over the weekend, go through the reasons that Anglo put forward but we are strongly opposing the announcement made by Anglo, we do not support that so many workers can lose their jobs especially under the current situation in terms of unemployment rates in SA, so we say no.”

Gama added: “If the company goes ahead with the process, we need to engage with in terms of section 189 [of the Labour Act], that is a consultation process. That engagement is a process and if we end up not agreeing, the CCMA will make a ruling to that effect, and if members want to go on strike it will be after we have exhausted all those processes.”

He also hinted that rogue strikes could occur despite AMCU’s plans. “Those processes need to be followed, however we know that there are certain elements among the workers who might maybe, for whatever reason, do something illegal but whatever happens at this point in time it won’t be the decision by AMCU, it will be those individuals.”

Peter Leon, head of mining and energy projects at Webber Wentzel, told beyondbrics: “The news from AMCU does not sound good; hopefully they will realise that the future of the platinum industry will be imperilled if there is a repeat of last year’s events. It really is a question of the industry’s survival at a time of declining commodity prices and unsustainable costs.”

Annabel Bishop, Chief Economist of Investec in South Africa, says: “Job cuts in the private sector are never a positive given South Africa’s high unemployment rate. The proposed job cuts at Amplats are a reflection of the difficulties South African businesses are facing as operating costs (electricity, water, labour, property rates and taxes etc) rise in a low growth environment while commodity prices fall.”

Regarding upcoming wage talks, Gama denied reports that AMCU wants a double digit rise, saying they are still consulting members. AMCU is angry over what it says are low salaries. Gama says some in the sector getting paid as little as R5,000 per year. He also said his union wants mining firms to give houses to workers to keep. “Most mine workers are still staying in hostels. I mean for how long? We need to change that. Mine workers need to own houses themselves.”

“These mines are benefitting a lot in terms of the mining resources that they are digging. So they have to contribute,” he said, “The salaries that these workers are earning cannot afford them to go and borrow money from the banks. Hence we are saying the companies, together with the government, should come up with a plan that will enable mine workers to own houses.”

Related reading:
Amplats scales back SA restructuring plans, FT
South Africa PMI: one month doesn’t make a recovery, beyondbrics
Amplats halts South Africa production, FT
South Africa: A faded rainbow, FT