Overcoming challenges: Addressing labour issues is a matter of importance for mine operators and the state

The issue of labour has emerged as one of the most salient challenges faced by South Africa’s mining sector. In early 2012 wildcat strikes in Impala Platinum’s Rustenburg plant, the world’s largest platinum mine, ended in rioting and a six-week production stoppage that cost the company 3000 oz per day. By August unrest had spread to Lonmin’s nearby platinum facility in Marikana, where rock drillers downed tools in another strike and demanded a 300% rise in their monthly salaries. Within a week a tense stand-off had degenerated into violence which brought the deaths of two policemen and 34 striking workers in the lethal response of the security forces, an incident that seems set to be considered a seminal event in the nation’s modern history. A 22% wage increase ended the Lonmin dispute, but not before protests had erupted in the Gold Fields mine outside Johannesburg, where police were compelled to fire rubber bullets, and Anglo American Platinum’s Rustenburg mine, which additionally required police intervention to quell unrest. By the beginning of October an estimated 75,000 miners had stopped work at gold and platinum mines across the country, the majority of which were wildcat, or illegal, operations. With labour disruption reaching levels that had not been seen since the apartheid era, addressing the causes of the industry’s manpower problem has become a matter of urgency for both mine operators and the state.

Union Issues

For many years the interests of South Africa’s mining labour have been largely represented by the National Union of Mineworkers (NUM), founded in 1982. The organisation is the largest collective bargaining agent in the mining industry and, with Nelson Mandela as honorary lifetime president, it has traditionally enjoyed strong relations with the governing African National Congress. In 1998 a small faction of the NUM broke away from the main organisation and formed the Association of Mineworkers and Construction Union (AMCU), which distinguished itself from its parent by establishing a non-communist and apolitical agenda. Since then it has slowly grown its membership, in some cases crossing the threshold (usually around 30%, but sometimes as high as 50%) of membership levels that mining firms demand before they will confer recognition on a union. While it had not achieved recognition at the Impala Platinum mine by February 2012, it had been recruiting new members at the gates of some shafts in the days leading up to the strike.

“Meanwhile, analysts and even the NUM are baffled by the meteoric rise of AMCU at Impala Platinum Rustenburg,” stated an analysis of the rise of AMCU in Miningmx. However, “There was also ample evidence of discontent and even open revolt against the NUM among important pockets of the workforce, particularly the rock-drill operators.”

Pay Rises

In particular, an 18% bonus increase to workers in higher-category jobs, which account for an increasing amount of the NUM’s membership, did not sit well with the 4200 lower-paid rock drillers which called the wildcat action. Union rivalry grew more intense during the strike at the Lonmin facility later in the year, where the NUM lost its organisational rights at the mine after its membership dropped below 50%. The AMCU, which had encouraged its members to continue the strike after the deaths of 37 miners on August 16 despite a NUM agreement struck with the mine owners, was widely regarded as the victor of the inter-union completion when the dispute was finally settled with a 22% pay rise.

The emergence of the AMCU as a second wage-bargaining force in the sector, and the necessity of its attracting membership from the NUM if it is to achieve recognition at other facilities across the country, suggest that the changing union landscape will remain a significant factor in the labour question.

Miners’ Greivances

While the union rivalry may play a significant part in labour unrest, the manner in which gold and platinum is removed from the ground ensures that this segment is particularly exposed to employee discontent. “Gold and platinum mines are narrow and deep – we have one gold mine at nearly 4 km already. The only option is to drill blast holes by hand, which is a tough job, and the migrant labourers who carry it out are unskilled and therefore low-paid,” Dick Kruger, deputy head of techno-economics at the Chamber of Mines of South Africa, told OBG. Coal mining, by contrast, makes use of continuous mining machines rather than human rock drillers, and their operators can command higher salaries.

Mining activity carries risk wherever it is carried out, and South Africa is no exception; since records began in 1904 some 54,000 miners have lost their lives in the country, according to the Department of Mineral Resources. This can be compared with 11,606 deaths of underground coal mine workers between 1900 and 2006 in the US. Living conditions, too, are considered poor at some facilities, particularly those that rely on manpower rather than technology; single-sex compounds and provisions for leave that make it impractical for migrant labourers to return to their communities more than once a year are both sources of discontent in the sector.

Industry Response

The response of the mining industry to the grievances aired by its employees predates the labour unrest of 2012. Safety concerns have been addressed through the Tripartite Action Plan on Health and Safety, which was formulated in 2008, and safety statistics have already shown a sustained improvement over recent years.

Chamber of Mines of South Africa data show that 200 miners lost their lives in 2007, a number which decreased to 171 in 2008, 169 in 2009 and 128 in 2010. That is compared with the US, which had a record-low death toll of 35 miners in 2009, 71 in 2010, 37 in 2011 and 35 in 2012. Moreover, in 2010 the industry provided more than 10,000 students with bursaries and study assistance in disciplines including engineering and technical operations, while in 2011 it spent in excess of R4bn ($487.6m) on skills development for current employees.

This effort comes alongside the industry’s move to engage with rural communities, which in many cases feel excluded from the mines’ success. In 2011 the mining sector contributed around R1.3bn ($158.47bn) to community development that, according to the Chamber of Mines of South Africa, represented about 1.4% of net profit before taxation, dividends and capital expenditure – or about 21.7% after these factors have been accounted for. A further R800m ($97.52m) was directed towards education, skills development and community enhancement programmes over and above the existing social and labour plan and Mining Charter commitments. Finally, a number of mine operators have started to address the problem of single-sex hostel accommodation and, with the assistance of municipalities, sought to improve access to both housing and community services.

After The Strikes

The industrial action of 2012 brought some amount of success for mine employees in the form of wage rises, but these victories came at a heavy price. Work stoppages in the sector between January and October 2012 reduced production by R10.2bn ($1.24bn), according to the National Treasury, with platinum production falling 15.3% year-on-year in August 2012.

The sector’s troubles have made their mark on the national accounts: South Africa’s export revenue is estimated to be $1.43bn lower in 2012 as a result of the strikes, while the country’s growth rate is thought to have been negatively impacted by 0.2%, falling from 2.7% to 2.5%. The proliferation of illegal striking activity and the possibility of more to come have also undercut business confidence in the sector, with the result that some operators have sought to reduce manpower rosters: in March 2012, for example, Impala Platinum reinstated only 14,950 of the 17,200 workers it had dismissed in February.

Jobs In Question

Of more serious concern to the industry was the January 2013 decision by Anglo American Platinum to close four shafts and sell a mine it considers unsustainable, placing 14,000 jobs at risk. While the company claimed that the strikes were not the principal reason for its operational review, the production loss of 306,000 ounces that the company suffered as a result of stoppages is likely to have affected its overall outlook.

In February 2013 President Zuma suggested in televised comments that when mining firms announce labour cuts or possible closures it is “almost blackmail” and that “lower wages in the mining industry have led us into trouble”. The president’s comments are expected to find favour with much of the sector’s labour force, but addressing the sentiments contained within them while maintaining the nation’s competitiveness against other mining giants like Australia and Canada will prove one of the largest challenges faced by mine operators in recent history, and one which will require a united and concerted effort by the public and private sector, as well as the unions.

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The Report: South Africa 2013

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