Can Rustenburg survive crisis?

2012-09-29 13:24

Platinum industry is the backbone of the region’s economy and any mine closures will have a massive domino effect on the area

Foreign investors are anxious, mining companies are suspending operations in the platinum province and mine workers are increasingly becoming militant.

After Lonmin succumbed to a six-week strike in which 45 people died and agreed to salary increases of up to 22%, other mining companies in the platinum and gold sectors are witnessing possible contagion fuelled by the workers’ successes at Marikana.

Anglo American Platinum workers based at the company’s Rustenburg operations have been on strike for two weeks now.

They are demanding R16 000 a month salary – a number mine bosses say is unjustifiable.

The company this week gave the workers an ultimatum to return to work in 24 hours or face dismissal.

Can Rustenburg’s economy withstand the impact of the protracted labour dispute that appears to have no end in sight?

Indications are that the province does not stand a chance, at least not in the short term.

Mining is the leading economy activity in Rustenburg.

It generates almost half of the province’s gross domestic product (GDP) and is the largest employer in the region.

The North West town is home to two of the world’s largest platinum mining giants – Impala Platinum and Anglo Platinum.

Both companies have been affected by the strikes.

The town is also the base of the world’s largest platinum refinery (Precious Metal Refiners) and Xstrata Alloys, the biggest ferrochrome producer globally.

The steel production industry is the largest consumer of ferrochrome, which it uses to make stainless steel.

Rustenburg’s mining sector employs close to 60 000 people, which is about a quarter of South Africa’s mining labour force.

However, what is at stake is not just the thousands of jobs that will most likely be shed subsequent to the ongoing mining strike.

Says Vusi Mabena, the senior executive for transformation and stakeholder relations at the Chamber of Mines: “The platinum group metals industry in Rustenburg is the economic foundation of the region.

"The closure of mines will definitely have a negative domino effect on other economic sectors as well as leading to more job losses beyond the platinum sector.”

Spokesperson for the Rustenburg Local Municipality, Peter Manzana, said the city was greatly concerned.

“We are concerned about what is happening, which is why we have been hosting the committees that are trying to resolve the impasse.

“Mining is a large employer in the province and we are concerned about the economic impact this will have on the town and province as a whole.”

But the province says it has a plan, which is to diversify its economy to make it less dependent on mining.

MEC for Economic Development, Environment, Conservation and Tourism Motlalepula Rosho said in her budget speech address earlier this year that the plan invested in manufacturing, agroprocessing, tourism and culture, and metal fabrication.

Manufacturing, for instance, is the North West’s third-largest sector after community services.

Made up mainly of maize crop, it contributes 5.6% to North West’s GDP and employs almost 8% of the province’s workforce.

But it will be sometime before the strategy bears fruit. Between 1996 and 2009, agroprocessing in the North West grew by a mere 0.2% to 1.2%, while metal fabrication grew to 0.2% during the same period.

While tourism and cultural industries is not growing at a rate that the province would like to witness, the growth rate has remained relatively stable.

The North West is home to the iconic Madikwe Game Reserve, Pilanesberg Nature Reserve and the world-famous Sun City mega gambling and leisure complex.

To boost tourism in the province, the government of the North West intends to position the province as a hunting destination and will be investing in the development of the Taung Game Reserve.

The netting and gambling industry is also promising though. For the year 2011/2012, the sector generated revenue of R82 million for the province, up from R67 million in the previous financial period.

The figure is projected to surge to R100 million by 2013/2014.

That said, it is clear that Rustenburg must survive the current situation.

This it can contribute to by making its target sectors more appealing and aggressively pursuing foreign direct investment.

Rosho says North West is geared to take advantage of South Africa’s membership of the Brics bloc of globally influential emerging market economies.

“We can easily build on the existing relationships with the Indian National Industry Corporation and the Brazil Investment Promotions Agency to increase the North West’s footprint in these regions.”

Fortunately, analysts are optimistic the euro zone crisis will turn around and with that the fortunes of the platinum sector, which is likely to experience increases in demand.

“South Africa needs to increase its global market share of platinum group metals, which is currently about 54%.

“Once this demand increases, more jobs will be created both directly and indirectly,” says Mabena.

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