Johannesburg - From being the Achilles’ heel that often chokes the economy, labour relations on the country’s mines are improving and may help the country in its bid to avoid its credit rating being cut to junk later this year.
The world’s three biggest platinum producers - Anglo American Platinum [JSE:AMS], Impala Platinum [JSE:IMP] and Lonmin [JSE:LON] - all reached three-year wage agreements with the Association of Mineworkers and Construction Union (Amcu) in the past week without losing one day to a strike. That’s a far cry from 2014, when the Amcu shut down the industry for five months, the longest strike in the nation’s history.
The need to improve labour relations was highlighted by S&P Global Ratings in June as one of the three key “structural measures” needed to keep the country’s investment-grade rating, along with a reliable power supply and revising its mining regulations.
Gold miners also concluded a wage agreement with workers last year without a stoppage.
“We have a history of frequent and long strikes in this country so the fact that one of the more militant unions has chosen not to strike is very significant,” said Mike Schussler, an economist at Johannesburg-based research company Economists.co.za. “It definitely does help towards credit ratings.”
S&P, Fitch Ratings and Moody’s Investors Service are due to review the nation’s credit assessment in the next few months and have identified prolonged strikes among weaknesses in the continent’s biggest economy.
With platinum down 39% to about $984 an ounce in the past five years, miners could ill afford another long stoppage. Amplats, Impala and Lonmin have cut capital expenditure by more than 40% in the period.
The cuts in capital expenditure and closing down unprofitable mines have intensified since the 2014 strike, with employment in the platinum industry down 10% to 170 000 since then, according to Schussler.
The change in tone from the Amcu, which rose to prominence after 34 protesters were shot dead by police in a single day near Lonmin’s Marikana mine in 2012, is marked.
Two years ago, union president Joseph Mathunjwa pledged to reform the “slave-wage system in the mining sector”. This year, he recognised the constraints of “a very deep economic crisis particularly in the platinum sector” while still vowing to gain a “living wage” for workers.
“We are delighted with this achievement, as others thought Amcu will embark on a protected industrial action this year,” Mathunjwa told reporters on Monday.
The environment is less hostile than a few years ago, said Arnold van Graan, Johannesburg-based mining analyst at Nedbank Capital. “One of the reasons for that is the realisation among unions that if you push too hard, you end up losing jobs further down the line.”
The Congress of South African Trade Unions, the country’s biggest labour-union federation, said in July it will encourage its member unions that represent 1.9 million workers ranging from teachers to miners to balance wage demands with the need to preserve jobs when salary negotiations in their industries begin.
The National Union of Mineworkers (NUM), which the Amcu has displaced as the biggest representative of employees in the platinum industry, is a Cosatu member.
At the three companies, the Amcu agreed to an increase in basic pay ranging from 7% to 12.5% for each of the three years.
The deal extends to all unions. The nation’s inflation rate was 6.1% in September. By the final month of the agreement in July 2018, a rock-drill operator at Lonmin will earn a basic wage of R12 296 monthly and receive guaranteed earnings of R19 455.
The pact raises total labour costs at Amplats, the biggest producer, by 6.5% to 6.9% over the period, it said. At Lonmin, the increase is about 8%.
“If you can get that coming in below 10%, like Amplats has done, you’ve done well,” Van Graan said.