Johannesburg, South Africa — 24 June 2013 – A well-known South African economist has rejected claims that South Africa’s platinum mining industry alone could shed up to 122,000 jobs in the next two years, saying the numbers were blown way out of proportion.

Fin24 reports that the shocking scenario put forward by Peter Montalto, a research strategist at Nomura Group, would entail the industry shedding 80% of its jobs. It was based on a platinum price of US$1,500 in 2014 and 2015 compared to the probable rise in the industry’s cost base.

Next year, about 24,000 platinum jobs would be “at risk”, which would rise to 122,000 jobs by 2015, he said.

The proportion of South Africa’s platinum production that Montalto estimated would be at risk is 64 million ounces in 2014 (14% of total supply), and about 277 million ounces (59%), the following year.

Mike Schussler, a director at Economists.co.za, told City Press that these numbers were too high, suggesting the industry was facing a wholesale collapse.

“I agree that the sector will shed some jobs if the platinum price reaches certain levels, but this number is a bit on the high side. A lot will depend on how the rand is going to perform during the next two years,” Schussler said.

“Given that we currently have about 500,000 jobs overall in the mining sector, if the platinum sector is going to shed so many jobs then this amounts to closing down the sector if you consider that the 500 000 is divided into gold, uranium, coal, chrome and other sectors. “I do not think that will happen,” Schussler said.

But Dawie Roodt, a senior economist at Efficient Group, said the gloomy picture painted by Nomura was “not impossible”.

“I am sorry to say this could certainly happen, with dire consequences. We could see high rates of unemployment and an escalation in social instability,” he said. “This will put pressure on the government and Treasury in particular.”

Montalto said the South African mining industry was in a grim state, with surging labour costs and electricity prices. All these were aggravated by persistent political, policy and structural risks.

“We can therefore see that the necessity and effects of restructuring will spread widely beyond Anglo American Platinum (Amplats),” said Montalto. According to him, the state’s recent crackdown on Amplats, which stopped the platinum miner from cutting 14,000 jobs, had only prolonged the inevitable.

Amplats reduced the planned job cuts to 6,000 workers following government’s threat to annul some of the miner’s licences. The state’s restriction of the job cuts would bolster the surging losses on mines, meaning that job losses would happen nonetheless, Montalto said.

The mineral resources department this week released the latest employment figures from the mining industry. The figure for March, which the department collects directly from the mines, shows 189,783 workers in platinum “’ 9,764 less than a year earlier. In the gold sector, jobs had fallen by 4,241 to 138,276.

Source: Fin24. For more information, click here.