Johannesburg, South Africa — 03 July 2013 – The South African Chamber of Mines has underlined the significance of success in the new mining industry wage talks by stating that the country’s mining companies and trade unions risk destroying its biggest export industry and threatening its credit rating should these discussions fail.
“Failure is not an option as this will accelerate the creeping destruction of one of South Africa’s most important industries and inhibit the investment support that the country so urgently needs,” Chamber CEO Bheki Sibiya wrote in the Business Day newspaper, reports Bloomberg News.
Falling precious-metal prices and higher costs have squeezed South Africa’s gold and platinum producers, who are facing demands from labour unions to as much as double wages for entry-level workers. A year ago, strikes spilled over into violence that led to the deaths of 50 people and shaved 0.5 percentage points off economic growth.
Gold dropped 23% in the second quarter, the biggest three-month slump on record, while platinum is down 11% this year. More than half of South Africa’s gold and platinum operations are “in loss-making positions,” Sibiya said.
Sibiya expressed the hope that unions would participate in pre-negotiation talks scheduled for July 8 that would determine the rules for wage discussions due to start three days later.
“Neither the industry nor the country can afford yet another wave of calamitous workplace disorder that delivers additional global uncertainty and becomes the cause of further downgrades of South Africa’s sovereign credit rating,” he said.
AngloGold Ashanti Limited, the world’s third-biggest producer of the metal, Gold Fields Limited, Harmony Gold Mining Company Limited and Sibanye Gold Limited are among the companies that belong to the chamber.
Entry-level underground gold miners receive a minimum wage of R5,000 (US$503) a month. The National Union of Mineworkers, which represents 64% of workers, wants this increased to R8,000 (US$805) while the rival Association of Mineworkers and Construction Union is asking for a rise of R12,500. (UDS$1,207).
South African miners’ wages can be required to support as many as 10 other people, including family members, according to Richard Hart, a Johannesburg-based analyst at Macquarie First South Securities Limited.
Standard & Poor’s and Moody’s Investors Service have kept South Africa’s rating on a negative outlook, after lowering their ratings by one level last year. Fitch Rating lowered the nation’s debt rating to BBB, the second-lowest investment grade, in January.
Source: Bloomberg News. For more information, click here.