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Gold Fields’ Ramphele Says S. African Mines Overstaffed

Mamphela Ramphele, the chairwoman of Gold Fields Ltd. (GFI), says the South African mining industry can no longer rely on low-cost labor and will have to engage in mass firings and mechanize more to remain competitive.

“The most fundamental problem of the mining industry is that it has a 19th century business model which depends on cheap labor, low-skilled labor, and therefore large numbers of workers,” she said in an interview in Cape Town yesterday. “It’s not sustainable. The 21st century will not tolerate an industry that functions on the basis of a 19th century model. We need to start the conversation around the medium and long-term restructuring of the industry.”

The labor-intensive nature of South African mining has deterred investment and contributed to it missing out on a global resources boom, said Ramphele, a former managing director of the World Bank and ex-director of Anglo American Plc. (AAL)

South Africa, which has the world’s most valuable mineral reserves, according to a Citigroup Inc. assessment in 2010, attracted $5.6 billion in mining investment last year, according to government data. That compares with $58.2 billion for Australia, a country that exports many of the same minerals to China.

South Africa established one of the world’s biggest mining industries using poorly paid black laborers during colonial and apartheid rule after the discovery of gold and diamond deposits in the 1800s. While government data shows output has dropped in seven of the past 10 years, the industry still employs about half a million people, and President Jacob Zuma’s administration is targeting 140,000 new jobs by 2020 to help reduce the nation’s 25 percent unemployment rate.

‘Credible Alternative’

“There’s got to be a smaller labor force, a highly skilled labor force, but the people who have given so much of their time and their lives to the industry have to be looked after,” Ramphele said. “We have got to offer workers a credible, sustainable” alternative.

South African mines have very thin gold and platinum ore bodies and several attempts at wide-scale mechanization have failed because they cost too much, said Leon Esterhuizen, a precious metals analyst at CIBC World Markets Inc.

“It could potentially change,” he said by telephone from London today. “The fact that we are now having wage increases that are now several-fold inflation means that labor is pricing itself out of the market. Mechanization almost becomes an imperative to survive.”

A wave of unauthorized strikes this year has shut shafts owned by Gold Fields, the fourth-largest producer of the metal, and platinum miners Anglo American Platinum Ltd. (AMS) and Lonmin Plc. (LMI)

“This unrest comes about because of the simmering anger about growing inequality in South Africa and workers feel they are not benefiting from the wealth they are generating,” Ramphele said. “They have lost faith in their representatives. They believe employers are not doing a fair deal with them and also feel the government doesn’t care about their welfare.”

Pay Increases

Lonmin granted its employees pay increases of as much as 22 percent to end a six-week stoppage and violence that claimed at least 46 lives. Anglo American Platinum, the largest producer of the metal, fired 12,000 of its employees on Oct. 5 after they refused to return to work.

Ramphele said she is confident the National Union of Mineworkers will be able to persuade about 24,000 Gold Fields (GFI) employees to call off a strike that began last month.

“There is a concerted effort to get the workers back to work this week,” she said. “The managers of these mines have got a terrible dilemma. The longer the mines stand still, the greater the damage and so firing wildcat strikers is always an option. One would like to avoid that option. We are not going to be hanging on for week after week, without a resolution.”

A medical doctor and social anthropologist, Ramphele was a one-time partner of anti-apartheid leader Steve Biko, who founded South Africa’s Black Consciousness Movement and died in 1977 after sustaining brain damage during a beating while in police custody.

Her name regularly surfaces in the local media as a potential candidate to lead an opposition coalition to challenge the ruling African National Congress, which has lead the country since all-race elections in 1994.

“I’m 64,” she said. “It would have to be something very dramatic that makes me want to go into active politics.”

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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