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South Africa Mining Pact Unlikely to Quell Unrest, Eurasia Says

A government-led agreement designed to bring stability to South Africa’s mining industry will do little to deter strikes or temper wage negotiations, according to analysts.

The Association of Mineworkers and Construction Union, the biggest labor group at the world’s three largest platinum mines, yesterday refused to sign the deal.

“Even if AMCU signs on later, the pact does little to resolve the turf war between rival unions or moderate wage demands, and labor unrest remains likely during upcoming negotiations over recognition and wages,” Mark Rosenberg, a senior Africa analyst at Eurasia Group, wrote in a note to clients.

Labor rivalry spurred President Jacob Zuma to appoint Deputy President Kgalema Motlanthe to broker a solution by hosting the talks between the unions and companies. Disputes have led to three worker deaths since May and cut 0.3 percentage point off growth this year. That followed the killings of at least 44 people, including 34 killed by police in one day, near the South African operations of Lonmin Plc (LMI), the third-largest platinum producer, last year.

AMCU leaders left yesterday’s meeting in Pretoria, the capital, without signing. Other labor organizations, mining companies, and government departments signed the pact.

“There’s a high probability we’re going to see strikes across the mining sector simply because the guys want money and the operators can’t afford to give it,” said Maurice Mason, a London-based mining analyst at Peel Hunt LLP.

Objections Raised

The rand depreciated 0.2 percent 10.0688 per dollar at 9:58 a.m. in Johannesburg, extending its drop this year to 16 percent, the most among 16 major currencies tracked by Bloomberg.

“We’re leaving,” AMCU President Joseph Mathunjwa said yesterday when asked whether the union would sign the accord.

The union raised objections over the dismissal of about 1,000 of its members at Glencore Xstrata Plc (GLEN)’s South African chrome mines and the loss of jobs at the Vaal River operations of AngloGold Ashanti Ltd. (ANG) this year, Lesiba Seshoka, spokesman for the rival National Union of Mineworkers, said at the meeting. The AMCU also spoke out against the NUM’s Labour Court application on the validity of membership forms at Lonmin, and asked to consult with members on the pact, he said.

“They’ve got other issues but they’re raising them at the wrong platform,” Seshoka said.

A previous attempt to restore peace in mines in the nation, which has the world’s biggest known reserves of platinum, failed even as all unions, including the AMCU, and the biggest mine operators agreed to the pact, which Susan Shabangu, the country’s mines minister, brokered in February and March.

No Option

“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,” Bheki Sibiya, chief executive officer of the Chamber of Mines, which represents companies in the industry, wrote July 2 in the Johannesburg-based Business Day newspaper.

Falling precious-metal prices and higher costs have squeezed South Africa’s gold and platinum producers, who are facing demands from labor unions to as much as double wages for entry-level workers. More than half of South Africa’s gold and platinum operations are in loss-making positions, Sibiya said.

Yesterday’s pact sets out processes that will see that all parties working together to ensure stability in mines, according to a statement handed to reporters in Pretoria.

The “government will act decisively to enforce the rule of law, maintain peace during strikes and other protests relating to labor disputes, ensure protection of life, property and the advancement of the rights of all,” it said.

The AMCU’s leadership asked to be given the chance to consult with its members, Motlanthe said.

“They have nothing against the framework,” Motlanthe told reporters, referring to the AMCU. “It is theirs as much as it is ours. They had no preconditions. Investors are not interested in this document, they’re interested in a stable mining industry.”

To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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