Zimbabwe Mine Companies Said to Be Asked to More Than Double Pay

Mining companies operating in Zimbabwe and the main labor union in the industry have reached a deadlock in pay talks for 2014 after the workers group demanded that wages be more than doubled, two people familiar with the negotiations said.

The Chamber of Mines, which represents companies, and the Associated Mine Workers Union of Zimbabwe met on Nov. 26 and as a result of the deadlock, the dispute has now been referred to the government’s National Employment Council, the people said, asking not to be identified because the dispute hasn’t been made public. The council will meet on Jan. 15 and will probably refer the matter to an arbitrator, the people said.

The Harare-based union wants employers to boost pay to a minimum of $800 a month for diamond-mine workers, $700 for platinum mines and and $573 for gold and other mineworkers, while the Chamber is demanding an inflation-linked adjustment, according to position papers presented at the Nov. 26 meeting and obtained by Bloomberg. The current minimum wage for all mineworkers is $227 while annual inflation was 0.59 percent in October.

Zimbabwe has the world’s second-biggest platinum and chrome deposits after South Africa and has reserves of diamonds, gold, coal, nickel and iron ore. Companies that operate in the country include Anglo American Platinum Ltd. (AMS), Impala Platinum Holdings Ltd. (IMP) and Rio Tinto Plc. (RIO) Mining is the country’s biggest source of foreign exchange, with platinum group metals and gold leading tobacco as the nation’s biggest exports.

Risks Remain

In its position paper, the Chamber said that mining companies can’t afford to boost wages by more than inflation because of excessive taxes and falling commodity prices.

“Fueled by a decline in commodity prices, the overall income generated by the mining sector has declined across most minerals,” it said. “Risks remain tilted to the downside and emanating from easing international prices of minerals while long-term financing and energy constraints continue to bind.

The price of gold has fallen 25 percent this year, platinum has declined 12 percent and palladium, the biggest byproduct of platinum mining, has slipped 5 percent.

Growth in Zimbabwe’s mining industry slipped from 60 percent in 2010, the year after the country abandoned its currency in favor of currencies including the dollar to rein in record inflation, to an estimated 1.7 percent this year, according to the Chamber. Growth in the industry is forecast at 3.4 percent next year.

Plunging Production

The value of mineral production excluding diamonds fell to $1.402 billion in the first nine months of this year compared with $1.447 billion in the same period last year. Full-year production is forecast to fall 4 percent to $1.806 billion, the group said.

The value of chrome ore production is forecast to fall 45 percent this year while high-carbon ferrochrome output will decline 31 percent, the Chamber said. Gold revenue will decline 20 percent to $623 million while revenue from coal will slump 17 percent.

Still, the value of nickel production is expected to jump 29 percent, while platinum and palladium will post gains of 18 percent and 35 percent respectively.

‘‘The union believes that it’s fair and just for each sub-sector to remunerate its employees at rates that are proportional to its performance,” the union said in its submission.

Pay was raised by 15 percent for gold workers and 7 percent for other miners this year.

“Continued high wage demands made by the trade union threaten the survival of the industry,” the Chamber said.

Taxes amount to 17 percent of mine revenue and 60 percent of profit, the Chamber said.

“Of major concern are the indiscriminate or fragmented approaches by different government departments in levying charges to the mining companies, unjustified increases in the tax rates as well as the unpredictability of the mining tax regime,” it said.

To contact the reporter on this story: Godfrey Marawanyika in Harare at gmarawanyika@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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