South African Unions Reject Gold Producers’ 4% Wages Offer

South African trade unions representing gold-mine workers dismissed a proposal to increase wages by 4 percent, increasing the prospects of a further deterioration in labor relations.

“We totally reject it,” Lesiba Seshoka, a spokesman for the National Union of Mineworkers, which represents 64 percent of gold-mining employees, said by telephone yesterday. “The chamber is setting the scene for confrontation.”

The Chamber of Mines, which negotiates on behalf of gold mining companies including AngloGold Ashanti Ltd. and Sibanye Gold Ltd., offered employees a 4 percent raise in basic pay and housing allowances that would bring guaranteed wages for entry-level workers to 8,900 rand ($900) per month. Labor groups and the chamber will reconvene on July 24 to discuss the offer, which is below South Africa’s 5.6 percent inflation rate.

“In terms of the spirit of negotiation to find a solution, this is not an offer that we can take to our members,” said Franz Stehring, head of mining at trade union UASA, which represents 6.9 percent of gold employees.

The Association of Mineworkers and Construction Union, which represents 17 percent of miners, is awaiting a better offer, General Secretary Jeff Mphahlele said by phone. The AMCU demanded that underground workers’ pay should be more than doubled with a minimum entry-level salary of 12,500 rand a month. The NUM is asking for wage increases of as much as 61 percent.

Dire Consequences

The consequences of companies acceding to the unions’ demands would be “dire,” Elize Strydom, chief negotiator at the Chamber of Mines, said on a call with reporters. “The future of the industry is at stake.”

The gold price has dropped 32 percent from its high of $1,900 per ounce in September 2011, including a record three-month fall in the second quarter. About 60 percent of gold-mining operations are unprofitable at the current gold price of $1,285 per ounce, with the figure increasing to 100 percent if capital expenditure is included, Strydom said.

“We need to do what we need to do to be responsible, be good leaders, look after our industry, and look after our employees’ best interests,” she said. “The offer we made was never meant to be confrontational.”

AngloGold fell 2.9 percent to 121.75 rand at 9:28 a.m. in Johannesburg today, the lowest intraday level since April 24, 2001. Sibanye Gold dropped 1 percent to 8.22 rand.

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