Platinum Producer Pay Offer Leaves Gap With Union DemandsPaul Burkhardt
A pay offer by the three largest platinum producers to try to end a three-month strike fails to meet union demands, suggesting a resolution may be weeks away, according to SBG Securities Ltd. and Investec Asset Management.
The Association of Mineworkers and Construction Union is meeting with Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc today to hear them set out the case for the offer, President Joseph Mathunjwa said by phone. The talks are due to continue tomorrow, Charmane Russell, a spokeswoman for the producers at Russell & Associates in Johannesburg, said in an e-mail.
The companies say the South African strike has cost them 14.2 billion rand ($1.3 billion) in sales, and workers 6.3 billion rand in wages.
Amplats, as Anglo Platinum is known, and Impala on April 17 proposed raising the cash portion of wages including bonuses and living allowances to 12,500 rand a month by 2017, or as much as 10 percent annually, from 9 percent before. That’s short of the union demand for monthly basic pay excluding cash bonuses of 12,500 rand within four years. South Africa’s inflation rate was 5.9 percent in February.
AMCU leadership last week wasn’t happy with the companies’ proposals, complaining that they fell “far short” of its demands, Impala spokesman Johan Theron said today by phone. The union hasn’t yet taken the offer to its members.
“I don’t think we’ve bridged that gap between basic pay and guaranteed cash components,” Hanre Rossouw, commodities chief for frontier and emerging markets at Investec Asset Management, said by phone. The strike may last until after South Africa’s May 7 presidential election, Rossouw said. “For AMCU, if there’s any political platform that they want to use, it would be senseless to give it up before elections,” he said.
The union says it isn’t affiliated with political parties.
The chief executive officers of the three companies and the Department of Labor were expected at the meeting today, Russell said.
While third-biggest producer Lonmin “is party to the offer,” it declined to comment on details, Sue Vey, a spokeswoman for the company, said in an e-mail.
“It’s nowhere near what AMCU obviously are after,” said Justin Froneman, an SBG analyst. “Fatigue on the ground is also starting to set in and this is also becoming quite real now in terms of it biting. Everyone is getting quite worried.”
“It is clearly the biggest private sector strike and far and away biggest mining sector strike” in South Africa, said Andrew Levy, who heads his own labor research company and advises multinationals.
The damage caused by the labor action is already making companies reconsider their operations in some areas, Impala’s Theron said.
The strike has had a “spillover effect,” hurting business in areas such as Rustenburg where mining provides about half the jobs and 60 percent of the economy, Thapelo Matebesi, a spokesman for the local municipality, said April 2.
“My sense is that they’re still a long, long way apart” and a deal before elections would be surprising, SBG’s Froneman said. “As soon as we do reach a settlement, I think you’re going to find that a lot of restructuring takes place and that’s obviously going to affect labor in a fairly dramatic way.”
Platinum dropped 0.2 percent to $1,401 an ounce at 5:28 p.m. London, trimming the increase this year to 2.2 percent.
“Mathunjwa needs a face saver” if the 12,500 rand basic wage demand isn’t met, Levy said, referring to the AMCU leader. That could take the form of a one-time payment for miners to return to work. He also said it would be wise for AMCU to negotiate a clause that would limit or delay companies cutting jobs.