So much for Africans being interested in working for “$2 a day” as Gina Rinehart tried to claim in that video for the Sydney Mining Club a couple of months ago. And so much for “sovereign risk” in Australia from tax and other issues. The strikes sweeping the South African mining industry at the moment and crippling Africa’s biggest and most advanced economy give the lie to much of the nonsense our own mining industry subjects us to about how tough they’re doing here under the Gillard socialist government.
The rising pace of industrial action has seen South Africa’s currency slump to a three year low overnight as the stoppages starting appearing in the wider economy. An estimated 100,000 miners are on strike, thousands more truck drivers and others in transport, including rail, are threatening to stop work. Reuters reported overnight that South African local government workers are now threatening to strike as well.
The rand has fallen nearly 9% against the US dollar this month as industrial action has escalated, including 30 miners shot dead by police at a strike at a platinum mine owned by Lonmin in August. It seems no one in South Africa wants to work for the $2 a day. The ruling African National Congress has a leadership poll in December and the strikes (legal and illegal) are seen as part of the lead up to this ballot, as well as a protest from workers against what they see as weak leadership from the main mining union and the government.
Part of the pressure on the government and the ruling party are proposals from the ANC’s youth wing for the takeover of up to 50% of the country’s mining industry. Now that’s what you would call “sovereign risk”.
Economic growth in South Africa has slowed to an annual rate of 2.5%, nowhere enough to cut unemployment. It will go lower as a result of the strike activity and the loss of production and activity and output, on top of the impact of softening global commodity prices.
Around 12,000 workers at Anglo American Platinum (Amplats), a subsidiary of Anglo American are also on strike, and overnight rejected the company’s firing of them on Friday. Anglo Platinum is the world’s largest platinum producer.
Last week, South Africa’s truckers went on strike, slowing transit of goods, while port and railway workers may join in. That saw Royal Dutch Shell declare force majeure on its oil, petrol and delivery commitments for other products across the country due to the strikes. Estimates are that South Africa has lost mining production valued in the hundreds of millions of dollars, amid growing reports of investment funds leaving the country and projects being halted.
All up, at least 22 mines have been shut because of the growing strike activity. There are fears the National Union of Mineworkers has lost control of its members in the country’s gold, platinum, coal and iron ore mining sectors. Friday’s sacking of the 12,000 workers by Anglo Platinum is seen as provocative and useless; it was one in five of Amplats workforce and is clearly unworkable if the company wants to continue mining. It can’t replace the sacked workers and needs them to keep production flowing.
The unrest began at Lonmin on August 10, and the London-listed company resolved its six-week strike only after agreeing to lift wages by up to 22%. Other miners such as Xstrata, Gold Fields, Harmony and AngloGold Ashanti have all been caught up. AngloGold stopped all mining in the country on September 25 after 24,000 of its 35,000 employees went on strike. AngloGold has said the strikes are costing it 30,000 ounces of gold production a week, worth more than $US5 million. The strikes have lifted platinum prices, but gold prices have weakened since late last week.
Arcelor Mittal, the world’s biggest steelmaker, said its South African plant has been impacted by the strike at Kumba Iron Ore, a subsidiary of Anglo which says the strike will cost it 120,000 tonnes of iron ore a week, worth around US$12 million.
Reuters and other media outlets say there have been strikes in the country’s coal and diamond industries as well. Around 20,000 transport workers have restricted the flow of coal to the country’s power stations, raising the possibility of brownouts or blackouts if supplies run short and power has to be rationed or curtailed.
And unrest and “sovereign risk” isn’t confined to South Africa. In Zambia, a country which Tony Abbott claims is safer for investment than Australia, a recurrence of violence at a Chinese-run mine saw the death of one Chinese manager and injuries to several others. The Zambian government doubled copper royalties in its 2012 budget and in July was forced to double mining wages to US$200 a month.
So much for Gina’s fantasy of happy Africans toiling in the mines for a pittance.
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