South Africa possesses the world’s largest reserves of platinum, a commodity with particularly favorable prospects.
It’s the most mineral rich country in the world, yet the mining industry is encumbered by labor unrest in a nation wrought with staggeringly high unemployment, according to a report commissioned by Citigroup in 2010.
Within South Africa’s mining sector, violent conflicts among workers, management, government and rival labor unions have detracted from the country’s growth, devalued its currency, and, perhaps more importantly, called into question the integrity of its methods and systems for labor representation.
Union Violence at Marikana
Mawethu Khululekile Stevens, the North West regional leader of the Association of Mineworkers and Construction Union (AMCU), was allegedly shot dead by four unidentified assailants while watching a soccer match in a Photsaneng tavern. This incident was followed by the murder of a local National Union of Mineworkers (NUM) leader at Lonmin’s Marikana platinum mine, and more recently by the killing of an AMCU shop steward.
Such are the reverberations that continue to emanate from last August’s Marikana miners’ strike, including the infamous Marikana massacre of Aug. 16, during which 34 workers were gunned down by police. The current situation appears to be that of a bloody turf war between two labor factions and would, therefore, suggest similar origins in last year’s strikes. However, a closer look reveals a different story – one of union members who lost faith in their leadership.
In a Daily Maverick article, Jared Sacks notes that the Marikana massacre was a culmination of events between strikers and NUM management. Miners from various Lonmin mines, primarily rock drill operators, wanted a higher hourly wage. Yet, when denied support from NUM leaders, the workers took matters into their own hands and embarked on a wildcat strike; that is, one organized without union representation.
On Aug. 11, a group of NUM leaders allegedly fired on protesting strikers without provocation, resulting in the death of two workers. The strikers, during the following week, proceeded to arm themselves with machetes and clubs; police were called on to the scene, and, as the saying goes, the rest was history.
Miners naturally became disillusioned with leadership of the National Union of Mineworkers, who appeared to have become too closely aligned with management and government. NUM is the largest affiliate of the Congress of South African Trade Unions (COSATU) and, thus, is vicariously allied to the African National Congress (ANC). BBC News points out the particular instance of Cyril Ramaphosa, a former NUM General-Secretary and Lonmin board member during the time of the Marikana strikes, who has since been promoted to an ANC deputy leader.
NUM members began to leave, finding refuge in the Association of Mineworkers and Construction Union. The AMCU, in consequence, has stripped the NUM of its majority at Lonmin and now represents over 70 percent of the company’s employees. The Labour Court has ordered that, if the NUM cannot regain a majority by July 16, then it must consolidate its operations into but one centralized office.
In spite of its demotion, the NUM, along with other unions, still represent a high percentage of more skilled laborers, on behalf of which it holds separate collective bargaining rights. The AMCU, however, insists on serving as the sole collective bargaining agent for all Lonmin employees, and has threatened to strike yet again if this demand is not met.
Economic Impact
The mining industry in South Africa makes up approximately 60 percent of the country’s export earnings as well as 6 percent of its total GDP. Hence, labor disputes in the sector have served as a drain on South Africa’s larger economy. The effect has been exacerbated further by the U.S. Federal Reserve’s perceived fading commitment to monetary easing. Chairman Ben Bernanke stated that, if the U.S. economy continues to improve, then the Fed could trim its use of open market bond purchases.
In early June, South Africa’s Reserve Bank warned that it might cut its annual GDP growth outlook to a meager 2.4 percent, reported Business Day. The country’s first quarter growth clocked in a 0.9 percent, in contrast to the 1.9 percent that had been previously forecasted.
These same factors have also taken their toll on the rand, which in May, reached a four-year low. The rand has fallen almost 18 percent against the dollar so far this year. This depreciation has stripped the Reserve Bank of much of its monetary ammunition. Although South Africa’s unemployment rate looms above a disturbingly high 25 percent, a reduction in interest rates might similarly render the country vulnerable to high inflation risks. Almost three months ago, governor Marcus corroborated this point, stating, “Monetary policy is not the panacea for growth… [And] is no substitute for structural reforms that are needed” (Mail & Guardian).
Future Prospects
In a recent news conference in Tokyo, South African President Jacob Zuma called for all stakeholders in the mining industry to engage in a dialogue and “find a way to deal with this (labor) matter” (Global Times). However, Zuma appears biased in favor of management, arguing that workers must be reasonable in their wage demands and take into account the effects of the global economic crisis (WSJ). Zuma cites the economic downturn as a major source of labor tension in South Africa. Nevertheless, there exists a wealth of evidence that suggests an extremely profitable future for the platinum industry.
Al Bredenberg, in an article for Industry Market Trends, drew attention to the expanding global auto industry and the corresponding positive effect this will have on demand for platinum-based catalyst converters, which reduces the toxicity of combustion emissions. According to the Associated Press, vehicle sales for 2013 are projected to reach 15.5 mil1ion in the U.S. — the highest amount in six years . Roughly 175,000 jobs have reportedly been added to the sector in May alone.
In the Chinese market, auto sales have risen by 12.6 percent year-on-year during the first five months of 2013, a marked improvement from that of the year prior, China Post reported. According the Transparency Market Research, the larger Asia-Pacific region accounts for 33 percent of the total demand for catalytic converters.
With that being said, South Africa is responsible for 78 percent of the world’s platinum production. Thus, if the nation can find a way to resolve its labor disputes, such as those that have ravaged Lonmin, it stands to reap enormous gains from the commodity’s expanding market.