After years of bleeding cash in the face of depressed prices, soaring costs, and frequent eruptions of community and labour unrest, South Africa’s platinum sector has turned a corner: Some companies are making money again — lots of it — and are rewarding investors with dividends.
That may be a red rag for unions in upcoming wage talks, but they will charge it at their peril. On the platinum belt, capital has the upper hand over labour and it also has space for olive branches and compromise.
For starters, the industry can probably afford, for the first time in years, above-inflation wage hikes. Such increases in the past helped push many mines into the red. But current inflation rates are low while profits are being made.
In March, the main CPI gauge was 4.5%, so 2019’s settlements could conceivably be in the single digits — a win for both sides. (Last time round inflation was more than 6% and had been much higher than that during previous platinum wage talks). And food price inflation was only 3.1% in March. Your typical mineworker has eight dependants, so pap on the table consumes much of their income. Muted food inflation is likely to mute wage demands (though there are price pressures in the pipeline).
Unlike gold, which pursues collective bargaining, platinum wage talks are conducted on a company-by-company basis. This was fertile ground in the past for militancy.
The Association of Mineworkers and Construction Union (Amcu) exploded on to the platinum belt in 2012 in part by going to workers from each company and saying, in effect, that “we can get a better deal” for you. But the industry has since changed almost beyond recognition and it is instructive to see where each company stands going into the talks, which should begin in the next couple of months.
Let’s start with Anglo American Platinum (Amplats), the world’s top producer of the white metal. Amplats has made a dramatic and profitable pivot to mechanisation, selling off its labour-intensive shafts around Rustenburg to Sibanye-Stillwater — effectively shedding thousands of its Amcu members in the process.
In 2018, the company paid a dividend for the first time in seven years as full-year earnings more than doubled. In 2019 its headline earnings almost doubled again and 40% of its headline earnings were paid out as dividends. The company also reported a strong balance sheet with net cash of R2.9-billion — meaning it can weather a strike. And its Mogalakwena mine, the company’s main cash spinner, is a fully mechanised and open pit operation where most union members belong to the National Union of Mineworkers (NUM).
Impala Platinum has also returned to decent profits. Its latest interim results unveiled in February showed an over 10-fold increase in headline earnings (off a low base, admittedly) and its debt fell to R967-million from R3.8-billion. Financially, it is also in a much better position to weather a storm than it has in the past.
Northam Platinum signed a three-year wage agreement with NUM in October at its main producing mine so it is off the table. Perhaps as a sign of things to come elsewhere, that was for annual increases of 7% for the lowest-paid workers. In 2017, Sibanye-Stillwater also reached a three-year wage agreement at its Kroondal operation (where Amcu is a majority) which also saw annual hikes of about 7%.
Lonmin will likely be acquired by Sibanye-Stillwater soon, which will leave the latter as the last big producer in the crosshairs.
This is where things could get interesting. There is plenty of bad blood between Sibanye-Stillwater ’s blunt-speaking CEO Neal Froneman and Amcu’s charismatic leader Joseph Mathunjwa, a man who mixes an intense Christian faith with strident calls for class conflict.
Mathunjwa has compared Froneman to colonial cowboy Cecil Rhodes. Froneman, for his part, has accused Mathunjwa of pursuing a political agenda to entrench his position. Both men, who in their very different ways have dominated South African mining in recent years, are girding for a showdown.
Sibanye-Stillwater has shored up its balance sheet with the placing of R1.8-billion in new shares. And much of Sibanye-Stillwater’s PGM profits are now coming from its American operation, the Stillwater in its name, which is primarily a palladium play. And palladium, used more as an emissions-capping catalyst in petrol engines, has been on a tear while platinum has been in the doldrums. That highlights the advantage, from the boardroom perspective, of diversifying away from South Africa’s toxic social and labour environment.
According to figures provided to Daily Maverick by Sibanye-Stillwater, Amcu at the end of 2018 claimed 64% of its 18,700 employees as members, down slightly from 65% the previous year. That’s not much of a change, but it does suggest Amcu may have reached a plateau after its spectacular rise.
NUM, by contrast, saw its ratio at Sibanye-Stillwater nudge up to 17% from 15%, with its overall numbers rising to 3,158 from 2,859. That’s also not much of a change — except when one considers Amcu’s reputation, which it has always denied, of using violence and intimidation to swell its ranks and keep its rank and file in line. This indicates that parts of the platinum belt that were once NUM no-go zones are again up for grabs.
Amcu is also smarting after its poorly conceived strike at Sibanye-Stillwater’s gold mines. When it violently swept into the gold sector in 2012 and 2013, dislodging NUM from many shafts, it had momentum on its side after its triumph in platinum and the searing memory of the Marikana massacre.
It does not have that kind of momentum after its roll of the dice in gold failed.
Amcu embarked on what turned out to be a five-month strike there to press for wage demands agreed by other unions. In the end, its 14,000 striking members had to accept that agreement with a token R4,000 cash payment.
It remains to be seen if its platinum members will be tempted to follow that path of folly — especially if the companies are in a position to sign off on above-inflation wage hikes. DM