Johannesburg - Job cuts are a certainty in South Africa's platinum belt because of losses stemming from a 10-week strike in the industry, the chief executive of world No. 1 producer American Platinum said on Friday, raising the risk of further unrest.
Chief executive Chris Griffith said Amplats' Rustenburg operations, which account for close to 20 percent of group production, would not make a profit this year and would likely be first in line for job cuts.
Any threat of more job losses could provoke further turmoil in the platinum communities northwest of Johannesburg, as Amplats' plans last year to restructure and cut up to 14,000 jobs met with fierce union as well as government resistance.
The Anglo American unit was eventually forced to dramatically scale back its restructuring plans.
More unrest could also add to the political fallout from the strike, as President Jacob Zuma and the ruling African National Congress face general elections on May 7.
Workers led by the hardline Association of Mineworkers and Construction Union (AMCU) had downed tools in late January, demanding a doubling of basic wages.
Platinum producers have said they can ill afford such an increase and AMCU and the companies - which also include Impala Platinum and Lonmin - remain far apart on the issue.
Asked at a media briefing if he felt job losses were inevitable, Griffith said he did.
“This situation is resulting in an acceleration of a position where jobs will be lost,” he said.
“Whilst the strike continues, there certainly is a very real likelihood that we will be entering section 189 conversations with the unions,” he said, referring to South African labour regulation requiring companies to talk with labour before bringing in layoffs.
He said such a process might even be initiated before the strike ends, adding that the Union and Rustenburg mines were the first operations the company would be looking at.
AMCU officials could not be reached immediately for comment.
IMPACT ON PRICES
Griffith said Amplats was unlikely to declare “force majeure” on supplies to customers, an industry term for when a producer is unable to supply due to forces beyond its control.
“If we run out of metal we will go to the market to buy it ... to supply our customers,” he said, adding that output was still running at 60 percent of normal levels.
Taking in the combined production of the three companies, the strike has hit about 40 percent of global supplies of the precious metal, used for jewellery and emissions-capping catalytic converters in automobiles.
But its impact on prices has been limited as the market has bet above-ground stocks are adequate to supply demand.
The spot price, currently just below $1,400 an ounce, is 3 percent lower than it was on the eve of the strike, which started on Jan. 23.
Talks between the two sides collapsed over three weeks ago and there are still no direct negotiations, although a government mediator met AMCU on Wednesday and will meet with the companies on Monday in a bid to reboot the process.
AMCU earlier in March softened its stance for the first time, saying it wanted staggered increases to bring the basic entry wage to 12,500 rand ($1,200) a month in three years' time, instead of immediately.
That would be more than double current amounts. The companies are offering increases of up to 9 percent.
The trio of producers has so far lost around 10.5 billion rand ($990 million) in revenue, while 4.7 billion rand in employee earnings are gone, according to an industry website. http://www.platinumwagenegotiations.co.za/home
No other single mining strike in South Africa has approached this scale since the end of apartheid in 1994 and the central bank has said its protracted nature remained a key threat to economic growth, which it now forecasts to be 2.6 percent in 2014 from 2.8 percent previously. - Reuters