Johannesburg - The compromise reached by South Africa’s largest platinum producer, Anglo American Platinum (Amplats), with the Association of Mineworkers and Construction Union (Amcu) may come back to haunt it.
Analysts unpacking the decision on Friday expressed views ranging from Amplats having been pushed into a corner to that it had failed its shareholders, to speculation that chief executive Chris Griffith might have to pull up his socks.
“Amplats couldn’t do what they initially set out to,” said Albert Minassian, an analyst at Investec. “By the time they pleased everyone, there was little left.”
Griffith’s future as chief at Amplats was secure and he remained a good candidate for the position despite concerns that he had lost ground against the government and unions, analysts said.
“Chris is doing a good job. I don’t think they [Amplats] will find anyone better in the industry,” said Peter Major, a mining analyst at Cadiz Corporate Solutions.
The speculation over Griffith’s future came as the world’s biggest platinum producer signed a compromise deal with Amcu last week ending a 11-day strike that was called to challenge its plan to forcibly retrench 3 300 employees.
Amplats agreed to pay voluntary separation packages and will no longer forcibly retrench affected employees.
Instead, it plans to reduce contractors and redeploy staff to low-cost operations.
However, asset management firm Investec was not quite so charitable.
It said on Friday that the compromise Amplats had made on job cuts with Amcu showed how outside pressures prevented the producer from trimming costs to improve profit.
In a note to clients, Investec said Amplats “has, therefore, demonstrated to shareholders that it is unable to make the changes that are needed to strengthen its business”, and its problem “runs much deeper than” the 44 000 ounces of platinum output it lost because of the strike.
Analysts have argued that Amplats, an Anglo American subsidiary, had attained its cost-saving measures by cutting down on contractors, redeploying workers and offering voluntary exit packages instead of eliminating 14 000 jobs as it initially intended to do.
“I don’t think [Griffith’s] credibility has changed. Their [Amplats] plan has not changed much and they have altered and modified their plan.
“You can call it panel beating,” Major argued.
He added that Griffith was an experienced engineer and had backing from the board as he led Amplats, which was taking a lot of strain.
Amplats reviewed the business in response to lower expectations for platinum demand and other challenges that have eroded profitability.
Abdul Davids, the head of research at Kagiso Asset Management, noted that Griffith had been chief executive of Amplats for less than a year and “it is early days”.
Prior to joining Amplats, Griffith was chief executive at Kumba Iron Ore, the country’s biggest iron ore producer and a fellow subsidiary of Anglo.
“Griffith has been there for less than a year, he is in the honeymoon period.
“He has a clear strategy which makes sense,” Davids said.
He was referring to the company’s decision to terminate the 21-year-purchase agreement with Johnson Matthey, the biggest producer of automotive catalytic converters.
The strike ended after Amplats reached a compromise settlement to offer voluntary severance packages to 3 300 employees it wanted to retrench.
Of the employees to be retrenched, 1 250 will be retained for six months to perform reclamation duties at the Khuseleka 2 shaft and Khomanani 1 and 2 shafts, which are affected by the restructuring.
The agreement will also see 328 employees fill the jobs of contract workers once the contractors’ arrangements have been terminated.
Griffith told SAfm, the SABC’s English language radio service, on Friday that the strike had cost the platinum producer 44 000 ounces of platinum or “nearly R1 billion in lost revenue”.
“They were offered voluntary separation packages before the strike. They did not need to lose two weeks’ wages, they did not need to go on strike,” he told the radio station.
Earlier this year, Amplats received a backlash from unions and the government over its plans to restructure its loss-making Rustenburg operations into three operating mines through the integration of the Khuseleka 2 and Khomanani 1 and 2 shafts into the surrounding mines.
The Rustenburg operations were losing R1bn every six months, Griffith said.
The company later backtracked in May following objections from the government and demands from unions. The number of job cuts was lowered further to about 4 000 in August. In addition, it said 900 corporate employees were to be retrenched.
Mpumi Sithole, the Amplats spokeswoman, was not available for comment.
The Amplats share fell by 0.24 percent on Friday to close at R415 after reaching an intraday high of R418.69.