The impact of disruptions in the mining sector this year will have a long tail, according to Peter Major, an analyst at Cadiz Corporate Solutions. While the immediate costs of the series of wildcat strikes were substantial, the ongoing and indirect costs could double the number, he said.
Anglo American Platinum (Angloplat) estimated lost platinum output at 191 359 ounces over the past eight weeks, Major said, and calculated the losses would be worth nearly $300 million (R2.6 billion), based on an average platinum price of $1 600 since September.
“And that is just from lost platinum – which is usually around 65 percent of the platinum mines’ total revenue.”
In addition, by-product metals were hit by the work stoppages and Major estimated these would push total Angloplat’s losses to $450m.
Major said that platinum production at Impala Platinum in the financial year to June was down to 1 448 million ounces from 1 836 million the previous year, after an illegal strike in January and February.
That would translate into a fall in platinum revenue of $600m and he said the losses for by-products would boost the number to $900m. In the case of Lonmin, platinum losses for the full year would probably be about $166m. By-product metals would push total losses to about $232m.
“But there are longer-terms costs,” Major said, “due to deterioration when operations come to a standstill, especially underground, where many sections of the mine actually cave in.”
In addition, a considerable amount of damage was deliberately inflicted by the striking workers. Major said it would probably be two to four months before the damage could be accurately quantified and probably six to nine months before operations could normalise.
Nicky Weimar, a senior economist at Nedbank, said real “value added” in the sector would fall by 12 percent in the third quarter. The number is a quarterly change, seasonally adjusted and annualised.
Elna Moolman, the South African economist at Renaissance Capital, said the mining strikes would subtract about 0.3 percentage points to 0.5 percentage points from economic growth in the second half. “The direct impact is expected to peak in the fourth quarter, when we expect growth to slow to about 0.8 percent,” she said.
“I am far more concerned about the impact the strikes will have on confidence, which in turn will be a key driver of private sector fixed investment and employment growth next year,” Moolman added.
Colen Garrow of Meganomics warned: “One of the first things employers do after strikes is trim costs, and trim the labour force.” So the already high unemployment rate of more than 25 percent was likely to rise even further.
Annabel Bishop, the chief economist at Investec, said 67 000 jobs could be lost in the broader mining industry.
Rating agencies are expected to downgrade South Africa’s sovereign credit rating – an event which would boost the cost of borrowing. Garrow pointed out this would hit people on welfare grants “since government has to borrow at more expensive rates”.
Weimar said South Africa desperately needed investment from abroad to fund the current account deficit. It is not clear how much workers have benefited from the settlements. Bishop said the outcome of Marikana was that workers lost about 12 percent of annual wages due to no-work-no-pay.
There are implications for policy. Bishop said: “The ANC elective conference at year-end could see proposals for government prescribed remuneration increases per sector; already government is proposing salary freezes for private sector executives from 2013.”