Kevin Crowley and Paul Burkhardt
PRODUCTIVITY should be included in the wage negotiations with employees due to begin in about April, the four biggest gold producers in South Africa said.
AngloGold Ashanti, Gold Fields, Sibanye Gold and Harmony Gold have been trying for at least a decade to link pay increases to efficiency gains. After platinum workers won basic wage raises of as much as 20 percent following a five-month strike last year, they say a productivity link is needed more than ever.
“The year 2015 is when both sides, the workforce and the companies, have to say, ‘we share in the risk, burden and upside of productivity’,” AngloGold chief executive Srinivasan Venkatakrishnan said. “Everybody is obviously concerned about the disruption which happened in platinum coming across to gold.”
A wage agreement linked to productivity would mean a portion of employees’ pay would be dependent on the performance of the mine or company. The industry’s current deal, which includes R5 400 a month basic pay for entry-level workers, is due to expire in June.
A productivity-linked agreement may help companies offer starting pay closer to the R12 500 a month demanded by the Association of Mineworkers and Construction Union (Amcu) when it led the record-long platinum strike last year.
That said, such an accord might be difficult to reach in practice. The gold mining industry conducts wage negotiations through collective bargaining, where an agreement between the largest companies and majority union is applicable to all employees. That makes productivity clauses more complex to agree on, according to Andrew Levy, the managing partner of labour market consultancy Andrew Levy Employment.
“You can’t possibly talk about it” through collective bargaining, he said. Worker efficiency can differ at each mine, depending on hard-to-measure factors such as ore grade, machinery used and extraction techniques.
Still, the subject had to be addressed, Levy said. “If mining is to go ahead and prosper and transform itself, it’s going to have to happen.”
Companies will redouble efforts to introduce such measures into wage talks this year, according to Gold Fields chief executive Nick Holland.
“Clearly there’s a greater imperative than ever to try and do something innovative,” he said. “That helps to grow the pie for both the companies and the employees involved.”
Sibanye, the biggest producer of gold in South Africa, is keen to start talks with unions about performance-based pay before the formal wage negotiations begin in about March. “Productivity has to be part of the mix,” chief executive Neal Froneman said.
AngloGold’s Venkatakrishnan is keen to push efficiency targets because the company’s local mines, which account for about a third of its output, are its least productive on a per-worker basis. The company is the world’s third-largest gold producer and has operations in Australia, US, Africa and South America.
Productivity measure
Productivity at its local mines was less than 5 ounces per total employee costed (TEC) in 2013, according to AngloGold’s annual report. Its Sunrise Dam Gold Mine in Australia posted 50.2 ounces per TEC, while Cripple Creek in the US had 37.4 ounces per TEC. Ghana’s Iduapriem had 18.4 ounces per TEC.
South Africa’s relative low productivity per worker was partly caused by its low-grade ore, ageing operations and mining method that used more people than machines, Levy said.
“It’s always been easier to replace or to add an extra pair of hands because labour is cheap and not to teach the person to do the job in the first place,” he said.
The National Union of Mineworkers (NUM) and Amcu declined to comment on the companies’ productivity pledge, saying they did not want to pre-empt talks with their members over this year’s wage demands.
Worker representatives
The NUM represents 57 percent of the country’s 100 000 gold employees, while Amcu represents 25 percent, according to the payroll statistics collected by the Chamber of Mines last month.
Two years ago, when an 8 percent basic wage increase was agreed on, the NUM spoke for 65 percent of workers and Amcu 19 percent.
The rise of Amcu will make negotiations more complicated this year, despite a collective-bargaining rule that means any settlement agreed on by the largest union applies to all employees, according to Sibanye’s Froneman.
“Last time, Amcu was a much smaller union,” he said. “That’s not the case this time. They are a material player in the industry and we need to acknowledge that
.” – Bloomberg