Spreading labour unrest ‘may damage economy’

The question regarding the greater effect of a labour driven economy comes back to how sustainable it is. Constant strikes for higher wages and less work must have a negative effect on the overall picture. Here is a article from the Sunday Times discussing that issue.

by Loni Prinsloo and Jana Marais , September 16 2012, 11:39
Mineworkers take part in a march at Lonmin’s Marikana mine on Monday. Picture: REUTERS


GOVERNMENT’s inability to contain and resolve unrest in the mining industry is “extremely concerning” to investors and will cause untold damage to the economy if action is not taken urgently, a range of stakeholders said this week.

On Friday, there was no prospect of resolving a strike at Lonmin, now in its sixth week. Anglo American Platinum, Xstrata and Aquarius Platinum have suspended operations in the Rustenburg area, while Gold Fields was negotiating with workers to resolve an illegal strike at KDC West near Carletonville. Impala Platinum, which faced a six-week illegal strike at the start of the year, sending mining production plummeting by 16.8%, said its mines were operating normally.

The spreading labour unrest may be “extremely damaging to our economy”, Finance Minister Pravin Gordhan said at a briefing on Friday.

Peter Leon, partner at Webber Wentzel, said the situation is “extremely negative for investor sentiment, coming on top of the unresolved nationalisation debate as well as the regulatory, infrastructure and cost issues bedevilling the industry”.

Konrad Reuss, country managing director for ratings agency Standard and Poor’s, said it will be “critical” to see government’s policy response with regard to public finances, labour regulations and mining-industry regulations.

The agency, along with Moody’s and Fitch, has downgraded South Africa’s outlook over the past 10 months because of political and socio-economic risk. This means there is a one in three chance that the rating may be downgraded, Reuss said.

Increasing regulatory intervention in the mining industry, as threatened by Mineral Resource Minister Susan Shabangu in a scathing attack on mining companies in the Financial Times, and renewed talk about nationalisation will increase the risk of a downgrade, Reuss said.

Speaking at the opening of Royal Bafokeng Platinum and Angloplats’ new R12-billion Styldrift mine near Sun City on Friday, RBPlat CEO Steve Phiri said the project “creates hope while the country is on fire”.

“We are in crisis. Not just on the mines, this is a national crisis,” Phiri said. “Certain ministers have been quick to pass the buck onto mining companies with the recent unrest. There have been service-delivery protests all across the country, not just where you find the mines. This is a national issue.”

SA has already been struggling to attract investment in the mining sector. During the previous commodities boom, between 2001 and 2008, China, Chile, Peru, Brazil, Australia, Colombia, India, Russia and even Venezuela managed to enjoy growth in the value added by mining in real terms. SA achieved a contraction of 1% over the period.

The mining industry employs about a million people and contributes about 8% to GDP.

Large diversified miners like BHP Billiton and Rio Tinto have decreased their exposure to SA in recent years, while the country’s gold miners are exploring and building gold mines in countries ranging from Papua New Guinea to Kyrgyzstan. AngloGold Ashanti has publicly stated that it is considering splitting its business to give investors the option to only invest in its non-SA operations.

Harmony, which still mines most of its gold in South Africa, said it has just spent more than a week meeting investors in the UK and US, “and they are getting concerned about the viability of their investments in SA”.

Lou van Vuuren, CEO of Great Basin Gold, which suspended operations at its Burnstone mine in Mpumalanga this week, said miners need foreign investment as local capital markets do not have the “depth” to fund requirements.

Other market watchers say there should be a distinction between labour-intensive platinum and gold mines, which investors are shying away from, and areas like coal and iron ore, where fewer workers are needed and unions tend to be less militant, and which are seen as more attractive.

* This article was first published in Sunday Times: Business Times

via Spreading labour unrest ‘may damage economy’ | Business Times | BDlive.

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