The African Review
16th March 2022
The Johannesburg-based miner Sibanye-Stillwater (JSE:SSW, NYSE:SBSW) has been struggling with labour relations at its South African gold mines for some time, and unfortunately the situation has not yet fully resolved. Workers from four unions have been demanding pay rises since December, but the company, which operates some of the highest-cost gold mines in the world (with costs of $1,749/oz in 2021), is understandably wary about adding too much to its costs. This is especially true when some of the shafts at the deep mines are reaching the ends of reserves, and restructuring is on the horizon to keep life-of-mine plans on track.
The latest information is that two of the unions, Solidarity and the United Association of South Africa (UASA), have accepted the company’s sixth wage offer of 5% per year for miners, artisans, and officials and 800 rand (around $52) per month for unskilled or semi-skilled employees over three years. That comes somewhat close to the 6% per year or 1,000 rand per month increase that the unions had been demanding, with the company CEO Neal Froneman saying when it made the offer on the 4th of February that wage increases above inflation were “not sustainable” and would not be considered.
Solidarity had already accepted that offer at the beginning of March, when an overwhelming number of its members voted in favour of it. It therefore split from the coalition of unions, who were negotiating together for the first time, when the remaining three (UASA, the Association of Mineworkers and Construction Union (AMCU), and the National Union of Mineworkers (NUM)) rejected the offer and voted in favour of strike action.
The strike started last Wednesday, with work stopping at three gold mines in South Africa: Driefontein, Kloof and Beatrix. In response, the company instituted a lockout, with all work but essential services such as pumping water comping to a halt. The lockout included members of the Solidarity union, which had accepted the company’s wage offer, and the union said it would contact the Labour Court urgently to obtain an interdict against the lockout. Sibanye said that it considered it was negotiating with a coalition of unions, which is why the lockout applied to members of all unions, and that it would defend itself against the court action.
That changed on Monday, however, with UASA members agreeing to accept the company’s offer as well. As a result, the company said that UASA and Solidarity members would no longer be locked out of their workplaces, while NUM and AMCU members are still on strike and going without pay. Neal Froneman, the Sibanye CEO, said he was hopeful that the holdout members of the disintegrating coalition would soon accept the offer as well.
It would be well if they did, because with the gold price surging, Sibanye is missing out on an opportunity for profit every day that its mines are shuttered. With such high costs of production at its old, deep mines, it really needs to take advantage of moments like this when its products can be sold at a premium, but that is impossible if workers can’t or won’t access the sites. The nightmare scenario is a repeat of a 2019 strike by AMCU workers that rolled on for five months, costing the company an estimated $114 million and 110,000 oz. of lost output, and even more alarmingly left nine people dead in associated violence. With the same union one of the holdouts on the current deal, Sibanye must be feeling a bit nervous.
The fact that this issue re-appeared as soon as the previous agreement expired is a sign that something it out of balance in the mining industry in South Africa. I’ve been down one of the country’s super-deep mines, and I can promise you it is hard, horrible, dirty work in loud, cramped and hot conditions. Miners certainly deserve fair recompense just for putting up with that. But at the same time, companies like Sibanye, whose operations are incredibly high-cost and therefore low-margin, feel they simply can’t afford to be overly generous with wages while remaining competitive. Personally, it wouldn’t surprise me too much if, in certain parts of the world, a phobia developed around deep underground operations, even more than exists at present. Projects that require kilometres of shafts could become increasingly hard to fund, with the exception of metals like platinum where there is often no choice. Those projects are only attractive when the gold price is riding high, like now, but even in those optimal market conditions, Sibanye’s labour struggles show that deep underground gold mining is rife with challenges.
Don't forget to check out this week's companion piece to the regional newsletter! David has given you a thorough overview of above-ground risks for mining in Africa.