The Association of Mineworkers and Construction Union, the majority union at Lonmin, Amplats and Impala Platinum mines — the country's largest platinum producers — has initiated negotiations with exaggerated demands, as was expected. The union demanded a 150 percent pay raise for entry-level positions. These high demands are not only a challenge to the mining industry; they are also a direct challenge to rival unions such as the National Union of Mineworkers, which had requested a 60 percent wage increase for entry-level positions, although demands overall amount to a more standard increase of about 15 percent.
The National Union of Mineworkers, in return, has initiated legal procedures to reverse Lonmin's recognition of the Association of Mineworkers and Construction Union. The latter represents 70 percent of workers at Lonmin, while the former only represents 20 percent of workers at Lonmin specifically, even though it is the largest union in the rest of South Africa's mining industry. Over the last few years the Association of Mineworkers and Construction Union, which historically had focused on coal and construction workers, was able to increase its foothold in the platinum belt by manipulating wage negotiations. Impala Platinum offered the National Union of Mineworkers a 10 percent wage increase to rock drill operators, a dangerous job that is critical to platinum mining, but the National Union of Mineworkers rejected it in an attempt to get all wages increased. In response, the Association of Mineworkers and Construction Union sought higher wages for rock drill operators and its membership rose. Prior to 2012, the Association of Mineworkers and Construction Union's foothold in the gold industry was negligible, but after workers saw it fighting for higher wages, it now represents 10-20 percent of the workers. It is likely that although the National Union of Mineworkers is much stronger, the Association of Mineworkers and Construction Union will seek to penetrate the gold sector through its negotiations.
On June 26, the South African government, mining companies and unions are set to ratify a Sustainable Mining Agreement that sets out guidelines on how to manage relations between the mining industry and major unions, as well as ways in which the government will facilitate these relations. It is not a legislative document but a contract between the government, mining industry and unions to conduct themselves in a fair manner, to promote cooperation and to protect the strategically vital mining industry and its employees.
The document introduces very few elements that go beyond ensuring fair and civilized negotiations, and therefore is not expected to drastically change the way wage negotiations are conducted. The signing of this document signals that mining companies and labor unions recognize that the African National Congress will continue to intervene significantly in labor negotiations if the parties cannot come to agreements in a peaceful manner. However, this does not rule out the use of strikes as a negotiation tactic.
The problem is that many of the underlying causes of tense labor negotiations are systemic, not political. This is most pronounced in precious metals such as platinum and gold. Platinum and gold mining costs have increased significantly over the last five years. Ore quality has degraded so more raw ore has to undergo energy-intensive processing to produce the same amount of gold or platinum as a decade ago. Meanwhile, state utility Eskom has increased electricity prices by an average of 27 percent annually for the last five years. This has left producers in these sectors with very little room to give in to wage demands.
However, coal producers have more flexibility when it comes to wage increases. The coal industry almost uniformly secures collective wage bargains through the Chamber of Mines and the National Union of Mineworkers. Its higher-skilled, better-educated workforce secures more competitive compensation packages and carries out generally less labor-intensive and more highly mechanized tasks. The workers are generally not migrant laborers but rather live in local communities with their families. Also important, there are fewer of them. Unions will likely use agreements with coal producers as benchmarks for negotiations in other sectors. Challenges such as these limit the utility of a political agreement that cannot fix existing constraints.
An official ratification of this document might also be meant to serve as a way to increase or protect trust in the South African mining sector, contain the political fallout of labor negotiations and avoid violent outbursts. The African National Congress government may use this positive agreement supported by all stakeholders as a tool to shield the mining sector from a negative investment outlook based on the disruptions that are taking place around the wage negotiation season. The government also needs this agreement because most of the mining in South Africa continues to be done by South African companies whose portfolios are becoming increasingly international. This sort of investment outflow hurts the African National Congress because it cuts jobs domestically.
