South African Gold Producers and Mining Unions Begin Wage Talks

Wage talks in South Africa began on Wednesday (July 11), gathering the country’s largest gold miners and unions to discuss an increase in the underground base pay for laborers.

The two groups are meeting against the backdrop of a shrinking industry that was once the largest worldwide. The National Union of Mineworkers are setting demands of an increase in base pay of up to 37 percent, while the rival Association of Mineworkers and Construction Union is seeking even more.

“A balance has to be struck in terms of which employees receive decent increases, which will have a positive impact on worker loyalty and which, in turn, will lead to increased production if correct production processes are followed,”stated trade union Solidarity, which is also involved in the talks.

Day one of the proceedings will mainly focus on the four representative unions and their presentations outlining their demands for consideration by the gold producers.

The gold companies involved, AngloGold Ashanti (JSE:ANG), Harmony Gold (JSE:HAR), Sibanye-Stillwater (NYSE:SBGL) and Village Main Reef, will listen to presentations made by the Association of Mineworkers and Construction Union (AMCU), the National Union of Mineworkers (NUM), Solidarity and UASA, and will respond in one week when on Wednesday (July 18) discussions resume.

South Africa’s gold mines are among the deepest and most most labor intensive in the world. This has left producers constantly struggling to reduce costs, which has led to elevated levels of inequality and poverty, resulting in highly charged wage negotiations.

According to the Minerals Council South Africa lobby group, the four producers involved in the gold negotiations employ approximately 80,000 people.

Mining employment dropped to its lowest since 2009 in the first quarter of this year and gold production has fallen from 1,000 metric tonnes in 1997 to 128 tonnes in 2017, with the industry losing more than 57,000 jobs over the last 10 years.

According to Department of Labor, the number of work stoppages in South Africa has increased by 8 percent over the last two years, bringing the number to 132. The duration of most strikes lasted fewer than 11 working days, the department found.

However, Andrew Levy, managing partner at Andrew Levy Employment, believes that a strike will not occur this time around. He estimates that there is a one in five chance that industrial action will take place.

“Employees themselves are not willing to embark on long strikes,” he said.

Additionally, Levy believes that gold producers and unions may end up settling on an increase in the range of 8 to 9 percent, which will mostly affect the lowest-paid workers.

The wage agreement that is currently in place expired on June 30 with new agreements that materialize from these negotiations to be back-dated to July 1, the Minerals Council said in a statement.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.