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Economy set to face more labour strife

Johannesburg – The end of South Africa’s longest strike will provide respite for its troubled platinum sector, but the stranglehold unions have over a flatlining economy has not loosened and more industrial action is looming.

The Association of Mineworkers and Construction Union (Amcu) signed a wage deal on Tuesday with Anglo Platinum (Amplats) [JSE:AMS], Impala Platinum (Implats)[JSE:IMP] and Lonmin [JSE:LON] to end a five-month stoppage that dragged the economy into contraction.

Around 70 000 strikers can now return to mines that account for 40% of global platinum output. But production could take years to reach pre-strike levels, while some shafts are unlikely to re-open and job losses are inevitable.

Lonmin, the smallest of the three producers, said restructuring was “inevitable” to ensure its business remained afloat, setting the scene for more labour turmoil.

Amcu is also pushing for a strike in the gold sector although a labour court has so far blocked those attempts.

“There is little sense of relief among investors or the public since the propensity for strikes will continue,” said labour economist Loane Sharp at Johannesburg consultancy Adcorp. “The long-term prospects for the mining sector are bleak.”

The strike has cost platinum producers R24bn in lost revenues and miners R10bn in unpaid salaries, according to the firms.

“It’s  inevitable that the producers’ margins will shrink on the back of this, unless we see a strong platinum price reaction, which has been muted to date,” said Investec analyst Marc Elliott.

Labour reforms

The stoppage may also have emboldened other labour organisations.

The National Union of Metalworkers of South Africa (Numsa), the country’s biggest union with more than 200 000 members, is threatening to down tools from July 1, a move that would hobble the vital auto industry.

A halt to car manufacturing would hit exports, hammering an economy that contracted in the first quarter for the first time since a 2009 recession, while a weak rand pushed inflation above the top end of the central bank’s 3-6% target band.

“The key thing to watch is what happens with Numsa. That would have a very negative impact on the economy,” said Peter Leon, a mining analyst at law firm Webber Wentzel.

Mining Minister Ngoako Ramatlhodi, who played an important mediation role said he wants to overhaul union-friendly labour laws to avoid another prolonged and nationally damaging stalemate.

“What we’re proposing is restructuring of the labour relations regime,” he told Reuters. “It’s not something that will happen quickly. That is a big deal and we do need everyone to buy into that.”

Mooted proposals include more government involvement, limiting the length of strikes or implementing pre-strike ballots, making it harder for union leaders to go on strike and reducing the intimidation that currently prevails.

Source – Fin24