Platinum Sector Crisis: Chamber Mines, National Union Mineworkers & Solidarity briefings

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Mineral Resources and Energy

20 February 2013
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Chamber of Mines, speaking for the Platinum Group Metal Companies (PGMC), National Union of Mineworkers and Solidarity briefed the Committee on the crisis currently facing the platinum industry, including the strikes and unrest in 2012. The Chamber of Mines noted that South Africa had, since 2008, been hard hit by the recession in Europe and the slowdown of economic growth in China, particularly since a large section of the platinum market was located in those regions. Previous demand expectations had stimulated the creation of over capacity. Platinum mining was also negatively affected by rapidly escalating input costs, and rising electricity prices were singled out as a major challenge. There had been structural changes in the industry, with a shift to UG2 ores. Illegal strike action had impacted on the industry. Demand, prices and productivity had fallen. The industry was perceived to be contributing too little to community development, despite the fact that there were several contributions to housing and other areas that had been underplayed. Reference was made to the Mining Industry Growth, Development and Employment Task team (MIGDETT), and the Platinum Task Team (PTT). MIGDETT was a collaboration between government, business and organised labour, which aimed to reposition the industry for growth, and to expand demand. The PMGC pointed out the need for stability to be restored to the production cycle, and for investor confidence to be restored. Beneficiation was emphasised. The government, mining industry, communities and organised labour had to cooperate for community development. Delegates from the platinum sector were very clear and unanimous that the sector was indeed in deep crisis, due to rising costs and decreased demand. The industry was in a loss-making mode, where shareholders were called upon to provide inputs without expectation of returns. A delegate from Anglo Platinum stated that retrenchment was inevitable, and that higher productivity would not solve the crisis. The Marikana unrest had worsened the situation, but the industry had been in crisis for a number of reasons even before that occurred.

Members raised questions around structural changes and the need for better mine technology, and possible different uses of platinum. One member felt that the background to the lack of sharing of profits in the country had been ignored, and asked if the reference to “perception” that too little was done for communities was not based on fact. A review of retrenchment was asked for. Members also asked about the role of MIGDETT, questioned whether platinum mining could be counted on to continue production in the country, and called for comment on the proposed royalty amendment and tax proposals. There were remarks and questions about equitable sharing. The Chairperson strongly disagreed with a suggestion of ring fencing mining royalties. Members also were interested to hear more on the effect of Eskom rates and whether fuel cell technology might not be an alternative, and whether jobs would be lost. A delegate from Impala mining called for an agreement for lower thresholds for new unions, but the Chairperson warned that it could foster a divide and rule approach. Members also questioned the mines around retrenchment proposals and closure of shafts.

The National Union of Mineworkers referred to unprotected strikes that had occurred outside of the bargaining process, and the struggles for power that led to demands that NUM should be rejected. Intimidation and violence had also been driven by political motives that went beyond collective bargaining. There had been ethnic and tribal recruitment strategies, brutality and anarchy, with people being coerced to move unions. NUM called for a mining Indaba, and suggested that Parliament, the Department of Mineral Resources, and the Department of Labour had to call for a peace accord. The NUM recommended cost saving, enhanced productivity, accelerated beneficiation and the creation and retention of jobs. Solidarity pointed to the role of non-employees and disgruntled people in the unrest at Marikana. Violence and intimidation had been rewarded with union membership, attention, and wage adjustments. The role of migrant labour came under the spotlight. The high media profile had increased incidents of violence. There was tension due to the two tier system of employees and contractors. There was union disharmony and intolerance. Recognised unions were sidelined. A culture of workplace anarchy came into being. The positive side had been the creation of a national Platinum Bargaining Council. The MIGDETT commitments against retrenchment were outlined, and Solidarity suggested that the Department of Labour must become more involved in union matters.

Members expressed concern over attacks on women at the mines, and asked the reasons for the breakdown of trust between workers and the NUM. Solidarity was asked if it was accessible to unskilled migrants. A member felt that there was too much concern about profits, and not enough about lives lost, and pointed out that workers did not share profits, and that political opportunism was opposed to both lives and profit. Members asked what could be done to restore worker confidence in unions, and what action had been taken against strikers. One member suggested the need for public hearings with platinum mining communities. Members noted the need for further discussions with all parties.

Meeting report

Platinum Sector Crisis
Chamber of Mines, representing the Platinum Group Metal Companies (PGMC) briefing
Mr Roger Baxter, Senior Executive: Economics and Strategy, Chamber of Mines, said that the prospects for platinum group metals at a global level were driven by economic growth. Since 2008, the platinum group had been hard-hit by the recession in Europe and the slowdown of economic growth in China. He noted that this was due to the fact that a large section of the platinum market was located in those two areas. Platinum demand growth had been stagnant, while palladium demand had recovered. Compared to other commodities, platinum was hardest hit by the global financial crisis. Moreover, previous demand expectations had stimulated the creation of over capacity. Platinum group supply had grown due to a surge in scrap supply.

Mr Baxter noted that platinum group mining was the largest component of the RSA mining sector, and was a significant contributor to the economy and taxes. Platinum mining in SA had been hit by rapidly escalating input costs. There had been structural changes in the industry, with a shift to UG2 ores. Illegal strike action had impacted on the industry. The platinum group mining industry was in crisis mode. Demand, prices and productivity had fallen. The industry had contributed R1,7 billion to community development in the preceding six years, but was still perceived to be contributing too little to communities.

Mr Baxter continued that input costs were increasing at a very rapid pace. Such prices included water, electricity, steel and diesel. Electricity prices to the mining sector had risen from 18 cents per kilowatt hour (c/kWh) in 2007 to 61 c/kWh in 2012. The illegal strikes in 2012 exacerbated the situation. Approximately R10 billion in revenue was lost.

Mr Baxter referred to the Mining Industry Growth, Development and Employment Task Team (MIGDETT) and the Platinum Task Team (PTT). MIGDETT was a tripartite venture between government, business and organised labour, and was established in June 2012. The objectives were to reposition the industry for growth, and to collaborate on expanding demand through research and development.

Mr Baxter gave some indicators to improve the situation. Stability had to be restored to the production cycle. Government, mining companies, communities and organised labour had to each play a role in community development. Investor confidence in the platinum sector had to be restored. Beneficiation had to be promoted.

Discussion

Mr Y Wang (COPE) referred to the increased Telkom rates also. He asked if green energy had been considered. He noted that structural changes were related to lower production, and so he recommended that there had to be improvements to mining technology.

Mr Baxter replied that fuel cell technology had been explored. The problem was that deep level mining was very hot, and electricity was needed. More effective ways of using electricity were being considered.

Mr Chris Griffith, Chief Executive Officer, Anglo Platinum, added that fuel cells were considered inappropriate for vehicles. Stationary fuel cells were used. He agreed that in some cases fuel cells could offset power demands.

Mr Baxter answered the comment on structural changes, saying that improvements in mining technology were incremental.  Mining technology was both labour and capital intensive. Future mining might depend more on skilled work, and might be more technology intensive. It was a gradual process.

Mr H Schmidt (DA) asked why there had been a growth demand for iron ore and copper, but not for platinum. Substitution by palladium would cause the bottom to fall out of the market and this would affect supply. He thought that a different use for platinum had to be found.

Mr Baxter replied that Europe had been a big market in the past, but had been weak for some years, with the demand generally dropping. There was a shift to palladium under way already. New markets were being explored, especially the Chinese jewellery market, as well as the potential around diesel components in the USA.

Mr M Sonto (ANC) said that the heading of the presentation could be set against the way forward. The Chamber of Mines was “lowering its head” about the crisis, but ended up saying that it was not catastrophic. He asked whether bringing other stakeholders in could help save some face for the platinum metals group. He commented that the meaning of “structural changes” was open to interpretation. He felt that this briefing did not take the historical background around mining profits into account.

Mr Baxter responded that equitable sharing was in the interests of both the country and production. The situation was indeed catastrophic, and MIGDETT had an important role to play. His reference to structural changes was related to the global industry.

Mr Sonto referred to the statement that it was perceived that too little was being done for community development. He asked if this implied that the mining communities were not being factual in their reports.

Mr Baxter replied that credit had not been given for the role played in closing housing gaps. There was a lack of help from local government. In addition the Department of Human Settlements could be more effective in the community.

Mr Johan Theron, Group Executive, Impala Mining, said that his group had spent R2 billion on bulk housing in the preceding five years. Even in the non tax-paying environment, contributions to schooling had not decreased.

Ms F Bikani (ANC) noted that community inputs did not include housing. She asked why housing could not be viewed as an investment.

Mr Baxter replied that the R1,7 billion spent in fact excluded housing.

Ms Bikani referred to Slide 17 on strike action. She asked how the underlying causes were to be addressed, in the interests of better production. She wanted to hear more about the Chamber and its members’ relations with the Department of Labour. She asked how the grey area of grievances was handled. Retrenchment had to be reviewed, and other solutions had to be looked at.

Mr Baxter replied that underlying causes would be investigated in more depth, but it was felt that as a first step, stability had to be restored. There would be engagement with all unions during 2013. The Department of Labour had a role to play. 2013 was to be a wage negotiation year. Job losses through retrenchment would be minimised. There were plans to cushion the blow of retrenchments. The Committee would be informed about the role of MIGDETT. MIGDETT did not overlap with the Mining Lekgotla. There was rather a synergistic relationship. Investment could be attracted when stability and predictability had been restored. All executives were committed to restoring confidence. There were long term investment plans. South Africa produced 50% of the world’s platinum, and was the second largest producer of palladium.

Ms Bikani asked about the life span of MIGDETT. She asked how often meetings were held. The Mining Lekgotla comprised the Chamber of Mines, National Union of Mineworkers (NUM) and the Department of Mineral Resources (DMR). She asked where MIGDETT fitted in. There had to be a unified structure.

Mr C Gololo (ANC) remarked that he liked the suggestions about the way forward. Confidence had to be restored in a stable environment. The Portfolio Committee (PC) had to be assured that there was a long term plan for platinum. It would not do for the mining companies simply to leave the country, like De Beers. He asked if the platinum industry was there to stay. South Africa had always been the number one platinum producer. He asked if that was still the case.

Mr Albert Jamieson, Chief Commercial Officer, Lonmin, replied that the greatest ore body in the world was situated in the Bushveld region. The question was how to turn that into wealth for the country. South Africans were currently not pulling together all their resources into good teamwork. Strategies like substitution could be followed to do justice to the ore body. South Africa had to “get its game together”. The Labour sector, and communities, had to cooperate. There had to be cooperative resourcing for beneficiation.

Mr Baxter reported that the project lifespan of a platinum mining project included five years to explore the terrain, five years to explore feasibility, and ten years for development. It was assumed that the mine would have a life of twenty years, and there would be a ten year scaling down phase. The mine was only productive during the productive cycle.

The Chairperson asked what the take of the Chamber was on the tax proposals doing the rounds. The Committee was saying that there was not enough sharing of mineral profits. There were still mining communities who were in an abject condition. Corporate taxes made a great contribution. There was a need to engage about royalty amendments.

Mr Vusi Mabena, Senior Executive, Chamber of Mines, replied that R5,5 billion in royalties had been paid to the National Treasury. Money was paid into the fiscus, but it did not necessarily stay as a lump sum, but rather became absorbed in dealing with challenges. The question was how to change perceptions towards seeing royalties as being of benefit to communities.

The Chairperson remarked that mineral wealth was a national heritage. It would not do to ringfence mining royalties. Lateral thinking was needed. It was argued that royalties could go towards creating a larger cake in which all should share. However, mining had generated profits for centuries, and the profit use had always been skewed. Production levels were not yet critical. He asked if it could be concluded that Mr Baxter was in favour of equitable sharing.

Mr Baxter replied that MIGDETT had resolved in December 2008 to help slow down rate increases, to prevent jobs losses. A growth strategy had to be based on cooperation between labour, business and government. All had to be reflected in a new growth path and development plan. In 2012 there were attempts to stabilise the situation through constructive engagement. The Platinum Task Team fed into MIGDETT.

Mr Griffith added that when it became clear that platinum was in crisis, and had entered a period of loss making, companies had to go back to shareholders to request investment. In 2010, Anglo had asked for R12,5 billion in investments. Shareholders were putting in without getting out, and this situation could continue for the following couple of years. Costs were rising at double the pace of inflation. Rising electricity costs had contributed greatly to the crisis, over the preceding five years. Eskom was now wanting another tariff increase of 21%. The demand for platinum was decreasing, and supply exceeded demand. The industry was in oversupply, and prices would not rise. The switch to palladium could alleviate the crisis, but currently it was every bit as bad as it sounded, and it was not only as a result of the strikes, which had merely added to an already existing problem. Companies and labour had to work together to promote investment in South Africa. Strikes had an influence on the willingness of shareholders to invest, making it hard for South Africa to maintain its position.

The Chairperson referred to input cost challenges. He asked if platinum mining companies had met with Eskom. He asked what impact the price of coal had on Eskom’s input. Domestic consumers subsidised major companies.

Mr Baxter replied that there were various cost drivers, not only energy. The prices of steel, diesel and labour also had an impact. The price of coal was not a problem for electricity provision. Eskom was increasing electricity prices at the expense of the country. It had to be recognised that mining could not afford these increases.

Mr Ruli Diseko, Investor Relations Manager, Lonmin, said that the crisis had to be acknowledged. There had to be a collaborative stakeholder response. It must also be recognised that the answer did not depend only on what the mining companies did.

Mr Johan Theron, Group Executive, Impala Mining, noted that the problems that had been outlined did not only apply to Anglo Platinum. Impala Mining had the same problem. Six of its shafts would have to close. Running costs had doubled over the preceding five years, and this included the rising costs for labour and electricity, whilst the income remained the same. This resulted in profits being eroded. Platinum mining was not paying taxes. Retrenchment could be avoided. Shareholder returns had suffered. US$500 million had been requested to carry on sinking shafts. The industry had to be saved. MIGDETT was saying that it was not only an issue for Anglo, but for the industry as a whole. There were now 50 000 new people in Rustenburg, as a result of people flooding from rural areas to secure a chance of getting a job. Mining companies were aware of the challenges the country was facing. They were spending more for productivity and the social environment. Money had to be spent more smartly, and in cooperation with government.

The Chairperson remarked that Anglo Platinum was shedding 14 000 jobs. He asked about the status of announcements on this. He referred to the shift to loss making mode. He asked how the situation of having to rely on shareholder funds could be turned around. He asked what could be done also to prevent illegal strikes.

Mr Griffith replied that Anglo Platinum would align its business to market demands, to return to a situation where it was making profits. Information would be shared through MIGDETT with the unions and the Department, over a 60 day period. Alternate plans had to be put forward. Market experts were on board. Operations at Rustenburg had to be reconfigured. Anglo Platinum would be making proposals around its plans for retrenchment and redeployment. There had to be creation of jobs, and linkage with other programmes. If no solution had been found after 60 days, it would become a Section 189 matter.

The Chairperson hoped that consultation would lead to a solution. He asked if jobs could be saved, and how many shafts were affected.

Mr Griffith replied that Anglo Platinum was not confident that jobs could be saved. The matter had been fully gone through in the previous year. Shareholders had been approached for cash in 2010. The crisis had been going for a long time. It was not just a matter of people having to work harder, or being more productive. The platinum sector was open to suggestions, but it was too early to say which alternative courses could be followed. There were no quick solutions. Platinum was facing a difficult time, because of an oversupplied market. It was not just a matter of chopping and changing at Rustenburg. There had to be reconfiguring to make the industry profitable.

The Chairperson again asked how many shafts were affected.

Mr Griffith answered that the Rustenburg lease area had been taken back to three mines. Four shafts had been affected, but had been reincorporated into the lease area.

Mr Baxter replied that there were many facets to and reasons for the strikes. High youth unemployment rates contributed to them. The migrant labour system forced some miners to support two households. There was high exposure to creditors, who garnished wages, and this pointed to the fact that workers had to be taught how to deal with credit sensibly. There had to be engagement with all the different unions, MIGDETT, government, and labour committees.

Mr Mabena added that in the recent past, new unions had caused tension by confronting NUM. Unions had to co-exist. Management had had to close shafts because of rivalry between unions. The Minister of Labour had tried to set up a process at Marikana.

Mr Diseko also spoke to the Lonmin tragedy, saying that initiatives had been launched around employee relations. Young people were affected. The subtext was that people wanted a voice. They had to be represented at the table, within a representative framework. The question was how the Department of Labour could help, as part of a collaborative response.

Mr Theron added that there had been blame appointed by the media, which had led to introspection. There had been an acknowledgment where mistakes had been made, and note was taken of how things could have been handled differently. Another of the root causes was the labour legislation. There was a majoritarian approach, which foresaw only one or two unions at an operation, and workers were used to that. The stakes were high. There were 50 000 workers and Impala appointed and maintained 120 shop stewards. Within that culture a union would fight hard to retain benefits. There had to be a more open and democratic system, and an agreement to lower thresholds. There had to be a more open shop floor. All parties had to agree to change. The legislation did not allow for that. He reiterated that with the high stakes, the unions did all they could to get and keep power.

The Chairperson remarked that the Labour Relations Act ensured stability, and it would be difficult to achieve stability with a plethora of unions. Union demands differed, with some asking for higher wage increases than others.  It would not do to apply the divide and rule principle. He believed that it was unnecessary to change the provisions of the Labour Relations Act.

National Union of Mineworkers (NUM) presentation
Mr Madoda Sambatha, Regional Coordinator, National Union of Mineworkers, said that Impala Mining had been responsible for distortions. There had been an unprotected strike resumed at the Lonmin mine. There was no bargaining process. The strike had been led by workers’ committees, who first started the strike and then declared that they did not belong to a union. There was a demand to reject NUM. The striking groups were more political than trade unions. There had been intimidation and violence. The grievances had not only been about salaries.  There were tribal or ethnic recruiting strategies. NUM had rejected floor crossing. Bosses had hired unrepresented workers. There was evidence of a primitive mentality, with resort to muti, and beliefs of invincibility attached to that. There had been abuse of women. A mob attacked a female miner underground for wearing a NUM T-shirt. There had been brutality and anarchy, with mutilation of the dead. The question was why workers had been armed. Mineworkers lives had been endangered by other workers. Shift bosses received more danger pay for four hours underground, than others did for eight hours. Association of Mineworkers and Construction Union (AMCU) had demanded resignations.

Mr Sambatha recommended a mining indaba. Parliament, the DMR and the Department of Labour had to call for a mining peace accord. The Marikana Commission had to investigate Impala Mining. There had to be the right to join a union of choice. At Impala there had been coercion and resignation from one union to join another. There had to be adherence to PTT and MIGDETT, investigation of cost saving, enhanced productivity and accelerated beneficiation, and long term creation and retention of jobs. Parliament had to restore peace. Killing and intimidation were a breach of the Constitution. Profits could not be more important than lives.

Solidarity briefing
Mr Gideon du Plessis, General Secretary, Solidarity, referred to violence and intimidation at Impala Platinum Mine, Aquarius Platinum and Lonmin Marikana from early 2012. At Marikana there was a dominance of non-employees and disgruntled people. Violence and intimidation were rewarded with union membership, attention, recognition and wage adjustments. There were clear signs of socio-economic pressure and worker frustration. The migrant labour situation came under the spotlight. Other underlying reasons for the unrest were the two-tier system of employees versus contractors, and union disharmony and intolerance. Informal settlements and incorrect use of housing allowance were another factor. The high media profile increased violent incidents.

Consequences for labour relations included the fact that recognised unions were sidelined, and management was alienated from entry level workers. Negative consequences included culture of workplace anarchy, and financial impact on employees. Positive responses to the unrest included the establishment of a national Platinum Bargaining Forum. The thresholds obstacle would be addressed.

Mr du Plessis drew attention to MIGDETT commitments. Those included the resolve to implement retrenchments only as a last resort. Employers would have to be more transparent with regard to cost-cutting measures as an alternative to retrenchments. Retrenchment avoidance mechanisms would be explored. There had to be more involvement and interest of government departments like the Department of Labour. Employers had to show more transparency regarding input costs. The industry was not responsive to joint measures to address industry cost drivers. MIGDETT parties were committed to supporting increased domestic beneficiation and downstream value addition of platinum group metals as a means of generating demand for platinum.

Discussion
Ms L Njobo (ANC) said that Parliament was concerned about women on the mines. Officials would not tell the truth. An NUM member had told about a woman being raped in a lift. The problem was not being discussed.

Mr Schmidt asked about worker attitudes, and whether the strikers were not in fact former NUM members. He commented that discipline was the joint responsibility of unions and management.

Mr Schmidt asked Solidarity what the average levy was that a mineworker paid to the union. He also asked about the role of the unions to discipline members.

Mr du Plessis replied that for some unions, the levy was 1%. Union discipline was a complex matter.

Mr J Lorimer (DA) asked about the “primitive mentality” to which the NUM had referred. He asked why trust had been broken between NUM and the workers, and if there had been efforts to educate them.

Mr Sambatha answered that workers had to be allowed to belong to a union of choice. No one had been intimidated to join the NUM. Unions could compete under peaceful conditions.

Mr Lorimer asked if it had been a mistake for the NUM to be allied to the ANC. He asked if a migrant from the Transkei region could join Solidarity.

Mr Sambatha replied that the NUM had historical links to the ANC. It had adopted the Freedom Charter a long time ago. It was also part of the Congress of South African Trade Unions (COSATU).

Mr du Plessis replied that 24% of Solidarity members were entry level unskilled workers.

Mr Sonto commented that political opportunism was not to stand against lives nor profit. He asked if the unions would assist the PC by drafting solutions, with Parliament and the mining companies, to promote stability. It was stated that profits went down when there was no work, but little was said about the lives lost. Workers had to share in profits.

Mr Sambatha replied that profits went to a tiny minority. They were not generally shared with workers. Race and gender distinctions were determining factors.

Ms B Tinto (ANC) said that workers had lost confidence in unions. She asked what could be done to restore confidence.

Mr Sambatha responded that workers had not lost confidence in the unions. Workers had been mobilised to believe that NUM could be blamed, through demagogy. For workers to make demands, and then remain on permanent stay-away, was anarchy. Regarding thresholds, he said that NUM believed in the majority principle. NUM would recruit under peaceful conditions.

Mr du Plessis added that thresholds created instability. There had to be a peace and productivity accord. Confidence of members depended upon bread and butter issues.

Ms Bikani was of the view that there should be a public hearing with platinum mining communities. There were people involved in the strikes who were not employees of the mine. She asked how they could be brought to book. People had also been killed underground. There had to be statistics on the mine killings.

Mr Sambatha responded that the National Prosecuting Authority (NPA) had charged strikers with common purpose. Half of those in prison were not Lonmin workers. A former expelled worker had chaired a worker’s committee.

The Chairperson concluded that mining companies, unions and the Department of Mineral Resources had to engage further on these issues.

The meeting was adjourned.


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