AMCU kicks off platinum talks with 48% wage demand; R17k minimum basic pay

By Paul Burkhardt

(Bloomberg) – The biggest union in South Africa’s platinum industry demanded wage increases of as much as 48% from producers in the world’s top supplier of the metal, setting the stage for a tough fight in upcoming pay talks.

Key insights

  • The opening salvo – issued to companies including Anglo American Platinum Ltd., Sibanye Gold Ltd., and Impala Platinum Holdings Ltd. – represents a substantial step up from the labor group’s years-long rallying cry for “a living wage” of at least R12,500 a month. That minimum still hasn’t been achieved at all producers.
  • The union wants companies to share more of their profits following rallies in the prices of palladium and rhodium, which are dug up alongside platinum. A weaker rand has also boosted miners’ earnings.
  • Metal and mining investors will be watching the negotiations closely for any potential strike. The militant labour organisation held the longest platinum mining strike in the country in 2014.
  • While today’s demand looks high, it’s not necessarily a harbinger of the final outcome as South African unions often start off with big asks. In the last wage round, AMCU accepted an increase of 12.5% for the lowest-paid workers, after initially demanding a 47% increment.

Market reaction

  • The FTSE/JSE Africa Platinum Mining Index pared some of its earlier gains. Precious metals prices are rallying Friday, with gold hitting a 14-month high and palladium reaching its highest since late March.
  • “I don’t believe these type of demands are affordable for the industry and would put its sustainability at risk, so it’s unlikely that the PGM producers would accede to these demands,” said Arnold Van Graan, an analyst at Nedcor Securities Ltd.