Platinum strike: wage deal signed amid black cloud of job cuts

By Zandi Shabalala and Olivia Kumwenda-Mtambo

JOHANNESBURG (Reuters) – The world's three biggest platinum firms signed a wage deal with South Africa's AMCU union on Tuesday but said that fallout from a five-month strike made job cuts and restructuring inevitable, setting the scene for more labour turmoil.

The three-year agreement with Anglo American Platinum, Impala Platinum and Lonmin ended South Africa's longest and costliest strike. The union's 70,000 striking members will return to work on Wednesday.

Association of Mineworkers and Construction Union (AMCU) president Joseph Mathunjwa told Reuters the companies had committed to "no retrenchments" for the duration of the deal, although his comment was at odds with statements from the firms.

Lonmin, the smallest of the three producers, said restructuring was "inevitable" to ensure its business remained afloat, especially while industrial demand for platinum in vehicle catalytic converters remained subdued.

Speaking to reporters and standing alongside his counterparts at Amplats and Implats after signing the deal, Lonmin CEO Ben Magara said the road ahead for the industry "remained a big challenge".

The companies have lost over 24 billion rand ($2.26 billion) in revenue as a result of the strike and production will only resume in September.

"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.

The Mining Minister Ngoako Ramatlhodi, who played an important mediation role after assuming office last month, told Reuters 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."

LABOUR REFORMS

Pushing through reforms is likely to face stiff opposition and Mathunjwa has already warned any changes to legislation would be "unconstitutional".

Job cuts are also a thorny issue in South Africa, which has an unemployment rate of close to 25 percent and AMCU members have gone on wildcat strikes to protest at planned job losses at Amplats.

As it embarked on the strike in January under the populist battle cry of a "living wage", AMCU had initially demanded that basic wages of miners be more than doubled immediately to 12,500 rand a month.

In the end, its members settled for increases that amounted to around 20 percent annually. Mathunjwa told reporters following the signing ceremony that AMCU would continue to "fight" for a 12,500 rand basic wage, suggesting negotiations were likely to rumble on in the future.

President Jacob Zuma welcomed the resolution of the platinum strike in a statement, pledging to revitalise battered mining communities and restore labour stability.

Life began to trickle back into the mining towns northwest of Johannesburg as miners returned after spending months with their families in rural home villages sitting out the strike.

"I haven't seen a cash vehicle coming out this way in a long time," said general store owner Mohamed Moosa, 38, describing a truck bringing notes to an ATM in the dusty town of Marikana, which has been starved of cash and customers.Investors will now be eyeing other potential labour unrest as the National Union of Metalworkers of South Africa, 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.

($1 = 10.6164 South African Rand)