South African Miners No Longer Willing to Pay to Play
Apr 27th 2013 11:15AM
Updated Apr 27th 2013 3:00PM
Considering the work stoppages and violent clashes that have become the norm at South African precious-metals mines, perhaps the miners were wondering exactly what they were getting for their money. An expose by South Africa's Daily Maverick has uncovered a system where miners such as AngloGold Ashanti and BHP Billiton surreptitiously paid for the salaries of the heads of the local mining unions to keep the mine workers in line, and it's only because the miners sought to end the "uncomfortable arrangement" with the unions that the matter came to light.
Mining in mineral-rich South Africa has been contentious for years, but in recent months, clashes have become particularly violent, with a strike last August at Lonmin's Marikana platinum mine leaving 44 people dead and bringing the crisis to the forefront.
Much of the violence is said to be a result of the unions' competition to represent the workers as the new Association of Mineworkers & Construction Union seeks to unseat the powerful National Union of Mineworkers, which is closely tied to the African National Congress political party. AngloGold Ashanti paid the salary of NUM's president, while BHP paid the salary of the deputy president. The Lonmin clash was in part a result of workers who no longer wanted to be represented by NUM, as they saw a conflict of interest between the union representatives and the miners.
Mining operations have long been subject to the vagaries of strikes and violence in South Africa. Harmony Gold suspended its operations at Kusasalethu because of security concerns, Gold Fields lost 35,000 ounces of production and had its credit rating reduced by Standard & Poor's because of labor unrest (and reduced its full-year production forecast by 200,000 ounces), and Xstrata has had to halt activity several times as a result of union violence.
From Barrick Gold to Kinross Gold, miners have been looking to exit from their South African holdings -- partially as a result to bring costs under control as commodity prices have plunged, but also as a means of insulating themselves from the vagaries of the country's labor problems.
The Daily Maverick indicated that jealousy over the payouts may have been a contributing factor to the violence, as unions on the outs wanted in on the lucrative stipends the others were receiving. Since the payments were said to be originally enacted to create a more harmonious relationship with the unions, the escalating level of clashes may have left the miners wondering what they were getting for their money.
It was a relationship that was bound to be problematic considering the inherent conflicts of interest, and ending the system may help to ameliorate, even if it doesn't eliminate, the violent and bloody protests of labor unions.
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