South Africa’s Broken Mining Labor Model (BD)
Continued labor unrest at South African mining companies should come as no surprise according to a new report from JPMorgan Cazenove that is summarized in a great article (SA’s labour model lays a path ‘to destruction’) in BusinessDay. The investment bank has warned that unless South Africa’s platinum producers restructure their cheap-labour model, industrial strife will not abate and the industry will continue on a journey to “self-destruction.”
Their report also comes out at a time when Amplats, Lonmin and Impala appear to have run out of solutions to end a crippling 16-week strike as talks between the companies and the Association of Mineworkers and Construction Union (Amcu) have broken down over the union’s demand for a basic wage of R12,500 (roughly $1,200) in four years – a 30% annual wage increase that the mining companies cannot afford.
The JPMorgan report considers mechanization as a possible way to resolve the labor problems but this will not be feasible for the next 10 to 20 years. Moreover, the structure of South Africa’s ore bodies (they lie in very thin reefs) and the existing infrastructure of mine shafts are not conducive to mechanized mining.
South Africa’s continued mining labor problems would certainly be of interest to any foreign investors who hold shares of the following South African ETFs or mining stocks:
- iShares MSCI South Africa Index ETF (NYSEARCA: EZA)
- AngloGold Ashanti Limited (NYSE: AU)
- Gold Fields Limited (NYSE: GFI)
- Harmony Gold Mining Co. (NYSE: HMY)
- Sibanye Gold Ltd (NYSE: SBGL)
You can read the full article, SA’s labour model lays a path ‘to destruction,’ on the BusinessDay Website.
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- South African Gold Mines “Would Not Weather Strike” (BusinessDay)
- South Africa Mining Sector Faces Unrest and Other Woes (BusinessReport)
- Iron Ore, Gold Rush Push South Africa’s Miners to 11-Year High (Bloomberg)
- South Africa Falls to #56 in the Global Competitiveness Report
- The Time Has Come to Say Goodbye to the FTSE/JSE Gold Mining Index (Business Report)
- ECB Rate Cut Will Likely Send Return Hungry Investors to South Africa (BusinessDay)
- South Africa’s Key Economic Sectors (Brand South Africa)
- Naspers’ Tencent Stake Drives the MSCI South Africa Index’s Returns (KraneShares)
- China’s Gung-ho Foray Into Africa Gets a Reality Check (Bloomberg)