Insight: Workers to warriors - union war batters South Africa mines

LYDENBURG, South Africa Sun Aug 19, 2012 7:34am EDT

1 of 4. Former African National Congress Youth League (ANCYL) President Julius Malema addresses striking miners outside a South African mine in Rustenburg, 100 km (62 miles) northwest of Johannesburg August 18, 2012.

Credit: Reuters/Siphiwe Sibeko

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LYDENBURG, South Africa (Reuters) - South Africa's platinum promise of prosperity has turned into a heap of broken dreams for Vusimuzi Mathosi, one of 2,000 workers laid off by Aquarius Platinum at its Everest Mine.

"This place can only be sustained with platinum. What can we do now?," he told Reuters near the one-room box he and his family call home in a dilapidated township on the outskirts of Lydenburg, 300 km (180 miles) east of Johannesburg.

He belongs to the Association of Mineworkers and Construction Union (AMCU), whose bloody turf war for members with the dominant National Union of Mineworkers (NUM) was the backdrop to Thursday's killing of 34 striking platinum miners by police at the Marikana mine.

When Aquarius, the world's 4th largest producer of the precious metal, closed production at Everest, it cited worsening industrial relations stemming from the AMCU/NUM battle which has turned workers into warriors across the platinum sector.

The country's ruling African National Congress is in a governing alliance with the NUM-affiliated national union confederation COSATU, and a perception has filtered down the shafts that the rank and file are not getting a fair deal because NUM is in bed with companies and the ANC.

This has been a common refrain among several AMCU workers Reuters has interviewed in recent weeks, from Lydenburg to the main platinum belt where police on Thursday opened fire on striking workers employed by Lonmin at its Marikana operations northwest of Johannesburg.

"The NUM, they have shares in the companies," said Fannie Bhengu, an AMCU branch chairman in Lydenburg.

Past NUM leaders who are ANC heavyweights include Cyril Ramaphosa, a business tycoon who sits on Lonmin's board. In his labor days, he led a strike 25 years ago that saw 11 mineworkers gunned down by police.

The NUM denied it had shares in mining companies, or that it had too cosy a relationship with the management of those companies.

AMCU and other upstart unions have however been drilling into a growing seam of discontent and poaching NUM members or picking up the unorganized at Lonmin, Aquarius and at the world's largest platinum mine run by Impala Platinum, which shut for 6 weeks early this year amid labor blood-letting.

The groundswell of revolt against the NUM is tapping into the same popular anger with poor government delivery of services that is confronting the ANC, marked by frequent riots in poor townships and squatter camps.

"It is not incidental that the challenge to the historically dominant union NUM, affiliated with the ANC, is taking place within a context of growing grass-root contestation to the performance of government," said Claude Baissac, managing director of mining consultancy Eunomix.

More mine shafts across the industry may be forced to shut as it faces union militancy, soaring costs and low prices linked to the sluggish global auto industry as platinum is the key ingredient used for emissions-capping catalytic converters.

The gold sector also embarked on a painful process of restructuring over a decade ago as the price of bullion slumped, leading to tens of thousands of job losses and South Africa's fall from world No. 1 gold producer to 4th place.

"I think the platinum guys are just starting to work out what the gold industry has been through. So they have some hard decisions they have to make," Mark Cutifani, chief executive of AngloGold Ashanti, told Reuters.

WHEN PLATINUM WAS KING

But the path blazed by gold, which has made the South African industry lean, mean and profitable, will not be an easy one for platinum to follow in this highly charged new era of social discontent, union rivalry and global economic woes.

Geology is also an obstacle as big South African gold miners such as AngloGold and Gold Fields now get half or more of their output from outside the country. But about 80 percent of the world's known platinum reserves are in South Africa.

South African gold companies aggressively trimmed their payrolls while the pro-market Thabo Mbeki was president, giving them political space to cut a labor force that numbered 300,000 in 1996 but is now down to around 130,000.

Those were the heady days that followed the demise of white apartheid rule. Almost two decades after Nelson Mandela became South Africa's first black president, that optimism has faded into frustration as many miners still toil in harsh and dangerous conditions for as little as 4,000 rand ($480) a month.

Average gross monthly earnings in mining are around 14,000 rand, according to government data. This is slightly above average but the median figure for mining masks stark differences across the pay scale.

Social conditions for mining communities in the platinum belt have also not improved, according to a report released this week by the Bench Marks Foundation, an NGO backed by churches.

In harsh criticism of most of the principal mining companies, the report faulted Lonmin's operations for "high levels of fatalities, very poor living conditions for workers, community demands for employment opportunities and negative impacts of mining on commercial farming".

Platinum presents a tempting target for an upstart union on a recruiting drive like AMCU because much of its labor force lives in the communities around mines on the platinum belt.

By contrast the gold sector still houses much of its workforce in mine hostels and so can keep agitators at bay.

When platinum was king it also laid the groundwork for the current troubles by keeping out of the collective bargaining arrangements that define union talks in gold and coal.

Platinum sector companies felt no need for a unified front. In 1999 gold languished at a 20-year low just above $250 an ounce and platinum was trading $118 higher.

Gold is now trading between $150 and $200 above platinum and many platinum shafts are not making money.

MUSCLING IN

But the sector is exposed to unions like AMCU, which can go company-to-company and persuade workers they can achieve new deals for them. Pay disparities exist between companies for workers of similar jobs, fueling resentment.

In a recurring pattern, AMCU will recruit among rock drill operators who have one of the toughest and most dangerous jobs in mining, promising it can extract big pay hikes for them.

At Implats earlier this year and Lonmin now, these workers then launched a strike deemed illegal because they did not follow the lawful steps or because agreements remained in force.

In the case of Implats this led to dismissals and then a wave of violence but when the smoke cleared, AMCU had muscled in and now claims it represents half of the 30,000 strong labor force centered around the city of Rustenburg.

AMCU denies accusations by NUM and mine company managers that it is stirring up violence. AMCU President Joseph Mathunjwa said after the Marikana killings that his union had been "set up by management and the NUM to take the blame".

NUM General Secretary Frans Baleni repeated his union's accusation that militant unions like AMCU were using violence and intimidation as a tool of recruitment.

"There are trade unions desperate for power who mislead and use workers for cannon fodder," he said, speaking on Sunday on a national television show called "The Justice Factor".

Anger over the Marikana killings could worsen the union war and trigger "retaliatory violence against NUM members and police at other platinum mines, raising risk of violent and protracted strike action over the next month at platinum mines in South Africa," London-based Exclusive Analysis Ltd said in a note.

AMCU also has gold firmly on its radar screen.

AMCU's General Secretary Jeff Mphahlehle told Reuters it was recruiting at the Evander mine that Harmony Gold is in the process of selling to Pan African Resources.

Evander is a target because while Harmony bargains collectively, Pan African does not, so AMCU can go use the tactics it has deployed in the platinum sector. AMCU also has members in the country's coal mines that supply Europe and Asia.

HOSTILE HEADWINDS

Amid the volatile labor environment, the platinum sector already faces many obstacles.

The 3 biggest platinum producers - Anglo American Platinum, Implats and Lonmin - employ about 135,000 people among them in South Africa, which is grappling with an official jobless rate of close to 25 percent and glaring income disparities.

The mining sector has for years been dishing out above-inflation pay agreements but this has failed to quell wage demands because the lower-paid workers come off such a low base and often have many dependents.

Citigroup has estimated South Africa's platinum group metal reserves are worth over $2 trillion and the sector was supposed to replace gold as the jewel in the country's mining crown.

But high costs and low prices are squeezing it. Power and labor costs have been soaring and are far higher than they were a decade ago when the gold sector was slashing jobs on its path back to healthy profits.

Platinum's price spiked over 5 percent this week because of the unrest at Lonmin which accounts for 12 percent of global supply, but it has generally been wallowing near $1,400 or less an ounce, a level that makes many shafts unprofitable.

Platinum is heavily exposed to the diesel-focused sluggish European car market, whose vehicles use a higher loading of platinum than the petrol engines favored elsewhere.

"We are forecasting a 122,000 ounce surplus this year," said Citigroup analyst David Wilson. "Lonmin do 60,000 ounces a month so if they were out for two months, that would bring the market back to a balance."

That might push the price up but would not help Lonmin.

AMCU members retrenched by Aquarius reject the link between global prices and their circumstances.

"There is no reason to close the mine, they are lying about the price of platinum. They did not retrench people in other mines. I think that it is part of capitalism," said Moses Malapane, 29, a fitting assistant.

($1 = 8.3335 South African rand)

(Additional reporting by Sheriee Lakmidas in Johannesburg and Jan Harvey in London; Editing by Pascal Fletcher and Giles Elgood)

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