* Food inflation fuels wage demands in southern Africa
* Fuel prices, lack of electricity are also a concern
* Tax rises in Ghana threaten some gold projects
By Ed Stoddard and Clara Ferreira-Marques
CAPE TOWN, Feb 9 Labour demands in the
south, power problems in the east and new tax burdens in the
west: wherever you look in Africa, miners face a perfect storm
of soaring costs.
"There is no question that there are considerable cost
pressures on all of us in the industry, whether it is
electricity, labour, whether it is inflation, overall in every
single country where we operate," said Cynthia Carroll, chief
executive of Anglo American.
In southern Africa, the pressures are literally springing
from the soil as rising food prices hit working class budgets,
fuelling union demands for double-digit wage hikes.
In South Africa, inflation was 6.1 percent in December but
food inflation was 11.1 percent, straining the household budgets
of lower-income workers and fuelling high wage demands by unions
in the mining sector.
Analysts have said above-inflation wage hikes in South
Africa's mining sector have not been matched by productivity
gains from its uneducated and low-skilled labour force.
Wage pressures are also ratcheting up in other parts of the
continent with heavily unionised work forces that face food
Glencore's Mopani Copper Mines in Zambia agreed a
17 percent raise with unions last week, almost triple the
inflation rate. Konkola Copper Mines, part of London-listed
Vedanta Resources, awarded a similar pay increase last
At the other end of the labour force, a lack of top skills
in areas like engineering is also adding to salary bills.
"Because of the scarcity of skills people are just not able
to (find what they need). First of all you are having to pay a
lot more to get people to build your project, and in some cases
you are simply not able to get the people you would ideally like
to have," said Tom Butler, global head of mining for the IFC,
the private sector financing arm of the World Bank.
"So if you are trying to build a project on time and on
budget, but you are using people who maybe have not done it 10
times before, and you have delays, which increases the costs for
investors," he said.
Costs are slamming miners on other commodity fronts.
High oil and fuel prices are a major concern in Africa,
where unreliable sources of power mean many mines run on diesel.
"Our biggest cost concern is the price of fuel. We do not
have enough electricity and most of the mines have to self
generate. There are mines that are using up to 6,7 or 8 million
litres of diesel a month," said Emmanuel Jengo, executive
secretary of Tanzania's Chamber of Minerals & Energy, told
Reuters on the sidelines of a mining conference in Cape Town.
On top of all of this, a common complaint this week in Cape
Town was the surge of resource nationalism across the continent,
as governments aim to extract more revenue from an industry that
has failed to translate mineral wealth into broad prosperity.
Africa's top copper producer Zambia may bring back a mining
windfall tax if copper prices hit $10,000 per tonne, the Zambian
high commission in South Africa said on Thursday, quoting the
minister of mines.
Zambia also recently doubled its copper royalty to six
percent and the mines minister told Reuters earlier this week
that government would audit all the country's mining houses as
it attempts to claw back as much as $1 billion in back taxes it
estimates it is owed
Ghana, Africa's second-largest gold mining state, plans to
raise the corporate mining tax to 35 percent from 25 percent and
introduce a 10 percent windfall tax as well to boost the state
share of revenues.
South Africa's Gold Fields has said the added costs
from this move mean it may have to pull the plug on projects
that would have brought a $1 billion of investment to Ghana.
Ghana has also set up a committee to review stability
investment agreements with mining houses.
And while South Africa has buried a drive to make
nationalisation government policy, a study commissioned by the
ruling African National Congress calls for what would
effectively amount to a 50 percent super tax on earnings.
In general, Anglo American's Carroll said cost pressures on
miners were in the double digits.
"I was with industry representatives in Davos and someone
spoke of 10 to 15 percent (costs increase) per year," she said.