* Main mining union NUM seeks wage hikes of up to 60 pct
* Gold companies' shares drop, rand also under pressure
* Threat of mines unrest is headache for ruling ANC
* NUM rival AMCU now dominates tense platinum sector
By Ed Stoddard
JOHANNESBURG, May 20 Big wage hikes demanded by
the government-allied trade union in South Africa's coal and
gold industries helped push the rand to a four year low on
Monday, highlighting the ripple effect of the prospect of more
turmoil in the industry.
The National Union of Mineworkers' (NUM) call for pay rises
of up to 60 percent in a submission to the Chamber of Mines seen
by Reuters on Sunday rattled mining investors after wildcat
strikes at platinum and gold mines killed 50 people and cost
billions in lost output last year.
As employers and workers square off in this year's salary
bargaining period, company margins in Africa's largest economy
are shrinking due to soaring costs and sinking commodity prices.
Shares in Africa's top bullion producer AngloGold Ashanti
fell almost four percent on Monday morning and rival
Gold Fields shed 3.5 percent to 4-1/2 year lows.
Gold fell for an eighth straight session to its weakest
level in over a month, as fears that the U.S. Federal Reserve
may wind back its economic stimulus programme hurt the metal's
appeal as a hedge against inflation.
Reflecting the jitters over the threat of fresh mines
unrest, the South African rand fell to a new 4-year low.
A fierce union turf war is roiling labour relations at South
African mine shafts, with the NUM fighting an aggressive
challenge to its once near monopoly of members from the growing
Association of Mineworkers and Construction Union (AMCU).
AMCU has poached tens of thousands of platinum miners from
NUM in an increasingly violent struggle at mine sites.
The union battle poses a headache for President Jacob Zuma's
ruling African National Congress (ANC), which faces criticism
that it mishandled last year's mines violence. Opponents say it
and the mainstream NUM have neglected the rights of workers and
sided with mine bosses, a charge they both deny.
Last year's mine violence dented South Africa's image with
investors and led to ratings downgrades for the economy.
NUM, a key political ally of the ANC, said at the weekend it
was seeking an entry-level minimum monthly wage of 7,000 rand
($750) for gold and coal surface workers and 8,000 rand for
those underground. The latter would represent a 60 percent rise
from the current minimum wage of 5,000 rand a month.
NUM also said it wanted 15 percent increases for "all other
wage categories," meaning more experienced and skilled workers.
Spot gold is currently fetching around $1,350 an
ounce, down close to 20 percent so far this year, and South
Africa's mines, the deepest in the world, are hard pressed to
turn a profit at these levels.
"If you look at the all-in-costs for South African gold
miners, including capex (capital expenditure), the break-even
costs right now are anywhere between $1,100 and ounce and $1,400
an ounce," said David Davis, mining investment analyst with SBG
Gold companies declined to comment on Monday.
NUM still represents the bulk of the rank and file in the
gold and coal sectors and needs to be seen taking a tough line
with management to head off the assault from AMCU, which now
dominates the platinum sector specifically.
AMCU has not yet submitted its wage demands to platinum
producers, which negotiate with unions on a company-by-company
basis. But companies can ill afford to be generous given current
prices for the precious metal.
Anglo American Platinum, Amplats, the world's top
producer, now plans to cut 6,000 jobs from an initial target of
14,000 as it seeks to restore profits after falling into a loss
It scaled back its original plan under government pressure,
but workers and unions have threatened strike action on the
platinum belt if the announced Amplats lay-offs go ahead.
African Bank Investments, a lender whose target
market is lower-income South Africans such as miners, said on
Monday many of its debt-laden customers were struggling to pay
back their loans.
"The knock-on effect from the recent strike activity led to
increased debt servicing burdens," the bank said in announcing
its first-half earnings.
AMCU's rise has been built in part on perceptions that NUM's
leaders have grown too close to management and the ANC.
The view from the boardroom is somewhat different as NUM has
been wringing above inflation wage hikes for its members over
the past decade, a huge squeeze on company margins.
But even increases above inflation do not go far for workers
at the bottom end of the pay scale who on average have eight
dependants and are mostly drawn from poor rural areas.
Inflation, which is currently running near 6 percent, looks
set to accelerate further given the recent weakness in the rand.
(Additional reporting by Agnieszka Flak and David Dolan;
editing by Pascal Fletcher and Philippa Fletcher)