July 8, 2016 / 1:45 PM / 2 years ago

Hobbled by 2014 strike, South Africa platinum producers brace for wage talks

* Platinum firms plead poverty, cite low metal prices

* Unions seek wage hikes well above 6.1 pct inflation

* 2014 union strike hurt producers, led to job cuts

By Zandi Shabalala

JOHANNESBURG, July 8 (Reuters) - The world’s top platinum miners face tough wage talks next week with South Africa’s hardline unions, having seen their balance sheets battered and the capacity for big pay hikes limited by low prices and the effects of a five-month strike in 2014.

The Association of Mineworkers and Construction Union (AMCU) plans to demand rises of more than 50 percent, while a smaller union demanded 20 percent.

The demands are well above inflation at 6.1 percent in a struggling economy, with the International Monetary Fund estimating GDP expansion this year at 0.1 percent, dented by low commodity prices and a severe drought.

Africa’s most industrialised country has the biggest and most lucrative platinum reserves but labour unrest and regulatory uncertainty have dampened investor appeal.

The strike in 2014, which was led by AMCU, hit Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin , forcing them to cut jobs, shed mines and in some cases make cash calls to investors.

On Thursday, AMCU, which represents the majority of workers on the platinum belt, stuck to its battle cry of demanding a “living wage” of 12,500 rand ($850) per month for the lowest-paid workers. That amounts to a 56 percent raise.

“The living wage addresses food inflation because it keeps rising. If we are stuck in that low wage then how are we going to cope with these increases, which are beyond our control,” AMCU president Joseph Mathunjwa said ahead of talks on July 12.

The mining companies are pleading poverty. The 2014 strike, along with low prices, cost the industry 24 billion rand and led to thousands of layoffs.

“We remain committed to negotiating in good faith whilst remaining aware of the economic realities” facing the industry, Lonmin spokeswoman Sue Vey said.

London-listed Lonmin was forced to raise cash from investors at the end of last year, selling each share for just over a penny. Larger rival Implats also tapped shareholders for equity to develop shafts it deemed vital to its growth.

“We have ensured that shop stewards have been appropriately trained and have a good understanding of our business and the challenging environment in which we operate,” Implats spokeswoman Alice Lourens said.

Amplats declined to comment.

Although platinum prices are up 22 percent this year, they are down 50 percent from 2008 peaks due to oversupply and muted demand from top consumer China.

“The balance sheets of Lonmin and Implats won’t be able to sustain another severe downturn,” Sanlam Private Wealth mining equity analyst Shiraaz Abdullah said.

$1 = 14.7067 rand Editing by James Macharia and Dale Hudson

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