The Investor SA

 - Minimum wage negotiations could lead to mine shutdowns-

 

South - Africa's  gold  mining  sector  may  be  going  towards   even

bigger  trouble, as  new minimum wage negotiations  are soon to be

coming over  the  next  couple of months. These negotiations  could

see the country's gold  production  take  an  even  bigger  knock, as

wage negotiations  can quickly go out  of  hand  in  South-Africa, for

example the  Platinum  Strike  that  took  place  over  the  course  of

2012/13. The platinum strike escalated into horrifying violent attacks,

like the 'Marikana- Massacre' when  police  opened fire onto striking

miners (killing 44)

 

Inter-Union rivalries between NUM (National Union of Mine-Workers)

and AMCU (Association  of  Mine-Workers  and  Construction Union)

could be the main cause  of  the minimum wage negotiations hosting

problems. AMCU, which  currently looks after the interests of 25% of

the total mine workers in the gold mining sector, will look  to  replace

NUM, which currently looks after 57%, as the more  dominant  union.

Reports suggests that NUM will be  looking  at  nothing  less  than  a

100% increase in  minimum wages, for the lower paid section  of  the

gold mining sector's workforce.

 

Minimum  wage  negotiations  couldn't  have  come  at  a worse time,

for a number of existing  mines  are  already  operating  at  a  loss. A

number  of  existing  mines  already  find  it  more expensive  to mine

gold  for  what  they  can  sell  it  for, taking  their  total  net  income  to  a loss., and there remains little, if any signs that circumstances will improve. Thus, mining companies cannot afford to concede any major wage increases  without  having  to shut down  smaller  mines. This could lead the minimum wagenegotiations to become as ugly as  the  platinum  strike. The probability  of  keeping  workers  and  the  gold mining sector happy seems low, if  not  almost  impossible. 'South-Africa's gold production reached a monthly low in January, according to data  released  by  Statistics  South-Africa. Although a  number of  temporary  factors  might  have  been  contributed  to the unusually low level, general historical trends show that gold has lost the prominent place it  once  had in  the  South-African  economy' -moneyweb.com-

South-Africa produced 168 tons of gold in 2014, a small improvement compared to 164.5 tons in 2013, which led to South-Africa regaining its position as the world's fifth largest gold producer. Not that many years ago, South Africa dominated the global  gold  production  scene, producing over a thousand tons of gold a year, but latest figures from  Statistics  South-Africa show that there's a ever-increasing downfall in the country's gold production.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statistics  South-Africa  has  issued  comparable  gold mining production indices that stretch as far back as 1980. But what is not shown in the statistical graph above is that the country's gold production downfall started to decline way before 1980. The fall in the gold production has reduced gold's contribution to the South-African  economy. Gold  contributed 3.8% to  gross  domestic  product  in  1993, declining  to 1.7% in 2013. Gold made up 67% of all mineral sales in 1980, declining to 12.5% in 2014.

 

I n our point of view, not even a huge increase, or bearish spike in the JSE index could save South-Africa's gold mining sector. Gold mines in  South-Africa  continue  to  dig  ever  deeper  under ground  to  produce  their  gold, and  the deeper  they dig , the  more expensive the operation costs. And with minimum wage negotiations coming up, the increase of inflation will cause the miners  to  settle  for  a  minimum wage that will allow them to keep their standard of living. Reports show that AMCU has already rejected the  gold mining sector's minimum wage proposal in March 2015. So with gold becoming more and more expensive to mine and gold continuing  to  lose its value, along with mine workers demanding unaffordable wage raises, its very difficult to see how the gold sector will survive in South-Africa.