Strike settlement could spark unrest at other mines

September 19, 2012

Lonmin PLC reached an agreement with striking miners to end a violent six week strike at its platinum mine in South Africa but this agreement might lead to further labor strife at other platinum mines in the region.

Lonmin agreed to an 11-to-22 percent pay hike deal with striking workers. This deal may be a red rag for others in an industry riven by income disparities, Reuters reported.

“We want management to meet us as well now. We want 9,000 rand ($1,100) a month as a basic wage instead of the roughly 5,000 rand we are getting,” an organizer with the militant Association of Mineworkers and Construction Union (AMCU) at Lonmin rival Impala Platinum told Reuters.

He declined to be named for fear company recriminations.

AMCU exploded onto the South African labor scene in January when its turf war for members with the dominant National Union of Mineworkers (NUM) led to the closure of the world's largest platinum mine, run by Implats, for six weeks.

The communities that serve the platinum companies sit side-by-side in the dusty “platinum belt” - proximity that will make the Lonmin deal a source of jealousy for workers from other mines.

Anglo American Platinum, the world’s top producer of the metal used for catalytic converters in cars, was forced to suspend its Rustenburg operations, 120 kms (70 miles) northwest of Johannesburg, because of the unrest.

Those mines rebooted but its workers will be tempted by the pay hikes achieved just down the road in Marikana, where 34 striking Lonmin workers were shot dead by police last month in the worst such incident since the end of white rule in 1994.

“The ripple effects will continue to be felt. The outcome of the negotiation at Marikana will likely set a new benchmark for mining more generally and wage costs are set to rise substantially,” JP Morgan said in a research note.

Wage hikes in the mining sector have been leap-frogging inflation for years, reducing margins in the industry as productivity has struggled to keep pace.

But your typical miner has several dependents to feed and so pay rises that outpace inflation may not go far as the gains evaporate at the kitchen table.



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