S.A. Gold Miners' Strike Unlikely to Affect Price

August 11, 2005

S.A. Gold Miners' Strike Unlikely to Affect Price

The worst strike in 18 years to hit the South African gold industry is unlikely to affect gold prices much, according to press reports. South Africa is the world's largest gold producer, despite a 9% decline in output in 2004, yielding a total of 342 tons. Its share of global gold production stands at around 14%, however, compared with 80% in 1970. "Although still the world's largest producer, South African output is now less than one ton a day, and in a market which is dominated by currency considerations, such a loss is unlikely to impact [gold's] price, we believe," HSBC gold analyst Alan Williamson told The London Times. Gold's price fell slightly on Aug. 9, to $436 an ounce.

The miners' strike, which started Aug. 7, brought the South African mines of AngloGold, Gold Fields, Harmony Gold and South Deep to a standstill. The mining stoppage will cost between $12 million and $20 million in lost revenue a day, analysts estimate. More than 70% of South Africa's 130,000 gold miners are taking part in the action. Gold miners in South Africa typically earn just over 2,500 rands (US$388) per month and often work more than two miles underground in narrow, hot tunnels.

Mining unions demanded pay raises ranging from 8%-12%, depending on the worker's position. The Chamber of Mines, which negotiates on behalf of employers, increased its offers Aug. 10 to 6%-7%. AngloGold Ashanti, Harmony Gold Mining Co. and Gold Fields Ltd. have also pursued individual talks with the three trade unions involved. But they maintain that with inflation well under 5%, workers can no longer expect high increases as in previous years.

"We are much closer than we were before with the employers," said National Union of Mineworkers spokesman Moferefere Lekorotsoana, who was hopeful the offers could be "fine-tuned" and made more acceptable. The mining industry has been badly hurt by the strength of the rand, which makes its exports more expensive, and has cut jobs on a massive scale – adding to the list of ills unions cite, reports the Associated Press.

A key part of the union's dissatisfaction is that it says the big mining firms – AngloGold Ashanti, Gold Fields and South Deep – have yet to address long-standing problems with miners' living conditions, says BBC News. Under apartheid laws, miners were forced to live in barracks, leaving their families in townships far away. Though the racial zoning laws were struck down by 1991 about three out of four of South Africa's 200,000 miners still live in hostels. AngloGold Ashanti says there is an average of six men per room in its hostels, down from 12 a decade ago. Harmony says its hostels average 4.2 men per room.

The union now wants the "living-out allowance" for finding family accommodation to be doubled, whereas the mining firms are offering only a 10% rise. AngloGold Ashanti is proposing to increase its allowance for miners renting their own accommodation to 1,000 rands (US$155) a month by the end of next year. The employers say they are working to improve hostels, but cannot move faster without jeopardizing jobs.

The National Union of Mineworkers says the crowded hostels are a breeding ground for tuberculosis. It also warns that South Africa's AIDS pandemic is worsened by the system, since miners far from home are more likely to visit prostitutes.

South African union leaders say there is rising ire at the growing gap between top management's seven-figure salaries and workers earning around 30,000 rands (US$4,700) a year. "In terms of pay differentials, South Africa is one of the most unequal societies in the world," said Patrick Craven, spokesman for the Congress of South African Trade Unions. A decade after the end of apartheid there is still deep resentment over inequality.

A strike by South African Airways ground staff and cabin crew grounded most flights for nearly a week in July. Pick & Pay, a major grocery store chain, was also hit by industrial action. On Aug. 8, South African municipal workers launched an indefinite and rowdy strike. About 500 of them threw rocks, lumps of concrete and bottles at police and dumped mounds of garbage in Cape Town during a march on Aug. 10.

"The way that workers in the formal economy see it, the apples are not falling in their basket," said Wyand Louw at the University of Cape Town's Institute for Social Development. "On the one hand, we have a glorious macro-economic Christmas tree lighting up, and on the other hand, we have the total alienation of the non-working community. In between, we have the workers who also feel they are not reaping the benefits."

President Thabo Mbeki voiced support Aug 10 for a strong trade union role to narrow the gap between rich and poor, black and white, but said this would take time because "we inherited such a disaster." His government has not sought to interfere in the strikes.

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