South Africa Gold Miners Reject 'Slave Wages,' Go On Strike: Is A Resolution In Sight?

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Gold miners in South Africa
Gold miners in South Africa

South Africa's gold industry has been on the precipice for weeks, but tens of thousands of gold miners finally took the plunge Tuesday evening and went on strike after weeks of stalled negotiations.

The National Union of Mineworkers, or NUM, represents about two-thirds of South Africa's gold miners. It's going head-to-head with the country's Chamber of Mines, which represents the miners' employers -- major companies including Sibanye Gold Ltd. (NYSE:SBGL), Harmony Gold Mining Co. (NYSE:HMY) and AngloGold Ashanti Ltd. (NYSE:AU). NUM was seeking a 60 percent pay increase for entry-level workers, which would bring monthly wages from US$487 up to $780. But the companies have so far been unwilling to raise wages by more than 6.5 percent. 

By Wednesday, however, it appeared that negotiations had already made some headway. Both sides are still keeping officially mum about the numbers, but there are reports NUM may now be considering dramatically reduced wage increases of as low as 10 percent.

"The employers and the NUM have come much, much closer to finding one another," Charmane Russell, a spokeswoman for the companies represented by the Chamber of Mines, said to Reuters. She added that despite ongoing discussions, formal offers haven't yet been revised.

There's plenty of impetus for both sides to come to a solution. Gold miners, many of whom struggle to support themselves and family members while living in tin shacks outside the mines, simply can't afford prolonged work stoppages. Gold companies, meanwhile, stand to lose about $34 million worth of productivity each day the strike drags on. 

The total economic cost, including lost taxes and wages, is as high as $58 million per day. That has the government scrambling to facilitate a resolution. "A protracted strike going on as it is looking now is not helpful to the country, nor to the industry itself,” said South African President Jacob Zuma, according to the Financial Times. “The strike hurts both sides; we can just [hope] that they… find a solution.”

A deeply troubled economy forms the backdrop to this latest crisis. Strike action isn't confined to the mining industry -- about 30,000 auto manufacturers and 90,000 construction workers are also demonstrating. Meanwhile, South Africa is struggling with shrinking foreign currency reserves, recurring power outages and a weakening currency. Inflation surged to 6.3 percent in July, exceeding the central bank's target limit of 6 percent. 

South Africa is now one of the slowest-growing economies on the continent, and strike-induced productivity losses will only dampen its prospects. In July, the International Monetary Fund slashed its 2013 GDP growth projection for the country from 2.8 percent to 2 percent.

But NUM argues that its wage demands are necessary, since addressing South Africa's endemic income inequality problems is paramount. The chasm between South Africa's haves and have-nots has become a focal point for demonstrators over the past year -- especially since Aug. 16, 2012, when security forces killed 34 strikers at the Marikana platinum mine, bringing back painful memories of similar abuses under apartheid.

"The union is aware of the devastating impact industrial action would have on the economy, which is largely a white man’s economy with no benefits for poor black mineworkers,” said NUM in a statement on the eve of the gold miners' protest. “The union reiterates its position of rejecting with contempt slave wages.”

 

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