After six weeks of talks between South African gold mining companies and unions over miners’ wages, negotiations have gone nowhere, increasing the prospect of strikes in a declining industry dealing with mounting costs and poor prices.
Gold mine stoppages could start as early as next week, reports Reuters, causing further damage on Africa’s largest economy, which is already losing $60 million a day because of a strike in the car manufacturing sector, involving over 30,000 workers.
Last week, union leaders rejected the newest offer by the Chamber of Mines to raise wages by 5.5% – at par with inflation rates. This represents a 0.5% increase from their previous offer, 1.5% on the initial offer but far below union demands.
South Africa’s chamber of mines represents the country’s main gold producers, such as AngloGold Ashanti (NYSE: AU) (ASX: AGG), and Gold Fields (NYSE: GFI).
Analysts agree the outcome of the stuck talks may push gold producers to leave South Africa or simply close down all operations, as costs continue to escalate.
In early July, the chamber’s chief executive officer, Bheki Sibiya, said a wage negotiation failure would likely destroy South Africa’s largest export industry and the nation’s credit rating.
“Neither the industry nor the country can afford yet another wave of calamitous workplace disorder that delivers additional global uncertainty and becomes the cause of further downgrades of South Africa’s sovereign credit rating,” Sibiya wrote.
Representatives for the country’s two main mining sectors, platinum and gold, have warned than any significant increase in wages will risk more job losses and trigger closures.
Based on a deadline set by the country’s Commission for Conciliation, Mediation and Arbitration, a settlement in the gold sector must be reached by this coming Saturday, August 24.
Image by Steve Garvie