South African strike unlikely

Talks regarding a new contract for miners in South Africa reached an impasse in mid-July, and workers in the world’s biggest gold-producing country set a deadline of late July for the first nationwide mine strike in 16 years.

During negotiations two years ago, both sides went down to the wire before inking a deal.

It’s thought that gold companies will likely boost their offers to around 10% for the first year of a 2-year pact from their latest proposal of 8.75%, as this would be less damaging than a work stoppage. And workers will probably settle for a wage hike well off their initial demand of 20%.

South African-based producers Gold Fields, Harmony and South Deep would suffer if there were a stoppage. (South Deep is jointly owned by Vancouver-based Placer Dome and Johannesburg’s Western Areas.)

A last-minute settlement would likely be similar to AngloGold’s latest proposal, which provides a bigger wage hike in the first year to account for a swell in inflation in 2002. Increases in the second year would be linked to inflation.

Besides wanting the settlement to reflect higher prices for everyday goods, workers are unhappy that managers reaped bonuses as gold prices surged while wages were fixed.

The minimum cash wage for mineworkers is due to increase within 12 months to 2,000 rand ($375) per month under current proposals by the Chamber of Mines, who represents the mining companies.

Mining companies say they cannot afford a substantial boost in labour costs, which constitute about half of gold production costs, since a stronger rand has depressed domestic income from dollar-denominated gold.

The rand gold price surged by 60% from July 2001, when the last wage pact was reached.

The price remained inflated until September 2002, and despite the subsequent slide, it is still roughly 20% above the level at which the previous contract was signed.

A work stoppage would also hit South African coal companies Eyesizwe, Anglocoal, and Kuyasa, as well as Ingwe, a unit of BHP Billiton.