SOME mining companies operating in South Africa are behaving recklessly, African National Congress (ANC) secretary-general Gwede Mantashe said on Friday, as the ruling party intensified its combative approach to the industry.
The mining sector is on the brink of major disinvestment, which would lead to a haemorrhage of jobs.
The ANC summoned mining industry bosses to a meeting on Wednesday afternoon, in the wake of the announcement of planned sweeping changes to Anglo American Platinum’s (Amplats’) business in South Africa, including the loss of 14,000 jobs.
The party and the government have threatened to take away the mining rights of companies considering pulling out of money-losing operations. These rights would be auctioned off to interested buyers.
Mr Mantashe said the industry had to be responsible and treat South Africans decently.
He said Mineral Resources Minister Susan Shabangu and the leaders of the National Union of Mineworkers were "annoyed" with Amplats because of the "reckless" and "insincere" way in which it had announced the news of the retrenchments.
Instead of consulting all the role players first, Amplats delivered the shocking news and planned to consult later, he said.
Mr Mantashe said Anglo American’s 50-year plan, presented to the government in 2010, on sustainable mining, growth and job creation was now "falling flat".
He said the ANC and the government had to consider whether mining companies were genuine when they presented plans when they were still applying for mining licences, or whether they just "make nice plans so that the government can approve their licences".
He said the government should consider whether revoking a mining licence was feasible in a case where it was found that a company had provided glorious plans for the sake of getting a licence but ditched those plans during the operational stage.
Mr Mantashe said it appeared Amplats was merely "testing the waters" with its retrenchment action, which was likely to be followed by similar industry-wide action.
He said more responsibility was expected of mining companies built in the South Africa economy.
"Anglo American is a South African company," he said. "It is a British company by default. It is reckless when it comes to South Africa, although it was built by our sweat and blood."
Companies such as Anglo American behaved like "visitors", treating the country "recklessly", he said.
Mr Mantashe had no qualms about the ANC’s strong-worded approach, saying the possibility of negative investor sentiment was often used to blackmail the government and the ruling party into taking no action, or as a means for outside parties to dictate its policy and political considerations.
Rating agency warning
Meanwhile, rating agency Fitch said on Friday that Amplats’ decision to mothball or sell costly operations in South Africa highlighted the difficult mix of labour-intensive production and sharply rising wage costs in the country’s platinum and gold mining industries.
"If the company succeeds with its restructuring plans in the face of government and union opposition, we would expect other operators to follow suit," the agency said.
Fitch recently downgraded South Africa’s long-term foreign currency issuer default rating (IDR) by one notch to BBB from BBB+ and its long-term local currency IDR to BBB+ from A. The agency also downgraded the short-term IDR to F3 from F2 and the country ceiling to A-from A.
It cited as one of the reasons for the downgrade the recent labour unrest in the mining industry, which prompted Amplats to take action.
"Gold and platinum mining in South Africa is more labour-intensive than in many other countries, and the four shafts being closed by Anglo American fall into this category; in part because of the depth at which mining takes place," Fitch said.
"We estimate that labour costs for South African gold and platinum miners account for about 40% of the total, compared with about 20% for coal and iron-ore mines. Big wage hikes, such as the 22% increase agreed between (platinum miner) Lonmin and striking workers last year, are therefore harder for companies to absorb.
"This mix has been a growing problem for years, but we believe cost inflation is likely to have a marked impact on mining companies’ results in 2013 due to stagnant commodity prices."
For Anglo American, it said, the shutdown of four shafts at the Amplats Rustenburg operations and the sale of the Union mines would cut platinum production by about 20%.
"The plans are likely to be neutral to positive for Anglo American’s credit profile, given the weaker profitability of the operations being closed. However, we expect the group to face significant political pressure to reverse or water down its plans as well as the potential for ongoing strike action and disruption at other facilities throughout the process, which could harm production in the near term."