Miners' strikes weaken S. African economy

Oct. 12, 2012 at 2:13 PM   |   Comments

JOHANNESBURG, South Africa, Oct. 12 (UPI) -- Escalating wildcat strikes in South Africa's mining industry, a pillar of the continent's largest economy, are scaring off foreign investment that's heading for other African states, such as those riding a wave of major oil and gas discoveries.

"After nearly two months of at times violent industrial unrest and a longer period of political uncertainty, investors who have been drawn by South Africa's superior legal, financial and physical infrastructures are beginning to think again," the Financial Times reports.

"This is most pronounced in the mining sector in general and the platinum industry in particular ...

"The sense of crisis is becoming infectious. Foreign companies have put a number of major investment decisions on hold in other sectors in recent weeks and the kind of multibillion-dollar deals that drew Barclays Bank into Absa, China's ICBC into Standard Bank and U.S. retailer Walmart into South Africa's Massmart look unlikely to be repeated soon."

The business daily castigated South African President Jacob Zuma, deeply embroiled in a political battle to secure re-election for a second five-year term, for failing to take decisive action to halt the profusion of strikes that began Aug. 10.

These have paralyzed the mining sector, which accounts for one-fifth of South Africa's gross domestic product and generates more than half the country's exports.

South Africa supplies 80 percent of the world's platinum, one-quarter of its chrome and is among the top 10 gold producers.

The unrest is the most violent to hit South Africa for since the end of apartheid in 1994.

About 50 people have been killed, 32 of them strikers gunned down by police Aug. 16 at the Marikana platinum mine near Johannesburg run by major producer Lonmin, where the trouble began.

The strikes quickly spread to other mines, fueled by growing discontent with Zuma's government, dominated by the African National Congress which toppled white minority rule in 1994, and anger over worsening economic inequality and official corruption.

Some 40 percent of the population of 50 million live below the poverty line of $50 a month.

A wage settlement by Lonmin at Marikana Sept. 18 was expected to end the industrial turmoil, the most violent unrest since the end of apartheid. But it didn't and, fanned by nationwide frustration with the scandal-plagued Zuma's actions, the strikes spread to the gold and iron ore sectors in an escalating challenge to the Pretoria government.

This has dented investor confidence in Africa's wealthiest economy.

The coal mining sector hasn't been hit yet but since 85 percent of South Africa's electricity is generated by coal-fired plants it may well be targeted soon if the government fails to negotiate an end to the trouble.

An estimated 75,000 miners are on strike, with major concerns including Gold Fields, Anglo American Platinum and AngloGold Ashanti, which has been forced to shut its entire South African operation with 24,000 workers on strike.

Anglo American Platinum, a subsidiary of London-listed Anglo American, sacked 12,000 striking miners Oct. 5 after the wildcat walkouts cost it production of 39,000 ounces of platinum worth nearly $100 million.

The company refuses to offer pay hikes, like the 22 percent pay rise Lonmin gave its workers in September. Anglo American is reported to be considering closing some mines as it weighs its future in South Africa.

The Financial Times has laid the blame for the worsening crisis squarely on Zuma's shoulders.

Since the Aug. 16 killing of strikers, now dubbed the "Marinaka massacre," the newspaper said, "Mr. Zuma has failed to show appreciation of the scale of the crisis or the need to address strategically and urgently its long-term causes, including deepening inequality and popular frustration at the pace of change since the end of white minority rule ...

"Crucial decisions keep getting deferred, allowing strikes to spread from mining into transport and now potentially the public sector.

"In the process, Mr. Zuma has looked more like a chief executive answerable to the ruling ANC board, than a president," the daily commented.

"Given that the ANC is now such an awkward coalition -- of newly gilded tycoons, liberals, racial nationalists, radical populists, leftists and unions -- there is little cause to hope for a firm new strategy of reform."

Topics: Jacob Zuma
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