Picture: THE TIMES
Picture: THE TIMES

AS CRUCIAL gold-sector wage talks opened on Monday with the Chamber of Mines offering a 4% raise, AngloGold Ashanti rocked the market with news of an asset write-down of up to $2.6bn.

The shock announcement starkly underlined the predicament faced by South Africa’s gold miners, whose wage offer is way below the double-digit increases being demanded by unions.

The National Union of Mineworkers (NUM) rejected the offer as an "insult", and warned of a looming confrontation in the fraught sector.

AngloGold, the world’s third-largest gold producer and the largest on the JSE, is undergoing a major review of its business to cope with a $220/oz drop in the gold price in the second quarter.

A report by David Davis, a gold analyst at SBG Securities, last week highlighted the parlous state of the gold industry, with a new all-in cost measurement leaving mining companies floundering.

Seven gold companies are engaged in the talks with four unions. Demands for entry-level wages have ranged from increases of 60% to 100%.

The companies, represented by the chamber at centralised talks, yesterday responded with a counteroffer of 4%, which the NUM warned was "setting the scene for confrontation".

"We view this in a very serious light. We reject the offer made with the contempt it deserves. It wags a middle finger at the workers. It’s an insult," said NUM spokesman Lesiba Seshoka.

The NUM represents about 65% of unionised gold miners.

Gold mining CEOs have made it clear in recent months that a double-digit wage hike is untenable given the weak gold price and soaring costs of electricity, materials and other above-inflation increases in recent years.

Elize Strydom, the chief negotiator on behalf of the companies, said the unions had to be realistic given the economic realities.

Asked on a media call what it would mean for the gold sector if the unions pushed for their demands to be met, Ms Strydom said: "It would be dire. The future of the industry is at stake. We need to become realistic and we all need to be very responsible and show leadership to do collectively what needs to be done to sustain this industry going forward."

Nearly two-thirds of South Africa’s gold mines are loss-making at current gold prices. If capital expenditure is added to cost calculations, all operations would be loss-making.

The talks will resume on July 24. The unions have asked the companies to reconsider the proposed increase, while the chamber had made the same request of the unions, Ms Strydom said.

The offer to increase basic wages by 4% would add R900m a year to companies’ costs and bring the sector’s wage bill to R29bn a year. Ms Strydom could not comment on what the unions’ demands would do to wage bills.

The offer would give the lowest-paid worker a guaranteed salary of R8,900 a month, including a basic wage, a living-out allowance, medical aid and retirement contributions.

It does not include profit shares, production bonuses and overtime payments, which bolster a wage packet, making this largely unskilled workforce one of the highest paid in the country, the chamber has said.

Trade union Solidarity said the attempt to strike an agreement on protocols for the talks, governing the way parties must behave, had foundered with the introduction of a raft of last-minute amendments by the Association of Mineworkers and Construction Union (Amcu).

Amcu did the same at a ceremony hosted by Deputy President Kgalema Motlanthe earlier this month to sign an agreement between the government, labour and mining companies to bring stability and restore investor confidence. Amcu, which has grown in the platinum and gold sectors at the expense of the NUM, submitted last-minute demands and refused to sign the industrywide agreement.

A task team in the gold sector wage talks would convene and try to resolve the issue around protocols ahead of the resumption of talks next week. "We’ll deal with the matter at the next plenary," Ms Strydom said, declining to say whether it had the potential to derail the wage talks.

Amcu represents about 17% of unionised gold workers and has been recognised by Sibanye Gold, one of the participants in the talks, as the majority union at its Driefontein mine. Amcu has a large presence at Harmony Gold’s Kusasalethu mine and AngloGold Ashanti’s Mponeng.

It said on Monday it would wait for an improved offer.

The talks are the first formal engagement between the unions and mining companies on wages. The platinum sector is the next to start talks, but unlike the gold sector, these will be done on an individual basis after Amcu scuppered attempts by the chamber and other unions to set up a centralised structure.

Amcu has tabled demands at Anglo American Platinum to increase entry level wages to R12,500 a month, matching the demand it presented to the gold companies. Those talks are due to start next month.

The ascendancy of Amcu last year was marked by unprocedural strikes, intimidation and the loss of more than 50 lives.