INVESTORS should fasten their seatbelts as more protests and economic uncertainty are likely in the run-up to the ANC's elective conference in Mangaung in December, as unions and politicians "play a game of chess" in a battle for power.
The protests seen at platinum mines around Rustenburg, and at Lonmin's Marikana mine in particular, are driven by politics, one institutional investor said. "There is no coincidence that this has happened in August, just a few months before Mangaung. What happened at Marikana is tragic in every possible way. It is a dipstick of what the next four months will feel like for South Africa. It will be very tough. If you go back to the period before the Mbeki/Zuma standoff in Polokwane, it was very stressful."
There is a risk that the platinum protests may spread to other sectors, he said. "The socio-economic fabric is being stretched, and it's getting tighter and tighter as we go along. We have inequality levels that are worse than they were 20 years ago; we have an economy that has essentially not created a single job in 30 years. Wage increases are persistently ahead of inflation. You don't build a vibrant economy by paying wages ahead of productivity. You have to build productivity first," he said.
This week, the IMF downgraded South Africa's growth outlook to 2.6% for the year and 3.4% for 2013. It said the country is facing enduring problems with external competitiveness as a result of the high domestic costs of production, including unit labour costs. Mining sector wages have risen by 47% in real term over the past decade, while strike action caused more than 1.7million man days to be lost over the period, Fitch said.
Impala, where rivalry between the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (Amcu) halted output for six weeks at the start of the year, said industrial relations around the Rustenburg area are "quite tense", and it cannot rule out more disruption at its own operations.
Amcu has a certificate of non-resolution and can call a legal strike at Impala. The dispute relates to the long delays in getting membership numbers of its employees verified. Impala has done eight verification processes since the strike at Rustenburg ended in March, but the process has not been accepted by all parties, Impala said. A new process starts on Wednesday.
Violence and intimidation in Rustenburg is not a new phenomenon but part of a pattern orchestrated to deal with the growing influence and power of Cosatu, Cosatu secretary-general Zwelinzima Vavi said on Friday.
Gold Fields CEO Nick Holland said "there are no indications" of a likely spillover into the gold sector. "We are engaging with the chamber [of mines] and the platinum industry and other stakeholders. We do not want to learn the hard way twice."
Holland said Amcu is not active on its gold mines yet.
The platinum protests highlight broader structural problems that have long weighed on South Africa's rating, which can increase the cost of borrowing for the country, Fitch said. It warned that high unemployment can threaten social and political stability over time, which will further damage the investment climate.
"The latest protests are another setback for South Africa's mining sector, which has been struggling since the early 2000s. Overall output is below 1994 levels."
*This article was first published in Sunday Times: Business Times
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