Integrated Annual Review 2012 Annual Financial Report 2012 Mineral Resources and Mineral Reserves Regional overview  
 

3.1.1 Issue 1: Industrial action in the South African mining sector

Issue

Between August and November 2012, the South African mining industry was affected by a wave of illegal industrial action and associated violence – prompting growing international alarm at the broader implications for the South African mining sector as a whole. This included serious illegal strikes at the Beatrix and KDC mines that resulted in a substantial loss of production (p139).

Drivers

The wave of illegal strikes was triggered by an illegal strike at Lonmin’s Marikana platinum mine in August 2012. This resulted in deadly violence culminating in the death of 34 strikers by the police on 16 August 2012. Strikes subsequently spread to mines operated by Anglo American Platinum, Gold Fields, AngloGold Ashanti, Gold One, Kumba and Harmony. This resulted in the mass retrenchment of striking workers by some operators – and further violence, albeit at a lower level than experienced at Marikana.

Although analysis of the root causes of the strikes is ongoing, certain key underlying themes have emerged that appear to have contributed to the unrest. At the societal level, there appears to be widespread frustration at a lack of meaningful post-apartheid economic transformation beyond that which has benefited what is increasingly seen as a ‘Black Economic Empowerment elite’. Indeed, serious economic inequality is proving a persistent challenge in South Africa – and has been largely unaffected by the country’s historical democratic transition. In this context, the South African mining industry faces a number of more specific challenges in terms of:

  • An unreformed migrant labour system: Challenges persist around South Africa’s long-established migrant labour system, which relies on workers from distant, poorly developed labour-sending areas within South Africa and from the broader Southern African Development Community. This requires workers to leave their families for long periods of time and to stay in what can be suboptimal on-mine accommodation – or to ‘live out’ in informal, near-mine settlements. Furthermore, many of those who do choose ‘living out’ have established second households – significantly increasing pressure on their wages and raising additional socio-economic challenges
  • Frustration amongst Rock Drill Operators: Rock Drill Operators appeared to be at the vanguard of the illegal strike actions in the platinum mines. This is linked to the fact that they tend to come from the labour-sending areas described above, carry out the most physically arduous roles within mines and have limited opportunities for career advancement (due to both low levels of education and a lack of clear career development pathways)
  • The failure of existing labour structures: The illegal and widespread nature of the strikes indicates a significant failure of the mining sector’s established labour negotiation framework. In particular, there appears to be a growing perception that established union structures are no longer effectively protecting or promoting the interests of all rank and file members – including more junior, migrant workers in particular

Implications

The strikes raised serious concerns amongst investors and other observers about the underlying social and economic fundamentals not only behind the South African mining sector but, in some respects, behind the country as a whole. In part, this was due to existing pre-conceptions about social tensions, inequality, crime and resource nationalism within South Africa. We believe such concerns have sometimes been exaggerated and that South Africa remains a strong destination for mining investment.

Nonetheless, the strikes (and associated violence) acted as a powerful reminder that despite the obvious cultural and legal transformation that has taken place since South Africa’s democratic transition, there are significant socio-economic challenges that (for the majority of citizens) remain largely unchanged. As such, there is increasing consensus within South African society that genuine transformation of wider society is required – above and beyond the relatively narrow boundaries of existing Black Economic Empowerment legislation.

The implications for our own business are obvious – both in terms of our shorter-term ability to maintain optimal operational performance, as well as investor perceptions around the long-term risks relating to our operations in South Africa.

Strategic approach

Our immediate response was based on responsible security provision, the maintenance of the gold mining sector’s existing two-year Collective Wage Agreement (which is not due to expire until June 2013) and constructive engagement with the unions. This meant we were able to secure an end to the strike in a way that did not result in serious violence or undermine existing labour relations frameworks.

Nonetheless, we are aware that the status quo cannot continue. At a macro-level, we are working on a collaborative basis with our peers, the South African government, relevant mining unions and our employees to examine the root causes of the strikes – and to examine new, fit-for-purpose collective negotiation structures that will help avoid similar challenges in the future.

In addition, we are directly addressing more specific challenges within our own business – in many cases through existing transformation programmes. This includes:

  • Promoting socio-economic development programmes within our labour-sending areas (p145)
  • Developing projects in laboursending areas in partnership with other mining companies
  • Ongoing enhancement of employee accommodation that goes above and beyond Mining Charter requirements (p138)
  • Examining enhanced employee incentivisation packages (similar to the new operating model agreed at South Deep in October 2012) to increase potential take home pay and advancement opportunities (p80, p140)
  • Exploring new career structures for Rock Drill Operators and other junior operational personnel to ensure clearer avenues for professional development

The longstanding nature of the migrant labour system means it will take time to reform. Nonetheless, we hope to play a key role in this process through the development of our mechanised South Deep mine, which is characterised by a smaller, better qualified and more technically advanced workforce. We are also seeking to source more labour from in and around South Deep.