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

7.1.5 Labour relations

Our operations in each of the following countries have the following levels of union participation within their workforces:

  • Australasia Region: 0%
  • South Africa Region: 85%
  • South America Region: 15%
  • West Africa Region: 95%

Illegal strikes at Beatrix and KDC

In 2012, the South African mining industry experienced a wave of wide-ranging, mostly illegal strikes – that impacted not only Gold Fields but the mining sector as a whole. This significantly affected our production at both KDC and Beatrix, with 29,000 workers participating in the illegal industrial action between September and November. As a result, we lost 145,000 ounces of production – equivalent to R2.1 billion (US$256 million) in lost revenue.

Although the strikers issued demands relating to administrative issues and wages, the root cause of the strikes appears to relate to tensions between the leadership of the National Union of Mineworkers (NUM) and certain sections of their membership.

The strikes violated the existing two-year Collective Wage Agreement (CWA) signed in 2011 between the gold mining industry and the relevant unions (including the NUM, Solidarity and UASA). We adopted a joint position with other gold producers during the strikes and insisted that the CWA continued to apply. Any wage negotiations can only take place when the CWA comes to an end in June 2013. As an act of goodwill, however, we brought forward certain elements of the 2011 CWA relating to changes to job grades and entry level wages, which cumulatively raised our wage bill by around 2.5%.

South Africa’s gold mining companies, trade unions and government have since established a working group to examine labour issues within the industry. This group will have input into the next round of labour negotiations scheduled for mid-2013.

The strikes raised concerns about the long-term sustainability of our deep underground, mature mines in South Africa under current corporate structures and labour-relations models. A key focus for Sibanye Gold, as owner of the Beatrix and KDC mines, is to examine the structure of labour relations at these two mines, as well as the potential for profit participation, through direct interaction with the workforce – as well as negotiations with registered trade unions.

Case study: Socio-economic drivers behind South Africa’s 2012 mining strikes

Maintenance of responsible security

Given the context in which the cross-sector strikes were taking place in South Africa – including strike- related incidents at Lonmin’s Marikana platinum mine in August 2012 that resulted in the death of 44 people – Gold Fields took particular care to avoid similar incidents at its own mines. The Marikana incident (along with the cross-sector nature of the strikes) was seen as indicative of many of the tensions within the mining sector – as well as wider society. It was also seen to demonstrate the potential for violence that could result from such tensions.

Employees at South Deep, South Africa

Despite a number of isolated, non-fatal incidents and acts of intimidation by illegal strikers against employees at Beatrix and KDC, we are pleased that all parties were able to reach a generally peaceful resolution to the situation without serious injury or damage to property. We believe this reflects the professional and sensitive response of Gold Fields Protection Services (GFPS) and those assisting them, particularly the South African Police Service, constructive engagement between our management and the relevant unions (and the NUM in particular), and the attitude of the majority of our employees.

New operating model at South Deep

Despite the strikes at Beatrix and KDC, in 2012 we marked a major step forwards in terms of our labour relations at South Deep. This related to the proposal by Gold Fields of a new operating model at the mine, which is aimed at improving productivity, performance and rewards in line with international best practice. Following months of negotiations with the relevant unions and the early agreement by UASA, in August we entered into a formal consultation process with the NUM and other unaffiliated employees under a Section 189 (3)1 notice. After further negotiations, the NUM and Gold Fields reached a landmark agreement implementing the new operating model in October, which allowed us to suspend the Section 189 notice.

The new operating model (p79 – 81) will transform South Deep into a 24-hour, seven-day a week operation – in line with advanced mechanised underground operations across the world. Under the agreement, an uncapped-bonus system will more appropriately reward employees who achieve production targets and will improve alignment to Gold Fields business objectives. At the same time, bonuses will be aligned to safety targets to ensure that safety performance is in no way compromised by the new system (p79). This will have a lasting impact on productivity at South Deep for the rest of its life of mine – currently estimated to be 2060 – and position it to become one of the leading underground mechanised mines in the world.

The long-term impact of this ground-breaking agreement on the future of Gold Fields (and indeed the South African mining industry) cannot be overstated. The agreement also serves as a valuable reminder of what can be achieved when management and labour work together for the common good.