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SA platinum: an industry in crisis
23 hours ago
Sasha Planting
Industry executives and trade unions had been summoned to Parliament by the committee which was concerned by the stories of job losses and mothballing of assets.
After one too many questions from Parliament's mineral resources committee on what the mining industry was doing to resolve issues in impoverished mining communities, executives from SA's platinum industry spelt out in no uncertain terms the state of the platinum industry.
Industry executives and trade unions had been summoned to Parliament by the committee which was concerned by the stories of job losses and mothballing of assets.
"This is an industry in crisis," says Amplats CEO Chris Griffith. Without exception, the past three years has seen every platinum company in SA go back to its shareholders to raise money. Anglo Platinum raised R12m in 2010; Lonmin plc raised R7.2bn last year and Impala asked shareholders for R4.5bn last week.
"Shareholders have been putting money in, not taking it out and this will be the case for the next couple of years," he said.
Mining input costs are rising at twice the inflation rate, with electricity, steel, stores and labour costing the industry an extra R28bn between 2006 and 2011, a 200% increase, said Roger Baxter, Chamber of Mines' senior executive for economics and strategy. His presentation detailed the issues confronting the industry.
While costs are rising, demand plummeted as the industrial demand for catalytic converters had fallen by 9% per year for the last five years. While demand for platinum jewellery had helped offset this it was not enough to absorb the excess supply of platinum in the market. "Supply continues to exceed demand," says Baxter.
Buyers of platinum are increasingly switching away from platinum and rhodium into palladium causing SA to lose 15% of its market share. While SA produces 50% of the world's platinum and 27% of its rhodium, it produces just 2% of its palladium.
Last year's strikes, committee members were told, simply compounded an already untenable situation. At Amplats, the biggest platinum producer in the world, 80% of its operations were loss making last year. Without the strike 30% to 40% of its operations would have been loss making. "In 2012 59% of the platinum sector was in a marginal or loss making position," says Baxter.
As a result the industry is being forced to restructure its operations to align the individual businesses with a change in market demand and to restore profitability.
However the mines say they have not lost sight of their social obligations in a time when margins and profits have declined. Last year the industry invested R500m in community projects. It also paid R30bn in salaries and wages and the five largest companies paid the government R7.3bn in tax.
"We cannot control the poverty and lack of jobs. We are acutely aware of the difficulties people without jobs face," says Impala Platinum's group executive for people, Johan Theron. "We acknowledge our responsibility. What we have also recognised is that with better co-ordination with government and other social partners can all get better value for our money."
With a minimum of 14 000 jobs on the line, mineral resources committee chairman Frederick Gona was not impressed with these numbers. He asked how confident Amplats was that the current round of negotiations with government and labour would yield positive results. "I'm not confident at all Chair," was Griffiths blunt response. "This is not about people working harder to find a solution we spent the better part of last year going through all the possible options. Perhaps there are things that government or the SARB can do, but us alone as a company, we have done all the easier stuff. I'm being honest, but I think that is important."
NUM regional co-ordinator Madoda Sambathe was horrified. "This is a major concern - that an employer can have that attitude ahead of a 60 day negotiating period. I need to communicate this."
Behind the rhetoric there is a considerable amount of work taking place, much of it co-ordinated by the ministers of Labour and Mineral Resources. The issues being addressed include restoring stability to the sector, re-establishing negotiating platforms for labour, addressing violence and intimidation and how to collectively address the social issues facing miners. "We need to engage, engage, engage," says Baxter. "That means bringing new unions like Amcu on board too."
