Friday, August 17, 2012

Lonmin shootings will change SA labour relations

THE emergence of a rival union in the platinum space must be the most worrying event in the 30-year history of the National Union of Mineworkers (NUM). The union is one of the biggest and certainly most politically powerful under the blanket of the Congress of South African Trade Unions, representing close to a fifth of its entire membership and has an important place in the African National Congress (ANC) alliance.

Given the importance of mining in the South African economy, support from the union is integral to the ruling faction in the ANC. It is this political role on which its leaders may have placed too much focus because of populist nationalisation rhetoric as well as the succession battle, to the detriment of its core mandate.

Straying from that focus on the interests of its workers has opened up space on its shop floors for a rival union, the Association of Mineworkers and Construction Union (Amcu). This happens as the situation remains dire for miners in the platinum sector as prices for the metal remain weak and costs keep rising because of poor management and other factors.

The NUM lays the blame for the unfolding violence in North West on mining houses for making unilateral salary adjustments that undermine existing wage agreements. Amcu may have been opportunistic in using those grievances from the disparities in pay to muscle in, but where has the NUM been? The union should have been alert and ready to react to the grievances.

You’ve got to think the union, which once had held sway over the entire mining industry, has taken its eyes off the ball in a big way. After the warning shots at Impala Platinum, the world’s second-biggest miner, the battle is playing out at Lonmin, the third biggest.

For the first time in the course of the Lonmin dispute, which has caused a number of fatalities, platinum prices have responded. In late afternoon trade, it had its biggest percentage gain in a month.

Anglo American Platinum, the world’s biggest miner, could well be the next explosion point in this festering battle. The NUM has warned that the turf war could spread to other mineral segments too.

The 30-year old NUM monopoly has certainly been challenged and it looks likely that it will continue to be unless its leadership gets focused on the matters at hand, instead of who occupies Luthuli House and the Union Buildings.

The deaths of the Lonmin workers yesterday have changed labour relations in the mining industry forever. Miners and the government may have to invite another party to the negotiating table, further complicating an already complicated mining regime.

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FOR the average Chinese citizen without access to international markets, there are very few places to go to grow their wealth. The stock market in the world’s second-biggest economy has underperformed all its emerging market peers as well as other major equity markets, with the Shanghai Stock Exchange index down almost 20% over the past 12 months.

In that time, the JSE all share has gained 19%, London’s FTSE 8,9% and the S&P has rallied 18%.

The only alternative is to invest in property and that has been quite the story over the past 10 years. In the country’s major cities, house prices are about 30 times the annual salary and in the smaller metros 10 times. Compare that to five times the annual salary in the US at the height of its housing bubble.

Realising the risk posed by this growth in housing prices, last year the Chinese government raised rates to both cool the housing market and to combat inflation.

Inflationary pressures have eased this year, unfortunately so has growth.

So much so that foreign direct investment in what was once the golden goose in terms of investment destinations has seen the biggest drop in two years.

Data out of China yesterday showed investment slid 8.7%, the eighth drop in nine months and the smallest inflow since July 2010.

China has now come under pressure from investors, much like the US and Europe has over the past four years, to look at measures to boost economic growth — either by cutting rates or lowering the reserve margin required by banks.

But just how far can China go to boost its economy without further fuelling concerns over its property market? It must be keeping the political powers in that part of the world awake at night, especially as there will be a change of guard by the end of the year.

As for other central banks in the global economy, there’s not much room to manoeuvre.

Source: Business Day

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