Coal Sector Faces Growing Labour Unrest

BRISBANE, Australia - June 2, 2013 - PRLog -- Peter Attard Montalto, a strategist for Nomura International, raised the concern that unrest in labour relations within the platinum sector could spill over into the coal industry and interrupt deliveries to Eskom, South Africa’s power utility. It could also further disrupt the building of Eskom’s Medupi power station where labour relations have been endemically troubled.

“We think the market under-estimates the structural changes, union dynamic and semi-permanent state of output losses and so ongoing economic impact – as well as the tail risk of this boiling over being under-estimated,” he said in a note.

Elize Strydom, senior executive head for labour relations at the Chamber of Mines of South Africa (CoM), acknowledged there was a risk to the wider industry. “There is definitely a risk of that and we’re taking that into account. On the positive side, the coal (and gold) sector have central bargaining,” Strydom said.

An important element of South Africa’s wage negotiations this year will be the interaction between industry and the Associated Mineworkers & Construction Union (Amcu). Amcu burst on to the labour radar last year as the upstart and radical union that stood behind mine violence at Impala Platinum, and later Lonmin and Anglo American Platinum (Amplats).

Although initially a coal union, Amcu has not made incursions into the coal sector, probably because more lucrative and a potentially larger membership reside in South Africa’s precious metals industry which is more labour intensive. However, Amcu has pushed the National Union of Mineworkers (NUM) to the side of South Africa’s labour industry, and is now the dominant union in the platinum sector.

The consequence of Amcu’s rise to power, however, is that it will lead to protracted wage negotiations. “It will definitely happen that there will be ‘one upmanship’ between Amcu and the NUM,” said Albert de Beer, a labour relations specialist who has long worked in the coal sector.

“At the end of the day, unions are businesses, and they are fighting for members. One union will try and get a little bit better than the other and the consequence of this is that wage talks will be more protracted than usual,” he said. “The unions will be reticent to sign new agreements until they see what the other has agreed to,” he added.

On May 19, it emerged that NUM had opened bargaining on coal and gold wage talks asking for a 60% increase for certain grades. On average, however, wage demands are likely to be far below this level, but still double-digit – a level likely to be given short shrift by mining companies, especially given the slump in economic activity globally, which has depressed metals and coal prices.

According to industry sources, the NUM has demanded a 16% wage increase of diamond giant, De Beers, a level that’s not as bad as it looks bearing in mind that this is the normally over-ambitious opening gambit.

“That’s about half of the demands that were received last year or the year before,” said De Beer. “It shows, I think, that unions are more sensitive to broader economic conditions as well as shareholders which have been bearing the brunt of wage inflation,” he added.

For the coal sector, the expectation is that wage talks will be generally peaceable. “The coal industry has a history of centralised negotiations and that is in the industry’s favour,” said Strydom. The absence of Amcu in the coal sector is also a benefit. Although De Beers heralds the development of democratisation in the labour field, not having Amcu around gives the NUM leeway to conduct ‘business-as-usual’ wage talks with the coal sector, which is generally a good payer.

“It’s slightly different for the coal industry,” says De Beer. “I don’t have any concerns for it although there will very likely be strikes. That can always happen anyway,” he said.

Mike Teke, chairman of Richards Bay Coal Terminal and deputy president of the CoM, said he expected wage negotiations this year to be “a tense” affair.

“You have to acknowledge there will be tense moments. But it’s key that we get everyone back to work,” he said, commenting on the recent two-day (and worryingly) ad hoc strike at Lonmin’s Marikana mine, the site of killings nine months ago in which dozens of protesting miners were gunned down by police services patrolling the area.

“Sporadic strikes are simply not good for the economy,” he said.

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