Nigerian central bank moves to push banks to increase lending will be a damp squib, meaning an interest-rate cut is in prospect, says John Ashbourne, senior emerging markets economist at Capital Economics in London.
Sibanye-Stillwater: miners’ strike over, but pressures remain
South African mining firms still face an uncertain outlook on costs after the ending of the five-month strike by gold miners at Sibanye-Stillwater.
The Association of Mineworkers and Construction Union (AMCU) ended the strike on 17 April, having reached an agreement with Sibanye-Stillwater to accept the pay deal already agreed with the National Union of Mineworkers (NUM).
The AMCU “overplayed its hand” in the dispute, says Indigo Ellis, Africa analyst at Verisk Maplecroft in London. Striking workers could no longer afford to forfeit their wages and defected to the NUM. Yet the walkout, according to Ellis, cost Sibanye-Stillwater more than $100m in lost revenue.
Platinum next in line
At current prices and costs, over 60% of South Africa’s platinum-mining industry is loss-making or marginal, according to the Minerals Council of South Africa. The country’s biggest platinum producers – Amplats, Impala Platinum and Sibanye-Stillwater – are all preparing to hold wage negotiations this year to fix wages at major mines over the next three years.
First on the agenda will be Sibanye-Stillwater’s Rustenburg mine, where the existing wage agreement expires in June.
- Ellis expects that Sibanye-Stillwater will be willing to raise wages by more than inflation and predicts an opening offer of a 5.5% annual wage increase, compared with the current consumer price index (CPI) rate of 4.5%.
- In 2017, Sibanye-Stillwater reached a three-year agreement at Kroondal for about 7% annual increases, when the CPI stood at 6%.
- Last October, Northam Platinum negotiated an annual wage increase of 7% for its lowest-paid employees, effective for three years.
Sibanye-Stillwater has the second greatest number of AMCU workers at its mines. CEO Neal Froneman and AMCU leader Joseph Mathunjwa have a fraught history. The AMCU has launched an appeal at the competition court to limit retrenchments and extend a job-loss moratorium from six months to 24. A decision is expected soon, and its outcome could swing the balance in wage negotiations, Ellis says.
Following completion of the proposed acquisition of Lonmin, Sibanye-Stillwater will likely become the largest producer of mined platinum in the world – and the miner with the greatest exposure to the AMCU, Verisk Maplecroft’s Ellis says.
A significant decline in the ANC vote share in South Africa’s election on 8 May would leave President Cyril Ramaphosa “particularly constrained” in facing these challenges, according to Ellis. Verisk Maplecroft’s election forecast gives a 23% probability to such a scenario.
Even if miners see off the challenge from AMCU, their operations in South Africa face pressure on multiple fronts. “Several years of regulatory stability and concerted action to tame the power of militant labour unions would be required to repair South Africa’s reputation among investors,” Ellis argues.
Other cost pressures are lurking, too. Gold and platinum miners face an uncertain future due to rising electricity prices.
- Eskom tariff hikes will make 75% of platinum-group metals operations marginal or loss-making by the end of 2021, jeopardising 67.2% of production, Ellis says.
The mining sector in South Africa, together with smelters and refineries, consumes more than 30% of total electricity supply, according to the Minerals Council.
- In its submission to the national energy regulator NERSA in January, the council said that the industry is a price taker, as mining production is exported on the basis of world prices. The industry cannot pass cost increases on to customers.
- The council has said that the viability of marginal and loss-making mines will be threatened by the electricity price hikes, and that 90,000 jobs in the mining sector are at risk.
Even that may be an understatement: according to Ellis, the issue, if unaddressed, could threaten over 111,000 jobs.
Despite the end of the Sibanye-Stillwater strike, predictable costs in for gold and platinum miners in South Africa remain as distant as ever.