JOHANNESBURG — Big wage hikes demanded by the government-allied trade union in South Africa's coal and gold industries helped push the rand to a four-year low on Monday, highlighting the ripple effect of the prospect of more turmoil in the industry.
The National Union of Mineworkers' (NUM) call for pay rises of up to 60 percent in a submission to the Chamber of Mines seen by Reuters on Sunday rattled mining investors after wildcat strikes at platinum and gold mines killed 50 people and cost billions in lost output last year.
Employers and workers are squaring off for next month's salary bargaining period against a backdrop of high inflation and shrinking company margins in Africa's largest economy due to soaring costs and sinking commodity prices.
This is making South Africa vulnerable, said George Glynos, managing director at financial consultancy ETM Analytics.
"Commodity prices are retreating, you have wage negotiations which look like they are turning pear-shaped even before they have begun, and all that on top of a fragile economy," he said.
Reflecting the jitters over the threat of fresh mines unrest, the South African currency fell to a new 4-year low of 9.4790 to the dollar early on Monday before recovering to 9.4580 by 1228 GMT, still down 0.6 percent on the day.
Shares in Africa's top bullion producer AngloGold Ashanti fell over four percent and rival Gold Fields shed 4 percent to 4-1/2 year lows.
On global markets, gold fell for an eighth straight session to its weakest level in over a month, as fears that the U.S. Federal Reserve may wind back its economic stimulus program hurt the metal's appeal as a hedge against inflation.
A fierce union turf war is roiling labor relations at South African mine shafts, with the NUM fighting an aggressive challenge to its once near monopoly of members from the growing Association of Mineworkers and Construction Union (AMCU).
AMCU has poached tens of thousands of platinum miners from NUM in an increasingly violent struggle at mine sites.
The union battle poses a headache for President Jacob Zuma's ruling African National Congress (ANC), which faces criticism that it mishandled last year's mines violence. Opponents say it and the mainstream NUM have neglected the rights of workers and sided with mine bosses, a charge they both deny.
The ANC's Secretary General Gwede Mantashe, a former top NUM official, defended the union on Monday, saying that "recent attacks" on it were akin to an attack on the ruling party's alliance with its labor allies.
Last year's mine violence dented South Africa's image with investors and led to ratings downgrades for the economy.
NUM, a key political ally of the ANC, is seeking an entry-level minimum monthly wage of 7,000 rand ($750) for gold and coal surface workers and 8,000 rand for those underground, according to the submission to the chamber of mines obtained by Reuters. The latter would represent a 60 percent rise from the current minimum wage of 5,000 rand a month.
NUM also said it wanted 15 percent increases for "all other wage categories," meaning more experienced and skilled workers. Wage talks are due to begin next month.
South Africa's Solidarity trade union, which represents mostly skilled workers, said on Monday it was seeking 10 percent pay increases for its members from the country's gold and coal producers in the upcoming negotiations.
Spot gold is currently fetching around $1,350 an ounce, down close to 20 percent so far this year, and South Africa's mines, the deepest in the world, are hard pressed to turn a profit at these levels.
"If you look at the all-in-costs for South African gold miners, including capex [capital expenditure], the break-even costs right now are anywhere between $1,100 an ounce and $1,400 an ounce," said David Davis, mining investment analyst with SBG Securities.
NUM still represents the bulk of the rank and file in the gold and coal sectors and needs to be seen taking a tough line with management to head off the assault from AMCU, which now dominates the platinum sector specifically.
AMCU has not yet submitted its wage demands to producers, which negotiate with unions on a company-by-company basis.
Anglo American Platinum, the world's top producer, is planning to cut 6,000 jobs from an initial target of 14,000 as it seeks to restore profits after recording a loss last year.
It scaled back its original plan under government pressure, but workers and unions have threatened strike action on the platinum belt if the announced lay-offs go ahead.
African Bank Investments, a lender to lower-income South Africans such as miners, said on Monday many of its debt-laden customers were struggling to pay back their loans.
"The knock-on effect from the recent strike activity led to increased debt servicing burdens," the bank said in announcing its first-half earnings.
AMCU's rise has been built in part on perceptions that NUM's leaders have grown too close to management and the ANC.
The view from the boardroom is somewhat different as NUM has been wringing above inflation wage hikes for its members over the past decade, a huge squeeze on company margins.
But even increases above inflation do not go far for workers at the bottom end of the pay scale who on average have eight dependents and are mostly drawn from poor rural areas.
Inflation, which is currently running near 6 percent, looks set to accelerate further given the recent weakness in the rand.
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