Strike Halts Platinum Mining in South Africa

JOHANNESBURG--Tens of thousands of platinum workers in South Africa went on strike Thursday to demand higher salaries, bringing a key part of the country's economy to a near standstill.

Members of Association of Mineworkers and Construction Union, the largest in the platinum sector, went on strike at the world's three biggest producers after the union and companies failed to agree on new wage levels. Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin PLC said mining operations had mostly stopped as a result.

The strike is the biggest to hit the platinum sector since the violent work stoppage in August 2012 that started at Lonmin's Marikana mine and resulted in police firing into a crowd of protesters killing 34 people. Since then, the platinum industry says it lost 879,400 ounces of production in 2012 and 2013 combined. Companies warn that the industry is in a financially fragile state and a new strike will be damaging to both revenue and jobs.

The work stoppage is the latest blow to an already ailing South African economy. The government forecasts growth at just 1.9% and the rand has weakened against the U.S. dollar to a more than four-year low. Mining accounts for 6% of gross domestic product and mineral exports 60% of export revenue. In addition, companies have cut several hundred jobs because of costly strikes and a weakening demand environment in the past two years, a blow to South Africa's already high unemployment rate of around 24%.

This week, Anglo American Platinum, the commodity's largest producer, said earnings in 2013 returned to a profit after a loss the previous year, but a strike threatens to reverse those gains. Its chief executive, Chris Griffith, said a long strike now could also lead to more job losses.

The workers are demanding that their employers raise entry-level salaries to 12,500 rand ($1,150) a month from around 5,000 rand currently. AMCU President Joseph Mathunjwa said he understands the damage to the economy a strike can cause but that workers need to earn better salaries in the face of rising living costs.

Impala Platinum spokesman Johan Theron said Impala overnight shut its Rustenburg mine, which accounts for about 52% of its output, in preparation for the strike. Lonmin said Rustenburg has been quiet so far. Workers didn't show up for the morning shift but the mine hasn't been affected by the kind of violence seen in previous years.

This month, South Africa passed a new act that prohibits those on strike from carrying weapons that could cause bodily harm, including spears and machetes, which had been prevalent in the 2012 strikes. Police on Thursday said they have deployed forces around the platinum-producing area, northwest of Johannesburg, to monitor striking workers and protect those not on strike.

AMCU gained dominance in the platinum sector following the Lonmin Marikana strike in 2012, that then spread to mines across the country, but cracks are starting to show. Some former AMCU members say workers are worried about going on strike and losing their jobs.

"I agree we need to get better wages, but people will lose their jobs after this strike. This isn't the time to strike," said Gaddafi Mdoda, a former member of AMCU who says he left because he didn't agree with how the union was being run.

Write to Devon Maylie at [e-mail]

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