Government urged to get serious about the threat facing exporters
Crisis threatens 70 000 mine jobs
October 10, 2003
By Sherilee Bridge
Johannesburg - The mining industry might lay off as many as 70 000 mine workers and halt up to R100 billion worth of capital investment as it struggled to avoid being pushed over the cliff edge by the stronger rand and the higher cost of production, the Chamber of Mines warned yesterday.
"At the current rand price of gold, seven of South Africa's 12 gold mines are lossmakers," said Roger Baxter, the chief economist at the chamber.
The job cuts represent about a fifth of the mining industry's 400 000 employment base.
Baxter said the reality was that the mining industry's export revenue for the full calendar year would fall by R14 billion to R77.1 billion from last year's R91.2 billion.
Government coffers would also be lighter, with tax revenues from the industry halving to R6 billion from R12 billion in 2002.
"Doing the numbers we have calculated that at today's rand exchange and with the likelihood of sliding production, the industry faces a total possible loss of R20 billion this year," Baxter said.
Besides the sharp edge of the rand, Baxter said administrative prices were spinning out of control. The cost structures of mines had increased by 30 percent on average, pushed higher by an 8 percent increase in electricity prices, double-digit increases for water supplies, a 35 percent rise in general tariffs charged by Spoornet and a 10 percent increase in wages.
Harmony Gold Mining yesterday added its name to the list of companies warning of job cuts.
The gold producer, which provides employment for 50 000 people, said it had begun talks with the workers' union.
This comes just weeks after marginal mining company Durban Roodepoort Deep followed through on its threat to retrench 3 000 workers at its unprofitable North West operations.
Baxter said it was time for government to "get very serious" about the crisis facing the country's export industry, which he regarded as the growth engine of the economy.
The rand has strengthened by 26 percent against the dollar since January and by 52 percent over the past 12 months. So, despite higher dollar-set commodity prices, local mining companies are bleeding.
Harmony first alerted the market to the possibility of job losses in April when it released its March-quarter results. It said further strengthening of the rand could threaten 10 000 jobs and slow planned capital spend.
On Wednesday, diamond marketing giant De Beers said it had been forced into a similar position.
Gary Ralfe, the managing director at De Beers, said the continuing strength of the rand posed "a serious and immediate challenge" to the company.
De Beers, which has Anglo American as a 45 percent shareholder, employs 10 000 people at its eight mines in South Africa.
Anglo Platinum, the world's largest platinum producer, may be next on the list. Speculation is that Anglo Platinum may not meet its expansion target of 3.5 million ounces a year by 2007, despite platinum prices leaping to 23-year highs last week.
Strong local currency will force Harmony to put some jobs on the line, says chief executive
By Reuters
Cape Town - Bernard Swanepoel, chief of Harmony, said at the Black Management Forum conference yesterday:
"There is no doubt that [the strong] rand will cost us some jobs across the company, but to predict how many is just impossible."
"In our organisation, just from natural attrition, the rate at which people leave the company is rather high so we certainly aren't at the point of looking at retrenchments as yet," Swanepoel said.
The merger of ARMgold and Harmony, approved by shareholders last month, created the world's fifth-largest gold miner.
Harmony has been hit harder by the rand than its two main rivals, AngloGold and Gold Fields, which have diversified offshore.
Swanepoel said the company was revising its business plans, since they were made on the basis of the rand gold price at R93 000 a kilogramme, but it had since plummeted to R82 000.
Swanepoel said the company was discussing with trade unions its proposal to switch to continuous operations, to keep job losses at a minimum, changing from working 11 days out of every 14.
Harmony stock fell R2.52 after the news of the job cuts to R92.48.
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