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South African strike hits world's top platinum producers

Armed security officers search cars outside the Lonmin mine in Rustenburg, northwest of Johannesburg January 23, 2014. REUTERS/Siphiwe Sibek
Armed security officers search cars outside the Lonmin mine in Rustenburg, northwest of Johannesburg January 23, 2014. REUTERS/Siphiwe Sibek

By Ed Stoddard

MARIKANA, South Africa (Reuters) - South African mines producing half the world's platinum shut down on Thursday as the sector's main union began a strike for hefty wage hikes their employers say they cannot pay.

Members of the Association of Mineworkers and Construction Union (AMCU) walked out at Anglo American Platinum , Impala Platinum and Lonmin , the top three producers of the metal used in catalytic converters in cars.

The chief executives of the three companies have said the wage demands are "unaffordable and unrealistic" and warned the industry could ill-afford further production and job losses.

The latest wave of labour unrest put the rand on the ropes, knocking it to a new-five year low of 10.9795 against the dollar as investors fretted about the impact of the strikes on an already fragile economy.

Amplats said the strike had affected mining at its Union, Rustenburg and Amandelbult sites, where low attendance was recorded. All processing operations were operating normally.

Implats closed its mines and processing units at Rustenburg, northwest of Johannesburg, before the strike began.

Implats expects to lose about 2,800 ounces of platinum daily while smaller rival Lonmin estimates losses at some 3,100 a day.

Lonmin mining and processing operations were suspended on Thursday and it said it would assess the situation daily.

"The strike action certainly wasn't a surprise to anyone though so they might have strategically stockpiled a bit of metal especially as the market expected prices to rally on the back of strike action," said Investec analyst Marc Elliott.

AMCU has as many as 100,000 members in the platinum belt, 120 km (70 miles) northwest of Johannesburg.

"This is a revolution of the economy of South Africa, to benefit all who live in it," AMCU president Joseph Mathunjwa told reporters after a mass rally at a football stadium marked by prayers, songs and dancing.

Basic wages for miners are about 5,000 rand ($460) a month and AMCU wants that hiked to 12,500 rand ($1,100).

GOVERNMENT MEDIATION

Several AMCU activists called on President Jacob Zuma and the African National Congress (ANC) officials to "stop the foolishness".

"We are paid peanuts. And the cost of living is too high," said one striker at an Amplats mine who did not wish to be named. "If they don't meet our demands, we will keep striking."

The government has offered to mediate to end the dispute that threatens to squeeze an already struggling economy.

Besides economic damage, Zuma and the ANC want to end labour unrest before general elections due in about three months.

But the government has been unable to soothe tensions in the platinum belt, where miners are angry about their lack of economic progress two decades after the end of apartheid.

"There is no concrete government action to prevent the kind of rolling strikes that we are seeing now for eleven months of the year," labour economist Loane Sharp said. "The government has lost control of the labour movement in South Africa."

AMCU is seeking a more than doubling of the basic entry-level wage from the three producers. The companies are offering increases of 7.5-8.5 percent, well above the 5.4 percent inflation rate.

POLICE DEPLOYMENT

The companies were battered by wildcat strikes in 2012 rooted in a turf war between AMCU and the National Union of Mineworkers in which dozens of people were killed.

Mindful of the bloodshed and violence of the last two years, police deployed in force, especially near Lonmin's Marikana mine where 34 miners were shot dead by police 18 months ago.

It is hard to estimate the duration of the stoppage amid recent signs of divisions in AMCU's ranks.

Dissidents said this week they planned to form a rival union, accusing Mathunjwa of recklessly pursuing a damaging strike they say many miners do not want and cannot afford.

Mathunjwa dismissed reports of divisions in the ranks as attempts to "undermine AMCU".

(Additional reporting by Olivia Kumwenda-Mtambo in Johannesburg, Dinky Mkhize in Marikana and Silvia Antonioli in London; Writing by Olivia Kumwenda-Mtambo; Editing by Tom Heneghan)

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