Monday, February 08, 2016

Dark Clouds Gather for South Africa’s Miners
James Wilson and Andrew England in Johannesburg
Financial Times

It is one of the mining industry’s historic heartlands and is endowed with some of the world’s richest mineral deposits. But right now South Africa is a place where some of the largest miners in the world are reluctant to do business.

More than 600 job cuts announced last week by South32, the Australian mining company that was last year spun out of BHP Billiton, are the latest indication of how South Africa is bearing the brunt of the worst commodities downturn in more than a decade. In total, 32,000 mining jobs in the country, about 6 per cent of the industry workforce, are subject to formal consultations that could lead to redundancies.

This will provide a bleak backdrop on Monday to the start of the Mining Indaba, one of the world’s leading conferences for mining executives and investors. As well as South32’s redundancies at its South African manganese mines, Lonmin is cutting 6,000 jobs at its platinum shafts in the country.

Anglo American is this month expected to give more detail of how it intends to make unprecedented reductions to its operations and workforce, with South Africa likely to be heavily affected. The company has begun consulting on 4,000 job cuts at Kumba Iron Ore, one of its South African subsidiaries.

The ups and downs of commodities cycles are familiar to South Africa, which for much of the past 150 years led the world in production of minerals including gold, platinum, chrome and diamonds.

But mining companies are concerned by the pressure from rising costs and fractious relations with a government seen as hostile.

South Africa’s mining industry is grappling with its toughest period in 20 years, according to Johan Theron, head of corporate relations at Impala Platinum. Neal Froneman, chief executive of Sibanye Gold, a large South African miner, says: “The big problem is that [it] is not an investor friendly climate . . . there is a toxic cocktail of issues that needs to be addressed. The mindset needs to change.”

Mosebenzi Zwane, mining minister, said on Friday that 2016 would be “a hectic year” for mining, including job losses. “We are engaging with the [mining companies] in the hope that something will come out of the crisis and I’m sure we can minimise the impact,” he added.

The government is acutely aware that employment in the mining industry has been shrinking in recent years. The sector lost 47,000 jobs between 2012 and 2015, according to the Chamber of Mines, an employers’ body.

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